Alaska Airlines says that fleet rationalization is part of its “DNA” and is already considering whether it will keep both the Airbus A330 and Boeing 787 as part of its long-term fleet strategy after a merger with Hawaiian Airlines.
Alaska Airlines Emphasizes “Fleet Rationalization” As It Ponders Widebody Implications Of Hawaiian Airlines Merger
I combed through the investor call, which took place on Sunday night, for discussion on the widebody fleet strategy in an integrated airline. Below, I’ve pulled key quotes, which I will follow with my analysis.
Shane Tackett, the CFO and EVP of Finance at Alaska Airlines, focused on “rationalization and simplification” in his remarks:
“I’d like to touch on the fleet setup we will inherit upon close, including 37 narrowbodies and 24 widebodies for 61 aircraft in total. First and foremost, we are acquiring a fleet that is 66% owned and 43% unencumbered. Hawaiian’s leased aircraft portfolio is modest, with several leases maturing in the next few years. This is a stark contrast to the fleet we inherited in our prior acquisition, in which 86% were leased, most of which had long-term duration remaining.
“Hawaiian has a high-quality fleet with net equity value and a range of capabilities that will allow us to maximize future flying opportunities. We remain strong believers in fleet rationalization and simplification, but we’ll take appropriate time to determine what the best long-term fleet setup for us will be, given the diversity of flying we will be doing, from high-frequency short stage lengths to widebody trans-oceanic flying.”
Here already we have a hint that Alaska Airlines may look to simplify its fleet over the years ahead, as it did after the merger with Virgin America (eventually eliminating all Airbus jets). Currently, Alaska operates a fleet of Boeing 737 jets and that model has served the carrier well. Adding transoceanic reach is not feasible on a 737 jet, but what I hear in this statement is that both the Airbus A330 and the Boeing 787 might not be necessary in the long-term and go against the principles that guide Alaska’s fleet strategy.
Ben Minicucci, CEO of Alaska Airlines, added:
“The 737 is a phenomenal airplane for our network utility. Shane mentioned in his remarks, we’ll see how the fleet — how we rationalize it going forward. The airplanes that Hawaiian have are perfectly suited for their geographies, for the domestic market, for the international market. And we have the time to assess as we go forward.”
He later added:
“I think having an international fleet, you need the lie flat seats. I think that’s required. Now, does it create a little more complexity? Of course, it does. But I think the advantages far outweigh the complexities that we have to deal with. And I’m sure there’ll be some things that we can rationalize going forward. Our DNA, Savi, we’re ones that like to drive costs down. And if we see abilities to do that, we will. But what I would just say is the opportunities far outweigh some of the complexities that we have to deal with, with this combination.
Minicucci mentioned fleet rationalization twice. We’ve seen his focus on this at Alaska Airlines. It may be far too soon to say the A330s will be sold or the 787 orders deferred, but I picture the long-term goal as one widbody aircraft.
Nat Pieper, the SVP Fleet, Finance & Alliances at Alaska Airlines, was asked if there will be any changes to Hawaiian’s 787 order and explained:
“Hawaiian has 787s coming, the 330s that are there, and the airplanes that they’ve got are well-suited for the missions in which they fly. We’re excited to compare the economics of those airplanes and continue to deploy the right aircraft for the missions that are in place. So don’t need to make an immediate decision on that, and we’ll see how that plays through.”
Minicucci interjected:
“And the widebody fleet serves a specific purpose, but some of those widebodies fly to JFK and to Boston and Austin. It’s not just to international destinations. So we see a lot of advantage in how we deploy those widebodies. And over time, the 787s are both growth and replacement airplanes. Where we deploy them, whether it’s Honolulu or somewhere on the West Coast, is something that we’ll look into.”
I found this remark telling. On the side of every Alaska Airlines aircraft is a “Proudly All Boeing” label. The Seattle-based airline and the (formerly) Seattle-based aircraft manufacturer, which still maintains several production lines there and employs 60,000 in Washington state, are key partners.
