The Seattle-based carrier saw revenues from its first-class and Premium Class economy seats rise by double-digits year-over-year in the fourth quarter, Alaska commercial chief Andrew Harrison said during a quarterly earnings call on Tuesday. Notably, premium revenues rose faster than the airline added premium seats to its fleet, an indicator of profitable growth.
“Our goal is to keep out premium cabins affordable, provide generous benefits to our loyalty members while competing effectively against our peers," Harrison said. He added that premium revenues are an "important contributor" to Alaska's earnings growth going forward.
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Alaska is far from alone in betting on premium dollars. Delta Air Lines, by far the leader in the segment, saw a nearly double-digit rise in premium- and loyalty-related revenues in 2019, and is seeing "increasing product affinity" from its business class and premium economy investments, according to executives.
United Airlines, for its part, is expanding domestic first class cabins on its Airbus A319s and A320s, and adding 50-seat Bombarder CRJ550s that have 10 first class seats to expand its premium offerings in smaller markets.
Alaska tries to differ its premium offerings from those of its competitors. For example, on lucrative transcontinental routes between New York and the West Coast, the airline paved its own trail eschewing the lie-flat first class seats offered by competitors for a new first-class recliner seat. However, it offers complimentary upgrades to its elite frequent fliers on the routes — something travel consultancy Atmosphere Research founder Henry Harteveldt has called a "prized" perk — that either are not offered or are hard to snag on competing nonstops by American, Delta, JetBlue Airways and United.
Related: Delta says passengers are spending big on its premium products
Another way Alaska is boosting premium revenues is adding first-class seats to its jets. The airline had retrofitted roughly 60% of its 61 Airbus A319s and A320s with 12 first-class and 24 premium economy seats at the end of December. This represents four additional first class, and up to 12 additional premium economy seats on each aircraft.
The first reconfigured A320 entered service in February.
Operating revenue at Alaska grew 6% year-over-year to $8.78 billion on a 65% increase to $1.06 billion in operating income in 2019. The airline achieved a pre-tax margin of 12%.
