https://alphastreet.com/bite/d0aaa20
ALK posted a 4% YoY profit growth and a 35% revenue growth for Q3 2017, as it continues the integrating with West Coast carrier Virgin America.

Awesome!!! Alaska is just chugging right along. Any talk about aircraft and the Airbus at all?

JammyBritton27 wrote:

https://alphastreet.com/bite/d0aaa20
ALK posted a 4% YoY profit growth and a 35% revenue growth for Q3 2017, as it continues the integrating with West Coast carrier Virgin America.

Wasn't that revenue "growth" just the results of AS and VX being combined - with the additional revenue being what came over from VX?

Wall Street was predicting $2.32 per share earnings; it was actually only $2.14. Somebody will be disappointed...

They are really great at cost control. The casm was flat despite higher fuel cost vs last year q3. Probably going to end up with the best margin since other major airlines all had a lot more exposure to hurricane season. That's one benfit to operating in the west coast.

jordanh wrote:

JammyBritton27 wrote:

https://alphastreet.com/bite/d0aaa20
ALK posted a 4% YoY profit growth and a 35% revenue growth for Q3 2017, as it continues the integrating with West Coast carrier Virgin America.

Wasn't that revenue "growth" just the results of AS and VX being combined - with the additional revenue being what came over from VX?

Wall Street was predicting $2.32 per share earnings; it was actually only $2.14. Somebody will be disappointed...

Yep, ALK down 10% today as of right now.

jordanh wrote:

JammyBritton27 wrote:

https://alphastreet.com/bite/d0aaa20
ALK posted a 4% YoY profit growth and a 35% revenue growth for Q3 2017, as it continues the integrating with West Coast carrier Virgin America.

Wasn't that revenue "growth" just the results of AS and VX being combined - with the additional revenue being what came over from VX?

Wall Street was predicting $2.32 per share earnings; it was actually only $2.14. Somebody will be disappointed...

Its stock is down 10% on those results. Revenue and earnings both missed estimates. Cost increases were far above estimates, as well. Load factor down. I suspect we will see a brake put on expansion.

jordanh wrote:

JammyBritton27 wrote:

https://alphastreet.com/bite/d0aaa20
ALK posted a 4% YoY profit growth and a 35% revenue growth for Q3 2017, as it continues the integrating with West Coast carrier Virgin America.

Wasn't that revenue "growth" just the results of AS and VX being combined - with the additional revenue being what came over from VX?

Wall Street was predicting $2.32 per share earnings; it was actually only $2.14. Somebody will be disappointed...

Yeah, right. VX was accretive to this qtr results.

Congrats to my co-workers on a nice quarter! That said, there are some headwinds, but we're going to face them head-on.

F9Animal wrote:

Awesome!!! Alaska is just chugging right along. Any talk about aircraft and the Airbus at all?

The first Airbus in AS livery will appear sometime in January 2018.

tphuang wrote:

Probably going to end up with the best margin since other major airlines all had a lot more exposure to hurricane season. That's one benfit to operating in the west coast.

And a drawback to operating on the West Coast is AS has no less than 5 major operations (ANC, SEA, PDX, SFO, and LAX) sitting on seismic zones that are capable of monster earthquakes. And SEA and LAX are overdue.....

But back to the headline, another great quarter for AS (and VX).

Cheers,
David

I think potential seismic activity that can occur anytime within the next 250 years is not something Wall Street is terribly concerned about.

jbs2886 wrote:

jordanh wrote:

JammyBritton27 wrote:

https://alphastreet.com/bite/d0aaa20
ALK posted a 4% YoY profit growth and a 35% revenue growth for Q3 2017, as it continues the integrating with West Coast carrier Virgin America.

Wasn't that revenue "growth" just the results of AS and VX being combined - with the additional revenue being what came over from VX?

Wall Street was predicting $2.32 per share earnings; it was actually only $2.14. Somebody will be disappointed...

Its stock is down 10% on those results. Revenue and earnings both missed estimates. Cost increases were far above estimates, as well. Load factor down. I suspect we will see a brake put on expansion.

Load factor was flat at a solid 85% year over year even with 7% capacity growth over AS+VX's combined 2016 capacity and 20 new routes started in Q3 alone. I don't think we're going to see brakes that aren't related to resource constraints anytime soon.

tphuang wrote:

They are really great at cost control. The casm was flat despite higher fuel cost vs last year q3.

It will be interesting to see if they can keep those costs under control going forward. The arbitrator's decision on a joint pilot contract should be out in the next week or two, and that's likely to include large pay increases. Right now Alaska pilots are running 18-25% behind Southwest on hourly rates, and the Virgin America group is more like 40%. The comparisons aren't any better with DL, AA, and UA so it seems likely that a large increase in pilot costs is in the near future. If they don't get a large pay raise, I'd expect to see an exodus from the bottom of the seniority list as DL, UA, WN, and AA poach their pilots, raising training costs at Alaska. If they get a big pay raise, you can expect that other employee groups will take note and push for similar gains.