Here, Minicucci suggests a future in which the 787 is the “replacement” widebody aircraft, suggesting the A330s may stick around for years but not be part of the long-term fleet rationalization plan.
As a fun aside, the fact that “West Coast” deployment is under consideration suggests that Alaska Airlines considers its own longhaul flights.
Tackett followed up by underscoring that this acquisition of widebody jets is the “best way in” for Alaska Airlines to operate longhaul flights of its own:
“I would just say, look, if there was a way into international flying and widebody flying, like, this is the best way in. It would be much more expensive and much more difficult if we ever had gotten to that idea organically to get into this type of flying. I think it’s unique flying that has worked really well, as Ben said, over a long period of time.”
Might we see Alaska Airlines one day serve destinations like Tokyo, London, and Paris from Seattle? At the very least, I think such service is under consideration as part of the longterm plan of the combined airline.
CONCLUSION
An investor presentation gives us some hints at how Alaska Airlines is thinking about fleet simplification in rationalization post-merger with Hawaiian Airlines. Even if the merger goes through wtih minimal regulatory pushback, there will be no immediate push to simplify the fleet. But the longterm strategy is a different matter. The admission that fleet simplification is part of Alasaka’s “DNA” is a tell-tale sign of what is to come in the years ahead.
image: Alaska Airlines
The 787 or A330 complicates the 2 airline plan. There would be a loss of efficiency if there were one operating certificate but Alaska 787s flown only from Seattle and Hawaiian 787 only from Honolulu. Loy
More likely, Alaska egos would paint them in Alaska livery and keep the Hawaiian name just on the 717 and A321.
Hawaiian loyalty is stronger than Alaska loyalty in Seattle so I favor most of the 787s to be in Hawaiian livery.
I thought the 787s were replacing the 330s?
Eventually that may have been the case, but my point is that Alaska could accelerate that process.
Hawaiian ordered the Dreamliners becuase Airbus decided it would not make the A350-800 and Hawaiian later decided it did not want the Airbus A330-800neo. Even with 12 Dreamliners coming, the plan was never explicitly to retire all A330-200 aircraft, but to grow.
A long, rambling post that states the obvious. The A330s will be removed. The timing depends on economics and 787-9 availability from Boeing.
We prefer not to make assumptions. Nothing is obvious here.
Long term, it’s safe to say that a less efficient fleet is on the way out. In a vacuum, it’s debatable whether it will be replaced by B787 or something like A330neo or even A358, given that new management and new strategy are in play. But given what HA has decided for themselves and AS’s track record, it’s still a safe bet to say that B787s will replace all A330 in the end.
I hope that this merger results in more nonstop flights between Hawaii and the east coast. Almost half of Americans live in the eastern time zone, and I believe there’s only four nonstop flights per day from there to Hawaii (one each out of ATL, EWR, JFK, BOS).
Flying back is especially brutal, because it usually involves a night time departure, with a layover on the west coast in the very early morning, and arriving on the east coast at the end of the day.
The east is pretty well covered with DTW, IAD, 2X JFK, BOS, ATL, EWR. Hawaiian has tried MCO and American has tried CLT but both weren’t financially feasible. The majority of Hawaii visitors come from the west coast, with the Caribbean being more popular with people east of the Mississippi, so what we have currently is pretty significant and extensive especially compared to ten years ago. Where else do you expect them to profitably fly?
Unlikely. They don’t have enough aircraft to cover more east coast direct flights. East coast flights takes 10-11 hours each way on a good day. So you barely have enough time to turn around a single airplane for each route. If there’s any delay, you have to have a spare plane ready. You will have to sacrifice on schedule or other routes to add more east coast directs.
What I expect to see is they put some widebody on transcon routes, relieving some of them from west coast mid density routes like Seattle or Portland. And replace these destinations with higher frequency. So AS will have a more competitive transcon offering with more options to connect to Hawaii. This will be better compliment to Hawaii’s current east coast strategy and boost AS’s transcon presence.
