Alaska’s Winter Was Even Darker Than Usual
For U.S. airlines, January and February long have lagged the rest of the year. But the chasm seems to be growing. And that's potentially concerning.
Years ago, most U.S. airlines made peace with their prospects in the first quarter, when leisure travelers retrench after the holiday season and business travel slowly resumes.1 They may not have liked it, but at least they knew demand would follow a predictable pattern. Some airlines could predict, down to the day, what would happen.
That’s less true now. As I have listened to earnings calls and read investor updates recently, I have noticed airline executives sound increasingly vexed by January and February. Demand is not fitting historical patterns, they say, and they acknowledge they need to make changes. But other than the obvious, like increasing flying to the few warm-weather destinations travelers want to visit in February, airline executives have offered few answers. I sense they’re figuring it out, and, maybe, hoping the old paradigm will return. But as Scott Kirby likes to say, hope is not a strategy.
Alaska Airlines on Thursday was the latest airline to express this sense of confusion. Its CEO suggested Alaska may make more drastic changes than United, which on Wednesday signaled it will attack the early-year doldrums with more warm-weather flights. But Alaska offered few concrete details as the plan is a work in process.
"We don't like the outcome in January and February," Alaska CEO Ben Minicucci said. "But the mandate has been given to the commercial team to say, there are things that we know, if we dissect the data. Airplanes can be moved. We can do things with our network, manage capacity. You've got to start thinking about it nine months before, which is why we're setting the goal now."
If you’re looking at full first quarter results, the period doesn’t seem so bad, as Alaska lost $142 million on revenues of about $2.2 billion2. But Minicucci said that March, the final month of the quarter, was “very profitable” with a nearly 10 percent pre-tax margin, suggesting that January and February were really bad.