It's difficult to see how AS doesn't have to fight quickly rising labor costs in the near future.

WkndWanderer wrote:

jbs2886 wrote:

jordanh wrote:

Wasn't that revenue "growth" just the results of AS and VX being combined - with the additional revenue being what came over from VX?

Wall Street was predicting $2.32 per share earnings; it was actually only $2.14. Somebody will be disappointed...

Its stock is down 10% on those results. Revenue and earnings both missed estimates. Cost increases were far above estimates, as well. Load factor down. I suspect we will see a brake put on expansion.

Load factor was flat at a solid 85% year over year even with 7% capacity growth over AS+VX's combined 2016 capacity and 20 new routes started in Q3 alone. I don't think we're going to see brakes that aren't related to resource constraints anytime soon.

85% is solid, but capacity expansion outpaced passengers. Costs were up significantly and PRASM was down 4-5%. I will just have to disagree with you on expansion; I don't see investors be happy with much more expansion if it comes at these costs - I think they are going to tighten the reins (on the other hand, I would love to be wrong!).

EA CO AS wrote:

Congrats to my co-workers on a nice quarter!

I don't mean to be rude, but this wasn't a nice quarter by any financial measure. ALK stock went down today 13.21%...that is worse than United's earnings call fiasco 6 days ago!

Alias1024 wrote:

tphuang wrote:

They are really great at cost control. The casm was flat despite higher fuel cost vs last year q3.

It will be interesting to see if they can keep those costs under control going forward. The arbitrator's decision on a joint pilot contract should be out in the next week or two, and that's likely to include large pay increases. Right now Alaska pilots are running 18-25% behind Southwest on hourly rates, and the Virgin America group is more like 40%. The comparisons aren't any better with DL, AA, and UA so it seems likely that a large increase in pilot costs is in the near future. If they don't get a large pay raise, I'd expect to see an exodus from the bottom of the seniority list as DL, UA, WN, and AA poach their pilots, raising training costs at Alaska. If they get a big pay raise, you can expect that other employee groups will take note and push for similar gains.

It's difficult to see how AS doesn't have to fight quickly rising labor costs in the near future.

I agree with that their labor cost should go up given that their pilots and fa are so underpaid compared to competitors. However, airlines like frontier and spirit have been able to drag their pilots on for two years without new contract, so there is no telling when as would agree to a new and more expensive labor contracts. Now I do think horizon will continue to have trouble pilots and that alone will put a cap on as expansion plans. Aside from all that, as does seem to keep all cost including merger cost quite low given the amount of work involved. That's a testament to the management there.

On the other head, their rasm declined quite noticeably despite not having the hurricanes to deal with or basic economy fare matching of ua vs nk that have killed the yield on north east to Florida.

And it's pretty obvious why. Those vx routes out of sfo and lax are much more competitive than Sea and pdx. Bos/fll to sfo/lax have been absolute bloodbath for vx. Anyone who followed the fares recently could tell you that. It's unclear to me why the analysts were caught off guard. And then there are the solitary operations out of lga and dca to dal which are huge money losers.

they also announced many routes earlier in the year is only now starting service and ua has added a lot of capacity. Same with transcon markets out of sea and San that will face increased delta and mint pressure over the next few quarters. And southwest entering Hawaii will bring down yields on those routes. So it's not hard to see rasm going down lower over the next year.

But you know, as made the decision to expand out of its comfortable home in pnw. Now it has to deal with the competitive nature of former vx focus cities. It has to continue keeping cost down.

Edit: I just saw an article on skift that reinforces my point. Apparently, prasm on vx markets dropped 7% this quarter and they complained about the sharp price drop of bos lax market. That's just the reality, sub $150 ow transcon ticket is more and more prevalent due to competition. And worth the wealth of lie flat options in the market, vx can't generate money up front to pay for those low y prices. And capacity is only increasing on bos lax and bos sfo.

I think something an analyst alluded to, but AS management refuses to acknowledge, is that a lot of Virgin's cool factor allure is gone with the branding changeover to Alaska; an SFO or LAX millenial might have paid a bit of a premium to book Virgin, but not Alaska. The fact that PRASM on VX markets dropped 7% this quarter isn't exactly a good sign.

Investors and media are not calling Alaska anything positive right now. Its not dooms day, but its also not a "light chop". Its a lot worse at Horizon than people are leading on to believe, and I *am* an Alaska cheerleader. I've been avoiding QX flights at all costs, and others have as well. And before the A.net koolaid drinkers call me out, just look at some of the frequent flyer message boards and social media. Delta is seeing some fairly interesting increases out of Seattle, yet they've cut back flying... I wonder why. Hopefully things "fix" themselves at AAG and it can go back to being a great airline.

From the Seattle Times Article:

Alaska Air Group management acknowledged Wednesday that the ongoing challenges of integrating its big Virgin America acquisition have caused “a lot of anxiety around here… a lot of tough conversations,” and have distracted executives from other issues.