If the Seattle kids get a chance, they will eventually have us flying Max 10’s between HNL and Asia, not to mention that they will eliminate all widebodies between HI and the West Coast. Fleet rationalization will will over customer preference. It is inevitable with the “Proudly all Boeing” crew in charge.
I think (hope) the Dreamliners are safe.
This is really a hater’s comment. There’s nothing wrong with supporting local, especially if local supplier offers a great discount and social benefit to the same city where most of your own companies’ employees are. They also specifically mentioned that the A330s are great for what HA has been using them for. But they aren’t the most efficient on the market. In long run, they are definitely on the way out. And why not replace them with something that comes with local benefits?
Clearly a former Virgin America pilot who lost their Airbus while now working at Boeing….errr I mean AlaskaAirlines
@Jnrfalcon, @dickbranson. Not an AS/VX pilot here or a “hater”, just an engineer who flies between the West Coast and Hawaii every other week for work, and I am both Pualani Platinum and MVP Gold. Given the choices, I give a slight preference to flying the HA A321 or A330 over an AS Max (or 737) over the Pacific… solely from this passenger’s perspective. AS has a better IT dept, but on HA, one gets a hot pocket vs. a bag of pretzels on AS.
@jnrFalcon…”Proudly all Boeing” after last night’s Portland incident? I rest my case.
FWIW, Boeing is no really longer “local” imo. The Max’s are basically built in Kansas by Spirit Aero, 787s built and assembled in SC, and the Company is now HQ’d in Virgina.
“Might we see Alaska Airlines one day serve destinations like Tokyo, London, and Paris from Seattle? At the very least, I think such service is under consideration as part of the longterm plan of the combined airline.”
Youbetcha. There is no doubt those 787s are driving a lot of interesting “consideration” at AS right now. Still doubt that? Note these juicy quotes from the call:
“I would just say, look, if there was a way into international flying and widebody flying, like, this is the best way in.
Yeah, best, cheapest, and quickest: Hawaiian’s 787 deliveries are just now beginning (first one is scheduled to go into service in April 2024). With 787s coming, and without the many-years-long wait for deliveries they would otherwise be facing, Alaska suddenly finds themselves at or near the front of a very long line of 787 customers waiting for 787s. Opportunity knocks….will AS answer the door?
Then this…parse the words here carefully for hints:
We remain strong believers in fleet rationalization and simplification, but we’ll take appropriate time to determine what the best long-term fleet setup for us will be, given the diversity of flying we will be doing, from high-frequency short stage lengths to widebody trans-oceanic flying.”
Note the specific use of the term “trans-oceanic.”
He didn’t say “trans-Pacific.” Those 787s will be crossing other oceans, too …the Arctic Ocean would be my bet, right on the way between SEA (and other west coast cities ie PDX/SFO/LAX) and London/Milan/Dublin, etc. (Note: the big tech companies in SEA all have a sizeable footprint in Ireland).
Lots of interesting possibilities.
Giddyup, Chester!
Do you mean the North Atlantic? SEA to Europe isn’t a polar route and doesn’t cross the Arctic ocean.
Do you think they could sell those 330s to AA. Clearly the dumping of AA’s existing ones was a bad move. They could even keep HA’s current interior. Who cares?! Nobody needs premium out of CLT or PHX.
My two cents:
As for the fleet, there’s several B787s in the Hawaiian pipeline. As least 2 or 3 would be based in SEA for Asian and Euro service. The B787 would be ideal for this. Lay flat seats would be the draw. The rest deployed via HNL as the A330 are phased out. As a “Proudly All Boeing” fleet, Renton would go out of its way to accommodate the B787 supply line just for bragging rights.
The only fly in the ointment is the HA contract with Amazon for a fleet of A330 freighters which includes flight hours and MRO services.
The A321 jets could be swapped out with B737MAX jets just like the Virgin Atlantic situation. The B737MAX can handle west coast to Hawaii just like Southwest.
The B717 could hang on for a few more years, but the B737 would be the replacement just like WN is doing today with inter island service.
As for the overlap in service between Hawaii and along the west coast (see map in prior article), Alaska would use the surplus to penetrate deeper into the mid west via frequency as opposed to twice a day service to airports which would draw more business PAX.
