Alaska Airlines will continue blocking middle seats for the rest of this year but is "mapping a framework" to end the policy in early 2021, executives said Thursday during an earnings call.
Passenger revenue in the third quarter declined 74 percent year over year to $572 million. The carrier has seen "a month by month steady uptick" in passengers and improving future bookings, and it is continuing to rebuild its network, chairman and CEO Brad Tilden said. Alaska's network, which dropped from 1,300 daily flights to 350 "nearly overnight" at the onset of the pandemic, has grown back to 760 daily flights and soon will be increased to 840 daily flights, he said.
Alaska also has continued to reduce daily cash burn, which was $4 million in the third quarter, compared with $5 million per day in the second quarter and $13 million per day earlier in the pandemic. In order to reach a break-even point, Alaska will need to recover to about 60 percent of normal passenger levels, or about 70,000 to 80,000 passengers per day, Alaska president Ben Minicucci said. Blocking middle seats caps makes it impossible for flights to have load factors that reach those levels, EVP and CFO Shane Tackett said.
As such, Alaska has extended its middle-seat blocking policy through Jan. 6 but will begin to phase out the policy after that. Short-haul flights will be among the first to end the policy along with flights to Hawaii, where pre-flight Covid-19 testing "is already reinforcing traveler confidence," according to Minicucci.
When Southwest Airlines ends its capacity controls next month, Alaska will be one of the few remaining major carriers globally—including Delta Air Lines—still blocking middle seats.
"We've got the next couple of months where we can educate even our own employees and educate customers that it is safe to fly as we slowly ease into the end of the year," Minicucci said. "Honestly, it's safe to fly right now, but we've got some work to do, just getting the information out there."
Demand to Hawaii already is showing improvement with the testing availability and removal of quarantine requirements for those who test negative, EVP and chief commercial officer Andrew Harrison said. Capacity to Hawaii in the third quarter was down 88 percent year over year, but the carrier will be down only half of that in the fourth quarter, he said.
Plans to end middle-seat blocking will be "calibrated to changing conditions," Minicucci said. "Things like rising Covid cases or more restrictive state postures that could change our plans."
Alaska Air Group reported a net loss of $431 million for the third quarter, compared with a net income of $322 million in the third quarter of 2019.
Microsoft Deal to Boost Sustainable Fuel Use
Alaska this week also announced an agreement with Microsoft to increase use of sustainable aviation fuel.
Per the agreement, Microsoft will buy sustainable aviation fuel credits from supplier SkyNRG to offset its travel on its three busiest routes with Alaska: Seattle to each San Francisco, San Jose and Los Angeles. That fuel will be delivered to Alaska's airport fueling system.
The companies are considering expanding that program in the future, and Microsoft EVP of worldwide commercial business Judson Althoff in a statement said he hoped the agreements would be a model "used by other companies as a way to reduce the environmental impact of their business travel."
RELATED: Alaska Q2 earnings