In an early morning internal message from Tilden to all Alaska Air employees, he cautioned that the competitive challenges “are going to get more intense in the months ahead.”

Chief executive Brad Tilden also said ongoing problems with cancelled flights at Alaska’s regional carrier Horizon Air have prompted him to move its flight operations center from Portland to Seattle.

https://www.seattletimes.com/business/b ... rizon-air/

usxguy wrote:

Investors and media are not calling Alaska anything positive right now. Its not dooms day, but its also not a "light chop". Its a lot worse at Horizon than people are leading on to believe, and I *am* an Alaska cheerleader. I've been avoiding QX flights at all costs, and others have as well. And before the A.net koolaid drinkers call me out, just look at some of the frequent flyer message boards and social media. Delta is seeing some fairly interesting increases out of Seattle, yet they've cut back flying... I wonder why. Hopefully things "fix" themselves at AAG and it can go back to being a great airline.

From the Seattle Times Article:

Alaska Air Group management acknowledged Wednesday that the ongoing challenges of integrating its big Virgin America acquisition have caused “a lot of anxiety around here… a lot of tough conversations,” and have distracted executives from other issues.

In an early morning internal message from Tilden to all Alaska Air employees, he cautioned that the competitive challenges “are going to get more intense in the months ahead.”

Chief executive Brad Tilden also said ongoing problems with cancelled flights at Alaska’s regional carrier Horizon Air have prompted him to move its flight operations center from Portland to Seattle.

https://www.seattletimes.com/business/b ... rizon-air/

From the outside looking in, as a person at another regional, it wouldn't surprise me at this point to never seen another 175 delivered to QX. Especially if AS has figured out they can get the same product from OO, for less money. The biggest obstacle there, is that OO is quickly forcing themselves into a coming staffing issue.

What are their best performing routes? Best performing transcons?

dmorbust wrote:

I think something an analyst alluded to, but AS management refuses to acknowledge, is that a lot of Virgin's cool factor allure is gone with the branding changeover to Alaska; an SFO or LAX millenial might have paid a bit of a premium to book Virgin, but not Alaska. The fact that PRASM on VX markets dropped 7% this quarter isn't exactly a good sign.

Virgin America lost $523,000,000 in their first 10 years of operation which is why their directors put them up for sale. Whatever "cool factor" Virgin had needs to go -- it failed long before any acquisition.

Yikes! Stock down over 13% today. AS management is known to be incredibly nimble and sophisticated, and I hope they can pull themselves out of this slump. Some of the comments are...ugly:

https://www.cnbc.com/2017/10/25/did-ala ... erica.html

B752OS wrote:

What are their best performing routes? Best performing transcons?

I don't believe specific routes were outlined, but the following article gives some color:

https://skift.com/2017/10/25/analysts-t ... of-issues/

Key paragraph:

On some key transcontinental routes, Alaska is seeing fares purchased within seven days of departure down 20 to 30 percent while demand remains strong. For example, Boston to Los Angeles fares recently dropped 56 percent on average from $239 to $104 without more planes being added to service the route by the various carriers that fly it.

Interesting that BOS-LAX was specifically mentioned, as B6 launched a fourth Mint frequency on the route a few days ago, and DL will deploy lay-flats during the summer of 2018.

IPFreely wrote:

dmorbust wrote:

I think something an analyst alluded to, but AS management refuses to acknowledge, is that a lot of Virgin's cool factor allure is gone with the branding changeover to Alaska; an SFO or LAX millenial might have paid a bit of a premium to book Virgin, but not Alaska. The fact that PRASM on VX markets dropped 7% this quarter isn't exactly a good sign.

Virgin America lost $523,000,000 in their first 10 years of operation which is why their directors put them up for sale. Whatever "cool factor" Virgin had needs to go -- it failed long before any acquisition.

I completely agree with you that Virgin America's financial history was beyond weak, but then why did Alaska management pay $4 billion for it, decide to remove Virgin branding, and expect to keep and grow that customer base? VX PRASM down 7% this quarter is really bad.

dmorbust wrote:

I completely agree with you that Virgin America's financial history was beyond weak, but then why did Alaska management pay $4 billion for it, decide to remove Virgin branding, and expect to keep and grow that customer base? VX PRASM down 7% this quarter is really bad.

VX gave AS a customer base, gates, planes, and routes that make them a major player in California, especially at SFO and LAX, that would have taken many years for AS to acquire via organic growth, as well as a bigger market share and more access to the east coast. Time will tell it they made a good investment but the VX branding was gone no matter what. Any other airline that acquired VX was going to kill their branding and make them profitable, and they weren't going to survive without an acquisition or a billionaire investor who didn't mind funding millions in losses.

Despite the slump,you really need to applaud AS, on every front they are being fought hard. DL in SEA, WN in CA and PDX. Despite larger carriers wanting to swallow them, nevertheless they persist!

