Alaska Airlines executives expect business travel demand will recover to only half of pre-pandemic levels by the end of the year, but they also expect to pick up some marketshare during the recovery.
Following similar commentary by United Airlines and Delta Air Lines executives, Alaska executives in an earnings call on Tuesday said they are expecting recovery later this year led by "substantial pent-up demand" on the leisure side. Conversations with their corporate customers, however, indicate that corporate travel should be 50 percent of normal levels as 2021 closes, said Alaska Airlines president Ben Minicucci, who will succeed CEO Brad Tilden at the end of March.
Besides a successful vaccine rollout, duty-of-care considerations also could slow corporations’ return to travel, and companies likely will operate with reduced budgets at the onset of the recovery, EVP and chief commercial officer Andrew Harrison said. Business travel levels in the fourth quarter of 2020 were about 15 percent of their usual levels, according to Minicucci, a similar level reported by other U.S. carriers. Alaska has seen some demand growth from some segments where it has an advantage over other carriers—the fishing and oil industries in Alaska, for example—and small businesses "who do a fair bit of travel," but large companies like Microsoft and Amazon are maintaining "strict policies with no travel," Harrison said.
In the meantime, however, Alaska's sales teams are working to win new customers, leveraging its new partnership with American Airlines and upcoming entry into the Oneworld alliance.
"Working with America Airlines and Oneworld as a global partner, we're seeing very solid and strong interest in new contracts, in terms of network and utility we can provide corporate contracts," Harrison said. "We're very bullish on getting an increased share of business travel."
For the fourth quarter, Alaska's passenger revenue was down 68 percent year over year to $657 million, and total operating revenue was down 64 percent to $808 million. The carrier's average daily bookings have been increasing since they stalled in November, when Covid-19 cases in the United States began to accelerate and local restrictions in several areas were tightened, Minicucci said. Even so, he expects the carrier will be "treading water" until a significant portion of the population has been vaccinated.
This month, Alaska also has begun the process of unblocking middle seats, though it should not make a substantial difference given low load factors at the moment, Minicucci said. Alaska will leave middle seats blocked in premium cabins through May 31, not for safety reasons but as an added benefit for travelers booking premium cabins, particularly as business travel levels remain down, he said.
For the fourth quarter, Alaska reported a net loss of $430 million, compared with net income of $181 million in the fourth quarter of 2019. For the full year, Alaska's net loss was $1.3 billion.
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