A recent spate of layoffs by large U.S. technology companies based on the West Coast contributed to what Alaska Air Group executives on Thursday called a fourth-quarter "softening" of business travel demand from levels seen during the late summer.
Corporate travel demand at the end of 2022 had recovered to 75 percent of 2019 levels in terms of volume and 85 percent in terms of revenue, Alaska EVP and chief commercial officer Andrew Harrison said during the company's fourth-quarter earnings call.
"West Coast business remains less recovered, which is not surprising given the significant workforce reductions happening across large technology companies located up and down the coast, where we primarily operate," Harrison said.
Several large technology companies in recent months have laid off thousands of employees, including Microsoft, Amazon, Google, Twitter and Facebook parent Meta.
Still, executives noted that those large tech companies generally have lagged other sectors in business travel recovery, and how those companies move forward from here remains an open question.
"Even though the headlines are recent on these job cuts … their corporate travel has already been severely depressed for some time now," Harrison said of the tech companies. "And the question is, will they come back? I'm more bullish and confident certainly on the non-tech side of corporate travel. I will say the jury is a little bit out on where tech does go."
Alaska CFO Shane Tackett said he was optimistic tech travel demand would come back at some point. "The one thing not to lose sight of is these tech companies, while they haven't been traveling for quite a while, are like the most valuable companies on Earth. And at some point, they are going to expand again, and they're going to get traveling again. So it's probably future goodness for us. We just don't know when it's going to really come back. It could be a year away or more."
Q4 Metrics, 2023 Plans
Alaska plans to return to pre-pandemic levels of capacity in the first half of 2023, Tackett said. The company this month also flew its final revenue passenger flights on Airbus A320 and Bombardier Q400 aircraft as it transitions to a single Boeing Max fleet.
Alaska reported fourth-quarter passenger revenue increased 10 percent from Q4 2019 to more than $2.26 billion. Total operating revenue increased 11 percent to nearly $2.48 billion. Pretax income was $35 million, compared with $243 million in 2019.
Full-year passenger revenue increased 9 percent from 2019 to more than $8.8 billion. Operating revenue increased 10 percent to nearly $9.65 billion. Net income before taxes was $79 million, down from nearly $1.02 billion in 2019.
Average fourth-quarter fuel cost was $3.55 per gallon, and $3.42 for the full year.
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