I'm still confused by this rising cost comment
http://investor.alaskaair.com/phoenix.z ... id=2311061
it looks like from their statement that cost is flat

more from seattle times on VX RASM

With the added capacity, Alaska Air is flying new routes mostly in California, while at the same time it also faces intense fare competition from larger airlines.

As a result, revenue per available seat per mile flown — a closely watched measure of an airline’s efficiency — dropped to 13.12 cents from 13.97 cents a year ago, down 6.1 percent. This metric was actually flat on the legacy Alaska routes, but down on the legacy Virgin routes.

Tilden said his team is studying the inherited Virgin routes closely and may reduce frequencies on some and make other changes.

“We are getting our arms around the Virgin network; we’re starting to think about it,” Tilden said. “You’ll see some adjustments to the part of the schedule that we inherited from Virgin America.”

This is the same airline that somehow decided to add a 4th daily on BOS-SFO next summer and is operating 3 FLL-LAX daily flight this winter despite being massive bloodbath.

Oh and AA is most likely deploy lie flat on BOS-LAX next summer also.

What are their best performing routes? Best performing transcons?

best performing transcon probably BOS-SEA, EWR-SEA? among VX routes, maybe DCA-SFO?
next summer, competition on NYC-SAN will get a lot more intense, can't see EWR-SAN being a money maker for them.
JFK/BOS-SEA will be a massive bloodbath by next summer.

Also, I've been seeing a lot of low $200 R/T from LGA to LAX with layover at DAL and $140 R/T from LGA to DAL. That's not going to be doing too well.

DiamondFlyer wrote:

usxguy wrote:

Investors and media are not calling Alaska anything positive right now. Its not dooms day, but its also not a "light chop". Its a lot worse at Horizon than people are leading on to believe, and I *am* an Alaska cheerleader. I've been avoiding QX flights at all costs, and others have as well. And before the A.net koolaid drinkers call me out, just look at some of the frequent flyer message boards and social media. Delta is seeing some fairly interesting increases out of Seattle, yet they've cut back flying... I wonder why. Hopefully things "fix" themselves at AAG and it can go back to being a great airline.

From the Seattle Times Article:

Alaska Air Group management acknowledged Wednesday that the ongoing challenges of integrating its big Virgin America acquisition have caused “a lot of anxiety around here… a lot of tough conversations,” and have distracted executives from other issues.

In an early morning internal message from Tilden to all Alaska Air employees, he cautioned that the competitive challenges “are going to get more intense in the months ahead.”

Chief executive Brad Tilden also said ongoing problems with cancelled flights at Alaska’s regional carrier Horizon Air have prompted him to move its flight operations center from Portland to Seattle.

https://www.seattletimes.com/business/b ... rizon-air/

From the outside looking in, as a person at another regional, it wouldn't surprise me at this point to never seen another 175 delivered to QX. Especially if AS has figured out they can get the same product from OO, for less money. The biggest obstacle there, is that OO is quickly forcing themselves into a coming staffing issue.

Could you point to some factual data that supports AAG can get the same product from OO for less money than QX. OO does not reveal its cost to AS and neither does QX.

A few pertinent points:

o Wall Street doesn't like to be surprised, hence the 13% drop today.
o Wall Street also likes buying opportunities, and that's what you should expect to see tomorrow.
o QX has taken a self-inflicted beating, but the plan to turn that operation around has already borne fruit
o QX is staffed to operate a full schedule going forward and does not anticipate further staffing cancellations
o The QX fleet plan calls for them to take delivery of 13 E175s in 2018
o The operational plan for QX also calls for improved opportunities for flow to AS to market AAG as a career destination for new pilots
o AS had already projected dramatically increased pilot CBA costs into their long term plans when weighing the VX acquisition costs/benefits
o Going to arbitration was part of an agreed-upon framework with ALPA to get a deal done more quickly than traditional, prolonged negotiations
o Transcon fares are depressed, but plans call for moving higher-capacity, lower CASM 737-900ERs to traditional VX transcon markets
o SOC still planned for January 2018
o Single PSS planned for Q2 2018
o First Airbus in AS livery will be in January 2018

So are there challenges ahead? Of course; but despite the headwinds, AS continues to have industry-leading pretax margins.

dashdrvr wrote:

DiamondFlyer wrote:

usxguy wrote:

Investors and media are not calling Alaska anything positive right now. Its not dooms day, but its also not a "light chop". Its a lot worse at Horizon than people are leading on to believe, and I *am* an Alaska cheerleader. I've been avoiding QX flights at all costs, and others have as well. And before the A.net koolaid drinkers call me out, just look at some of the frequent flyer message boards and social media. Delta is seeing some fairly interesting increases out of Seattle, yet they've cut back flying... I wonder why. Hopefully things "fix" themselves at AAG and it can go back to being a great airline.