I agree with most of this.
717 – will be kept for quite a few years then switched to Embraer 175. The 737-700 could do the job but Alaska has too few of them. The 737’s CFM engines experience high wear with so frequent short flights, too.
737NG and 737MAX – mainstay of Alaska Airlines
787 – the next generation for Alaska and Hawaiian
A321neo – gone by 2028
A330 – some will be gone but many won’t be leaving for awhile. Some leases have been extended because up to 4 A321neos are grounded for engine issues. They will have 10 for Amazon.
I think you’re right about the B717. Delta picked up 13 B717s from Volotea in early 2023. Two months later, four of these jets were handed off to Hawaiian. All are listed as “stored”. I would image these will be used as spares.
Well let’s not get ahead of ourselves just yet. The acquisition hasn’t been approved only announced. And given the dismantling of the Jet Blue/American partnership, and the Jet Blue/Spirit acquisition this might not even be approved. Right?
I would think I’m not alone in that I would never fly all the way to Hawaii, or any other destination requiring a long trans-oceanic flight, in a non-lie-flat seat. All of my trips to Hawaii have been on planes with lie-flats. An airline that doesn’t have those isn’t getting my business.
The 787s Hawaiian is getting has lie flat seats. If you read the article, you’ll notice there’s a hint that all A330s will be replaced with these new 787s with…lie flat seats.
I am going with the Airbus is out! They just got rid of the A321 they inherited from Virgin America.
So AK just got rid of their final A321neo from VX and “SURPRISE SURPRISE”… buys more from HA. Talk about a love hate relationship.
AK to Airbus: “We just can’t quit you”
It’s been stated multiple times, as well as in their presentation, that the wide-bodies could be redeployed to the West Coast on currently unserved routes. My bet on the first two is SEA-NRT and SFO-NRT. This wouldn’t step on AAs toes, and transpacific routes are still under capacity due to US-China routes not returning to pre COVID levels.
Alaska PLEASE keep some of the Big Body Planes!
Don’t make the mistakes you did with the Virgin America fleet.
Example : Doing away with the VA 1st Class seats! Those were far superior to the throne seats AS has now 6 yrs later.
Example : Doing away with the extremely interactive IFE that allowed PAX to order Food + Bev with minimal speaking/yelling that would have been Excellent during Covid19 flying. The VA IFE would have protected staff + Pax.
Ok, a few things:
– AS got rid of the A321s because VX was a financial basketcase and had really, really lousy lease terms.
– HA has far better terms for their A321s than VX did – odds are the A321s are staying, and they may order more
– The A330 fleet will be staying for at least 5-7 more years
– The B787 fleet will be for growth, and eventual replacement as the A330s grow too old and costly to maintain
– Lie flats will be present in the A330 and B787 fleet, and you could possibly see some lie flats on the A321
– The B717s have about 5 years of useful life left; odds are there will be no dedicated intraisland fleet once they’re gone
– Intraisland ops will be handled how WN does it today; the aircraft flies in from the west coast with passengers, overnights, spends a day or two doing island hops, then heads back to the mainland carrying passengers back
– Fleet composition in ten years will be B737-900ER, B737-8MAX, B737-9MAX, A321NEO, B787-9, and possibly some B787-10
Alaska seems to be interested in keeping the 787s (not sure about the a330s), which is definitely very interesting. Since it is obviously cheaper to operate narrowbody 737MAX aircraft than 787s on routes between Hawaii and the Mainland, I wouldn’t be surprised if over time many of the current A330 routes are downgraded to 737MAX aircraft, so I am interested in where the 787s would be deployed (Alaska has 12 orders and 8 options I believe) if Alaska chooses to pursue longhaul operations (which is sounding more likely).
