Alaska Airlines Gives Boeing a Big Order With an Eye to Expansion
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Alaska Airlines, the fifth-largest passenger airline in the United States, said on Wednesday that it would buy dozens more Boeing planes in the coming years as it aims to rapidly expand its fleet and convert to a single aircraft family.
The airline plans to buy 52 Boeing 737 Max planes through 2026, in addition to 94 already on order. The planes are a mix of Max variants and will help Alaska achieve its goal of becoming an all-737 operator by the end of next year. The airline also has an option to buy another 105 of the aircraft by the end of the decade.
“This is the biggest fleet announcement in Alaska’s history,” said Nat Pieper, an Alaska executive who oversees fleet and airline alliance strategy. “This deal with Boeing ensures access for us for sufficient aircraft through 2030 for our replacement needs, and for our growth levels that we anticipate achieving in that time.”
Flying a single type of plane yields benefits to airlines, making it easier to reassign pilots, swap planes and maintain a uniform inventory of parts. Alaska expects to eventually save about $75 million to $100 million annually from the simplification of its fleet, Mr. Pieper said. Southwest Airlines, the nation’s third-largest carrier, also operates an all-737 fleet.
Alaska’s order comes as its position in the industry is under threat. JetBlue Airways, the sixth-largest domestic airline, plans to buy Spirit Airlines. If that deal goes through, JetBlue would easily leapfrog Alaska in market share, though it is unlikely to immediately threaten Alaska’s strength on the West Coast.
The new Max jets will allow Alaska to expand its hold there while also adding more transcontinental service, Mr. Pieper said. The Max 8 variant has fewer seats than the Max 9, but more range, making it well suited to longer flights, such as those between the West Coast and Hawaii, he said. The Max 10 has the most seats, optimal for heavily trafficked routes.
The Max was banned globally for almost two years after a pair of fatal crashes in which 346 people died. The plane was allowed to return to the skies in late 2020, after Boeing agreed to make certain changes to systems that were implicated in the crashes. Since then, the Max has been used for nearly a million flights, according to Boeing.
Alaska and Boeing share a strong bond: Alaska is headquartered in Seattle, where Boeing produces the Max and other planes. The airline had previously flown only Boeing aircraft, but acquired dozens of planes produced by Airbus, Boeing’s rival, when it bought Virgin America in 2016. Alaska said it expected to replace the last of those Airbus planes with Boeings by the end of next year, reflecting how long it can take to smooth out airline mergers and acquisitions.
Alaska’s regional subsidiary, Horizon Air, uses dozens of jets made by Embraer and Bombardier for shorter flights or on less-trafficked routes and is also phasing out the Bombardier aircraft.
The Wednesday order is part of a spate of ambitious purchases announced as the industry has emerged from the depths of the pandemic. Last year, Southwest announced plans to buy 100 Max planes, while United Airlines said it planned to buy 200 Max jets and 70 Airbus planes. This summer, Delta Air Lines said it planned to buy 100 Max 10s, with the first deliveries expected in 2025.
Travel demand remains strong, but airlines have started to warn investors that industry growth may be limited as Boeing and Airbus struggle to overcome delays in delivering new aircraft. American said this month that it expected to receive 19 Max 8 planes next year, down from the 27 previously expected. United this month also said that some of the 179 aircraft deliveries it expected for next year could be delayed.
Boeing is racing to meet an end-of-year deadline to get the Max 7 and Max 10 certified by federal regulators. If it fails to do so — or fails to get an extension passed by Congress — it will have to substantially overhaul the plane’s pilot-alerting system to meet more stringent standards. Boeing and others have argued that the overhaul would be costly and counterproductive, leaving the two Max variants with a different system from other 737s.
Alaska said it did not plan its first Max 10 delivery until the summer of 2024 and would take Max 9s if the Max 10 was unavailable. Delta’s chief executive, Ed Bastian, said this month that the airline had a “plan B” if the Max 10 was not certified in time for Delta’s expected deliveries.
Boeing on Wednesday reported mixed quarterly results, with big losses from its defense business offset by a better-than-expected cash flow. Revenue from its commercial airplane unit was up 40 percent in the third quarter from the same period last year, partly because of resumed deliveries of the twin-aisle 787 Dreamliner after a long delay. Overall, deliveries in the quarter were up 32 percent from last year.
Alaska has also overcome struggles that plagued it and other airlines earlier in the year. Fast-spreading Omicron cases in the winter decimated its crews while heavy snows and strong winds disrupted flights in the Seattle area, causing the airline to cancel hundreds of flights. Problems arose again in the spring, caused by limited pilot availability. That led the airline to scale back its summer schedule to be better prepared for disruptions.
The decision paid off. Transportation Department data show that Alaska had the best on-time performance of any major U.S. carrier in June and July. During those busy summer months, about 80 percent of Alaska flights were on time. Fewer than 1 percent were canceled, while the rest were delayed for various reasons, many of them out of the airline’s control.
The airline said this month that it had brought in record quarterly revenue in the three months that ended in September, with strong expectations for the rest of the year. Alaska said it expected revenue to be up 12 to 15 percent in the fourth quarter, despite offering 7 to 10 percent fewer seats. Airlines across the industry have been collecting record revenues as they raised fares to cover high costs.
Mr. Pieper said Alaska planned to pay cash for all of the planes it expected to receive this year and next year and many of the deliveries scheduled for 2024. “The best thing we can possibly do for that next rainy day is to pay cash for airplanes,” he said.