From the Seattle Times Article:

Alaska Air Group management acknowledged Wednesday that the ongoing challenges of integrating its big Virgin America acquisition have caused “a lot of anxiety around here… a lot of tough conversations,” and have distracted executives from other issues.

In an early morning internal message from Tilden to all Alaska Air employees, he cautioned that the competitive challenges “are going to get more intense in the months ahead.”

Chief executive Brad Tilden also said ongoing problems with cancelled flights at Alaska’s regional carrier Horizon Air have prompted him to move its flight operations center from Portland to Seattle.

https://www.seattletimes.com/business/b ... rizon-air/

From the outside looking in, as a person at another regional, it wouldn't surprise me at this point to never seen another 175 delivered to QX. Especially if AS has figured out they can get the same product from OO, for less money. The biggest obstacle there, is that OO is quickly forcing themselves into a coming staffing issue.

Could you point to some factual data that supports AAG can get the same product from OO for less money than QX. OO does not reveal its cost to AS and neither does QX.

I said if. And AS knows what it costs to fly those 175s at QX, since they own QX. By virtue of contracting with OO, they know what OO is charging them to fly them (including the OO skim). As to which is cheaper, nobody knows. But in terms of economies of scale, OO is going to win, looking at their fleet as compared to the QX fleet. Add to that the fact that the labor force, in general, is much less senior at OO, also helps sway the costs to being lower at OO.

EA CO AS wrote:

o QX is staffed to operate a full schedule going forward and does not anticipate further staffing cancellations

Well that’s not true. The schedule is significantly reduced from what it was. Maybe, hopefully, they’re finally adequately staffed to fly the schedule as it exists but it is not the “full” schedule QX would have anticipated a year ago.

Even on the call, they said Horizon's completion factor is down 4 points; so if its a 98% completion, its at 94%. Still ouch. QX 'adjustments' have been deeper than previously revealed, but as EA CO AS said, its starting to level out. It will still happen, but just not as prominent as before.

Was also good to hear that AS will NOT be doing an Economy Basic product.

And about pilot costs, they are expecting a $140 million hit, but not until Q4 or later.

ucdtim17 wrote:

EA CO AS wrote:

o QX is staffed to operate a full schedule going forward and does not anticipate further staffing cancellations

Well that’s not true. The schedule is significantly reduced from what it was. Maybe, hopefully, they’re finally adequately staffed to fly the schedule as it exists but it is not the “full” schedule QX would have anticipated a year ago.

It's absolutely true. QX did the right thing by right-sizing their schedule to not have additional weeks or months of pre-cancels that would negatively impact customers, and now that new schedule they anticipate operating fully, without any staff-related drawdowns or cancellations. In addition, they're doubling the size of the training department to keep up with the influx of new pilots and those transitioning from the Q400 to the E175. In the meantime, the schedule anticipated a year ago, which was aggressive, can return in time.

Now, perhaps my way of looking at it is glass half-full, but it's also entirely accurate.

EA CO AS wrote:

ucdtim17 wrote:

EA CO AS wrote:

o QX is staffed to operate a full schedule going forward and does not anticipate further staffing cancellations

Well that’s not true. The schedule is significantly reduced from what it was. Maybe, hopefully, they’re finally adequately staffed to fly the schedule as it exists but it is not the “full” schedule QX would have anticipated a year ago.

It's absolutely true. QX did the right thing by right-sizing their schedule to not have additional weeks or months of pre-cancels that would negatively impact customers, and now that new schedule they anticipate operating fully, without any staff-related drawdowns or cancellations. In addition, they're doubling the size of the training department to keep up with the influx of new pilots and those transitioning from the Q400 to the E175. In the meantime, the schedule anticipated a year ago, which was aggressive, can return in time.

Now, perhaps my way of looking at it is glass half-full, but it's also entirely accurate.

They “right-sized” the schedule, i.e. made it smaller, less than “full.”

DiamondFlyer wrote:

dashdrvr wrote:

DiamondFlyer wrote:

From the outside looking in, as a person at another regional, it wouldn't surprise me at this point to never seen another 175 delivered to QX. Especially if AS has figured out they can get the same product from OO, for less money. The biggest obstacle there, is that OO is quickly forcing themselves into a coming staffing issue.

Could you point to some factual data that supports AAG can get the same product from OO for less money than QX. OO does not reveal its cost to AS and neither does QX.

I said if. And AS knows what it costs to fly those 175s at QX, since they own QX. By virtue of contracting with OO, they know what OO is charging them to fly them (including the OO skim). As to which is cheaper, nobody knows. But in terms of economies of scale, OO is going to win, looking at their fleet as compared to the QX fleet. Add to that the fact that the labor force, in general, is much less senior at OO, also helps sway the costs to being lower at OO.

I too am in the regional industry and think there is a bit of speculation with not much fact to back it up. Reference to OO being much less senior. Fact, only 8% of line pilots have been at QX more than 15 years. 48% have been at QX for 3 years or less. Sounds like some stats I might find at Skywest or Envoy.

ucdtim17 wrote:

EA CO AS wrote:

ucdtim17 wrote:

Well that’s not true. The schedule is significantly reduced from what it was. Maybe, hopefully, they’re finally adequately staffed to fly the schedule as it exists but it is not the “full” schedule QX would have anticipated a year ago.