While Alaska Airlines is not a low cost carrier, it might help to look at this scenario from that perspective. Essentially, Alaska wants to compete with airlines that have already well established longhaul networks. Japan and South Korea in particular have many flights to the United States operated by ANA, JAL (Alaska’s partner through One World), Zipair Tokyo (JAL subsidary, Low Cost Carrier), Korean Air (Alaska’s partner), Asiana (To be acquired by Korean Air), Air Premia (Low Cost Carrier), United, Delta, American (Alaska’s partner through One World), and of course the existing services operated by Hawaiian. Needless to say, Alaska will face fierce competition, and on routes already served by their partners, there isn’t even a need to do so. Therefore, if Alaska were to finally start flying longhaul from the West Coast, it actually would make more sense to operate routes without competition, similarly to long haul low cost carriers.
Japan (or at least just Tokyo) and South Korea (or at least just Seoul) can be ruled out, at least to Seattle, Los Angeles, and San Francisco. These routes already are served by many airlines. Obviously flying to Mainland China could be difficult to do because of approval, however Mainland China might have more potential than other destinations. Mainland China has many large cities besides Beijing, Shanghai, and Guangzhou, that are underserved when it comes to transpacific services, and I can see a lot of potential here, especially from the West Coast, where this is both a large Chinese diaspora (I am Chinese American myself) and lots of demand for business (I know this somewhat conflicts with the longhaul low cost carrier comparison I made, but that’s more about facing competition than it is about target audience), which is no doubt the most lucrative when it comes to longhaul. Alaska also already has a large network into these West Coast hubs, which would make it much easier to fill their Boeing 787-9s and possibly Airbus A330-200s, than for other US competitors, with connecting traffic aiding significantly.
So where would it make the most sense for Alaska to serve?
1. San Francisco, California – Shenzhen, Guangdong: These are 2 of the biggest tech hubs in the world, but there are currently no airlines serving this route. In fact, there are no services to neighboring Guangzhou either. This route would provide a nonstop connection for business travellers, and make it easier for Chinese diaspora in the Bay Area to visit friends and relatives in Guangdong province.
2. San Francisco, California – Hangzhou, Zhejiang: Hangzhou is another large city when it comes to business, and just like Shenzhen, there is also no competition on this route. Furthermore, due to its proximity to other huge cities like Shanghai, Nanjing, Suzhou, Ningbo, and Wuxi, it would also provide a good connection for Chinese diaspora.
3. San Francisco, California – Zhengzhou, Henan: Zhengzhou is where a lot of Apple’s production takes place, while it’s headquarters are located near San Francisco. Along with creating a potentially large business demand, there is also naturally cargo demand to transport apple products to the United States, which could be transported in the belly of a 787 or a330, and Zhengzhou also has a large population of about 13 million. This destination also would have no competition.
These 1st 3 routes could also make sense from San Jose, which is also in the Bay Area, or even from Seattle.
4. Portland, Oregon – Shanghai, Shanghai: Portland is where Nike is headquartered, while Shanghai is where their Chinese headquarters are located. Naturally, this would create a lot of business and cargo demand. Shanghai is also a massive city in a region with a massive population, and a good gateway into China. There is no competition on this route, in fact there are no Asian routes from Portland anymore with Delta pulling out. Alaska has a large presence in Portland, so filling the aircraft might not be as difficult as it would seem, and a city like Portland without any current route to Asia may even incentivize this route.
5. Portland, Oregon – Tokyo, Japan: Delta pulled out of this route, and while Delta might have a had a lack of profitibality potential on this route, Alaska has 2 benefits that Delta doesn’t have. 1st of all, Portland is one of Alaska Airlines’ major hubs, while Delta did not operate a hub in Portland. Because of this, Alaska will be able to capture connecting demand through Portland. 2nd, Delta does not have a partner in Tokyo, so it doesn’t make much sense for them to serve this route, but Alaska does (JAL). Furthermore, just like my proposed Shanghai route, Portland does not currently have a direct route to Asia, so it could be incentivized. There might also be some business demand, however I doubt it would be as significant as Shanghai.
I am aware that all of these routes may seem like weird choces for Alaska, however I can see potential in all 5, and the lack of competition makes them more achievable. Of course, I doubt they will materialize, given the unconventional nature of these.