Alaska Airlines: Boeing or Airbus to replace Virgin America fleet
Quick summary
Alaska Airlines is weighing the question nearly every major airline today faces: order more Airbus A320neo family jets or up its commitments for the beleaguered Boeing 737 MAX.
The Seattle-based carrier needs to replace the 61 leased Airbus A319s and A320s that it inherited from Virgin America by around 2024. Those jets begin returning to lessors later this year, prompting the need for a decision.
Alaska's impending narrow-body aircraft campaign, which will likely kick off this quarter, looks set to be the next major order among U.S. carriers. It will also determine the future of Alaska's long-standing slogan: "Proudly All Boeing."
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"We have an opportunity to replace 61 A319 and A320 aircraft with larger gauge, more efficient assets... [that] would give us the ability to generate more revenue while lower unit cost," said Shane Tackett, Alaska's executive vice president of planning and strategy — and chief financial officer from March — during a quarterly earnings call on Tuesday.
The airline will consider either additional A321neos or more 737 MAX 9s or MAX 10s to replace the outgoing jets, Tackett said. The airline operated 10 A321neos — all via its Virgin America acquisition —and had orders for 32 737 MAX jets at the end of December.
The issues surrounding both the Neo and MAX do not appear to weigh on Alaska's consideration, at least not yet. Production delays have plagued recent A321neo deliveries that, for example, have forced JetBlue Airways to lease additional jets to make up for the shortfall of new aircraft.
The 737 MAX's issues are well known. The aircraft has been under a microscope since it was grounded last March. Under Boeing's latest forecast, the jet is not expected to take to the skies again until the middle of the year.
Alaska is due to take delivery of 10 737 MAX 9s this year, though Tackett called the timeline "uncertain."
"Boeing's challenges with the MAX did cause us to rework the sequencing of events and some of our timing," Nathaniel Pieper, senior vice president of fleet, finance and alliances at Alaska, said about the replacement timing for the A319s and A320s. However, he is confident that the airline will make a decision by the fourth quarter.
Related: Why Alaska Airlines is returning to its routes in the West
Alaska has known about the coming A319 and A320 retirements since it bought Virgin America in 2016. In early 2017, Alaska said it would make a replacement decision by year-end — a decision it has punted every year since.
The carrier already has two aircraft options in its back pocket. Alaska has commitments for 30 A320neo family jets with deliveries from 2022 to 2024 in an order it inherited from Virgin, and options for a further 37 737 MAXes. It could exercise either — or both — of these alternatives if it wanted.
Alaska plans to grow capacity by 3-4% year-over-year in 2020. Part of this is its network pivot back to its strongest markets along the West Coast. The airline has unveiled a number of new north-south routes in recent months, including new flights to Monterey, California (MRY).
Related: Alaska Airlines' California expansion lands in Monterey