It's absolutely true. QX did the right thing by right-sizing their schedule to not have additional weeks or months of pre-cancels that would negatively impact customers, and now that new schedule they anticipate operating fully, without any staff-related drawdowns or cancellations. In addition, they're doubling the size of the training department to keep up with the influx of new pilots and those transitioning from the Q400 to the E175. In the meantime, the schedule anticipated a year ago, which was aggressive, can return in time.

Now, perhaps my way of looking at it is glass half-full, but it's also entirely accurate.

They “right-sized” the schedule, i.e. made it smaller, less than “full.”

It's the new "full". Had they increased their schedule instead of decreasing it, would they have been flying a "more than full" schedule? No - it'd still be "the schedule". I think we get what he's saying. QX reduced their schedule and now is able to operate that reduced "full" schedule without staffing issues. No need to quibble.

PlanesNTrains wrote:

ucdtim17 wrote:

EA CO AS wrote:

It's absolutely true. QX did the right thing by right-sizing their schedule to not have additional weeks or months of pre-cancels that would negatively impact customers, and now that new schedule they anticipate operating fully, without any staff-related drawdowns or cancellations. In addition, they're doubling the size of the training department to keep up with the influx of new pilots and those transitioning from the Q400 to the E175. In the meantime, the schedule anticipated a year ago, which was aggressive, can return in time.

Now, perhaps my way of looking at it is glass half-full, but it's also entirely accurate.

They “right-sized” the schedule, i.e. made it smaller, less than “full.”

It's the new "full". Had they increased their schedule instead of decreasing it, would they have been flying a "more than full" schedule? No - it'd still be "the schedule". I think we get what he's saying. QX reduced their schedule and now is able to operate that reduced "full" schedule without staffing issues. No need to quibble.

His original point gave the impression they had fixed their staffing problem and were back to flying their normal schedule. No, they reduced the schedule to meet the staffing. As I said, hopefully this means they can fly it now without further cancellations but it is not a “full” schedule if that word means anything.

EA CO AS wrote:

A few pertinent points:

o Wall Street doesn't like to be surprised, hence the 13% drop today.
o Wall Street also likes buying opportunities, and that's what you should expect to see tomorrow.
o QX has taken a self-inflicted beating, but the plan to turn that operation around has already borne fruit
o QX is staffed to operate a full schedule going forward and does not anticipate further staffing cancellations
o The QX fleet plan calls for them to take delivery of 13 E175s in 2018
o The operational plan for QX also calls for improved opportunities for flow to AS to market AAG as a career destination for new pilots
o AS had already projected dramatically increased pilot CBA costs into their long term plans when weighing the VX acquisition costs/benefits
o Going to arbitration was part of an agreed-upon framework with ALPA to get a deal done more quickly than traditional, prolonged negotiations
o Transcon fares are depressed, but plans call for moving higher-capacity, lower CASM 737-900ERs to traditional VX transcon markets
o SOC still planned for January 2018
o Single PSS planned for Q2 2018
o First Airbus in AS livery will be in January 2018

So are there challenges ahead? Of course; but despite the headwinds, AS continues to have industry-leading pretax margins.

Some of this is pure cheese whiz...

QX turnaround is bearing fruit? Laughable. Never mind AS Corporate abruptly moving QX SOC out of PDX to SEA because QX can't operate itself to established norms. And doing so on top of just-around-the-corner combination of Virgin and AS OCC...Everyone in our biz who I know well is in pure agreement that this move means QX is no better.

It might also help that AAG actually have someone in a top-level position who has experience combining carriers. Every AAG person calling the shots comes from the inward thinking world of Alaska - and it's harming the carriers right now. AAG has always been a well-run airline - when focused on their own world. That world is gone now and, so far, the results aren't good.

n7371f wrote:

EA CO AS wrote:

A few pertinent points:

o Wall Street doesn't like to be surprised, hence the 13% drop today.
o Wall Street also likes buying opportunities, and that's what you should expect to see tomorrow.
o QX has taken a self-inflicted beating, but the plan to turn that operation around has already borne fruit
o QX is staffed to operate a full schedule going forward and does not anticipate further staffing cancellations
o The QX fleet plan calls for them to take delivery of 13 E175s in 2018
o The operational plan for QX also calls for improved opportunities for flow to AS to market AAG as a career destination for new pilots
o AS had already projected dramatically increased pilot CBA costs into their long term plans when weighing the VX acquisition costs/benefits
o Going to arbitration was part of an agreed-upon framework with ALPA to get a deal done more quickly than traditional, prolonged negotiations
o Transcon fares are depressed, but plans call for moving higher-capacity, lower CASM 737-900ERs to traditional VX transcon markets
o SOC still planned for January 2018
o Single PSS planned for Q2 2018
o First Airbus in AS livery will be in January 2018

So are there challenges ahead? Of course; but despite the headwinds, AS continues to have industry-leading pretax margins.

