Despite "severely depressed" levels of business travel not likely to substantially recover this year, Alaska Airlines is betting on its ability to win corporate travel share as the sector recovers with its new alliances in place.
Alaska Air Group's passenger revenue declined 56 percent year over year to $659 million in the first quarter. Similar to other U.S. carriers, Alaska has seen "a strong return of leisure demand," with passenger enplanements this month down 35 percent from April 2019 levels—compared with a 65 percent decline in January—and future bookings have recovered to about 80 percent of pre-pandemic levels, CEO Ben Minicucci, who last month succeeded retiring CEO Brad Tilden, said in an earnings call.
Business travel, however, showed little recovery during the first quarter and was about 25 percent of its usual levels, Minicucci said. The carrier's quarterly surveys with its corporate customers indicate that business travel levels will be about half their normal levels by the end of the year, EVP and chief commercial officer Andrew Harrison said. The projection is similar to what Southwest Airlines executives said in their earnings call this week.
The carrier's recent entry into the Oneworld alliance and its partnership with American Airlines, however, bode well for its corporate business in the long term, with "greater access to managed corporate accounts" as the carrier can provide "much greater utility," according to Minicucci. Corporate customers have shown "overwhelming engagement" in interest of jointly contracting with American Airlines, Harrison said.
"We finally resolved a longtime issue for our corporate guests by now having a seamless global program in place," he said. "As we look forward, we believe the continuation of the return of demand supports our plans to add back capacity in our strongest hubs in the Pacific Northwest and Alaska, then ultimately California as it begins to relax restrictions."
This summer, Alaska plans to fly 80 percent of the levels it flew in 2019, and it will return to full capacity "no later than summer 2022," Minicucci said.
Alaska Air Group reported a net loss of $131 million for the first quarter, compared with a loss of $232 million the first quarter of 2020. The company achieved positive cash flow in March and is "now laser-focused on a return to profitability and growth," according to Minicucci.
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