Some of this is pure cheese whiz...

QX turnaround is bearing fruit? Laughable. Never mind AS Corporate abruptly moving QX SOC out of PDX to SEA because QX can't operate itself to established norms. And doing so on top of just-around-the-corner combination of Virgin and AS OCC...Everyone in our biz who I know well is in pure agreement that this move means QX is no better.

It might also help that AAG actually have someone in a top-level position who has experience combining carriers. Every AAG person calling the shots comes from the inward thinking world of Alaska - and it's harming the carriers right now. AAG has always been a well-run airline - when focused on their own world. That world is gone now and, so far, the results aren't good.

They are taking action. Isn't that a good thing?
There are going to be few staffing cancellations moving forward. Isn't that a good thing?
They are bringing QX' operations to Seattle so that things get back on track. Isn't that a good thing?

I think AAG has a lot on it's plate right now and they will probably struggle to work through everything coming their way. Hopefully they learn fast and can use the mistakes along the way as lessons for the future.

jordanh wrote:

Wall Street was predicting $2.32 per share earnings; it was actually only $2.14. Somebody will be disappointed...

the horror the horror

I remember the days when if the airline posted a profit the stock would go through the roof. Now if you post a 17% margin versus last years 18% the investors want to burn the witch.

dmorbust wrote:

EA CO AS wrote:

Congrats to my co-workers on a nice quarter!

I don't mean to be rude, but this wasn't a nice quarter by any financial measure. ALK stock went down today 13.21%...that is worse than United's earnings call fiasco 6 days ago!

It was a nice result, not in terms of the stock price though

JammyBritton27 wrote:

dmorbust wrote:

EA CO AS wrote:

Congrats to my co-workers on a nice quarter!

I don't mean to be rude, but this wasn't a nice quarter by any financial measure. ALK stock went down today 13.21%...that is worse than United's earnings call fiasco 6 days ago!

It was a nice result, not in terms of the stock price though

Short interest is up 54% as well. Not sure Alaska has ever had so many betting on the stock price continuing to slide as much as they are now.

N757ST wrote:

I remember the days when if the airline posted a profit the stock would go through the roof. Now if you post a 17% margin versus last years 18% the investors want to burn the witch.

And share prices in those days reflected the low expectations for most airlines. The higher expectations today bring higher prices but there's a penalty to be paid if you miss on your numbers. It's akin to how people have higher expectations from a Lexus compared to a Yaris even though Toyota makes both.

dmorbust wrote:

I completely agree with you that Virgin America's financial history was beyond weak, but then why did Alaska management pay $4 billion for it, decide to remove Virgin branding, and expect to keep and grow that customer base?

ALK really didn't have much choice. They could have let JBLU win the auction, which would have slammed the door shut on growth in California and locked ALK into its Pacific Northwest niche which has faced increased competitive pressure thanks to the new Delta hub at SEA. Keeping the Virgin America branding and product would have resulted in a confusing offering for customers and far less flexibility in responding to changes in markets served; i.e. a VX A320 couldn't be placed on SEA-SNA and an AS 739ER couldn't serve SFO-JFK due to the wrong product and branding for the respective markets. Not to mention the fact that the VX branding carried a license fee to Virgin Group.

IMO buying VA was the least bad alternative compared to letting JBLU get it. AS needed opportunities to diversify beyond SEA, and neither PDX nor ANC is a large enough market to really accomplish that. SLC was a dumb revenge play and also not a very large market. California, while very competitive, was Alaska's best opportunity to grow and they enjoy some brand recognition there. But given their product offering and brand positioning, they're going to have to make some adjustments. And, FWIW, I still think their decision to hang on to DAL was a dumb move -- and the fares show it.

DiamondFlyer wrote:

AS knows what it costs to fly those 175s at QX, since they own QX. By virtue of contracting with OO, they know what OO is charging them to fly them (including the OO skim). As to which is cheaper, nobody knows. But in terms of economies of scale, OO is going to win, looking at their fleet as compared to the QX fleet.

OO may well be able to operate more cheaply than QX, but then AS pays a guaranteed margin to OO which might make the all-in cost higher. There's also some value to having the captive subsidiary in that it gives AAG some flexibility in negotiations with the outsourced regional providers. If SkyWest/Republic/Trans States don't sharpen their pencils quite enough, AAG can take the business back. With the consolidation in the regionals over the past decade or so, those carriers have likely regained a bit of negotiating leverage.

VX had many issues; one thing they did not was choice real estate in key markets. That the markets are complementary for AS is a big plus.

Every airline, including Delta, have had their hiccups. AS is but they will get over it. Obviously, SFO/LAX are great but even better is access to East Coast. No one succeeds without getting out of their comfort zone. AS has, and eventually will get it right!

EA CO AS wrote:

o Wall Street doesn't like to be surprised, hence the 13% drop today.
o Wall Street also likes buying opportunities, and that's what you should expect to see tomorrow.

Stock is currently down 4pts today... No one is buying the story. Their competitive picture is only tougher in the future, there is no sign of an easing anywhere.

Even their leadership knows it:

usxguy wrote:

From the Seattle Times Article:

In an early morning internal message from Tilden to all Alaska Air employees, he cautioned that the competitive challenges “are going to get more intense in the months ahead.”

https://www.seattletimes.com/business/b ... rizon-air/

ScottB wrote:

DiamondFlyer wrote:

AS knows what it costs to fly those 175s at QX, since they own QX. By virtue of contracting with OO, they know what OO is charging them to fly them (including the OO skim). As to which is cheaper, nobody knows. But in terms of economies of scale, OO is going to win, looking at their fleet as compared to the QX fleet.

OO may well be able to operate more cheaply than QX, but then AS pays a guaranteed margin to OO which might make the all-in cost higher. There's also some value to having the captive subsidiary in that it gives AAG some flexibility in negotiations with the outsourced regional providers. If SkyWest/Republic/Trans States don't sharpen their pencils quite enough, AAG can take the business back. With the consolidation in the regionals over the past decade or so, those carriers have likely regained a bit of negotiating leverage.

The problem is, today's newhire regional pilot, is the most technologically connected group of pilots ever, and they do their research. QX is a burning dumpster fire right now, that offers nothing to potential new hires. They have no real unique bases, no pay that's outstanding, no sort of career progression to speak of. And obscenely long seat locks.

Money would eventually solve the problem, but AS doesn't seem to be interested in that solution.

DiamondFlyer wrote:

The problem is, today's newhire regional pilot, is the most technologically connected group of pilots ever, and they do their research. QX is a burning dumpster fire right now, that offers nothing to potential new hires. They have no real unique bases, no pay that's outstanding, no sort of career progression to speak of. And obscenely long seat locks.

Money would eventually solve the problem, but AS doesn't seem to be interested in that solution.

Agreed completely, although AAG does have a card up its sleeve in that they apparently plan to offer better flow between QX and AS, which could make QX a more attractive choice for applicants -- subject to AS rates also rising to a level more comparable with the Big 4. But really, QX is a problem for which the blame falls squarely on AAG management. They played hardball with the QX pilots by forcing them to take concessions in exchange for not farming the E175 flying out to OO and the chickens have finally come home to roost.

vadodara wrote:

VX had many issues; one thing they did not was choice real estate in key markets. That the markets are complementary for AS is a big plus.

Every airline, including Delta, have had their hiccups. AS is but they will get over it. Obviously, SFO/LAX are great but even better is access to East Coast. No one succeeds without getting out of their comfort zone. AS has, and eventually will get it right!

How is it getting any better?

Last year at vx q3 earning call, they explicitly said that their rasm went down 7% due to pressure from mint. And this year, with wealth of options on these transcon markets, their rasm went down another 8%. All this could be seen. If vx had been left alone, they would have gone under pretty soon from these pressure. All the markets where they used to be able to get premium on their nice fc cabin now have been invaded by better options. All the markets remaining markets don't generate the revenue to pay for those seats. How is any of this going to change with more transcon markets getting lie flat options in the next few months?

Transcon markets have changed and it appears as management have not accepted it.

They think somehow the sub $150 transcon tickets are abnormally, when that seems to be the norm going forward where carriers use the j cabin to pay for lower y cabin prices. Markets like bos sfo, fll lax are going to be bad for a long time until at least one of the players drop out.

VX established a name for itself in its Premium cabin offerings and built a loyal following of high yield customers in the transcon market as a result. I just don't see how Alaska is going to be competitive in those markets with the well established MINT product of JetBlue and lie-flat beds offerings of the legacies. There are good premium cabin products in the market. What is going to be Alaska's competitive advantage for the high yield transcon customer demographic?

EA CO AS wrote:

A few pertinent points:

o Wall Street doesn't like to be surprised, hence the 13% drop today.
o Wall Street also likes buying opportunities, and that's what you should expect to see tomorrow.

ALK just closed down over 5% today. No offense but you should stick to working for an airline, not prognosticating the market.

Jamake1 wrote:

VX established a name for itself in its Premium cabin offerings and built a loyal following of high yield customers in the transcon market as a result. I just don't see how Alaska is going to be competitive in those markets with the well established MINT product of JetBlue and lie-flat beds offerings of the legacies. There are good premium cabin products in the market. What is going to be Alaska's competitive advantage for the high yield transcon customer demographic?

It seems to me from the outside (call me an uneducated fan) that AS has taken over VX gates, and has largely been using them to open new routes into "fly-over" country, and and is generally lessening VX's former reliance on said highly competitive trans-con routes.

Please correct me if I'm wrong.