Alaska Introducing Basic Economy, Restricts Generous Change Fee Policy
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Alaska Airlines reported a number of updates during its earnings statement on Monday. The airline will launch Saver Fares to compete against the basic economy fares offered by United, Delta and American. Alaska will also begin charging extra for exit-row seats. Furthermore, only elite-status MVP Gold and 75k members will be able to waive change fees for itinerary changes made more than 60 days before departure date. Finally, Alaska will begin adjusting its Premium Economy pricing in real time to reflect competitive market rates.
According to Alaska’s Chief Commercial Officer Andrew Harrison, the new Saver Fare is expected to add $100 million in annual revenue in 2019. Ancillary fees, elimination of fee waivers and other pricing shifts will further pad the airline’s bottom line by an estimated $50 million.
These announcements followed in the wake of Alaska’s first quarter earnings report, which saw a profit margin of $4 million, or 3 cents per share. Alaska Chief Financial Officer Brandon Pedersen stated that “management is not happy with our results,” and explained that the impending changes would add revenue that would “improve the profitability of the business.”
Travelers may be unhappy, but stockholders are not: After Monday’s news, Alaska’s stock rose by $3.72, or 5.7%, to $69.11.
Executives on the earnings call also stated that the merger with Virgin America was progressing well. One of the biggest merger milestones will take place Tuesday night, when Virgin’s passenger-service system will officially be merged into Alaska’s reservation system. The transition, taking place 16 months after Virgin America was acquired by Alaska, will result in a single reservation system, a single mobile app and a single booking site.
Simultaneously, all physical branding will be updated overnight, so Wednesday morning passengers will only find Alaska Airlines branding at all 29 of the airports served by Alaska and Virgin America.
“We’re getting through the most intense part of the merger,” Chief Executive Brad Tilden explained. “When that is done, the majority of our systems-integration work will be behind us.”
Despite Q1 2018’s tiny profit margin, Alaska Airlines performed better than its management team predicted toward the end of 2017, when analysts anticipated a loss in the first quarter due to multiple costs including the continued merger efforts, rising fuel prices and an increasingly competitive market.
Featured image courtesy of Alaska Airlines.
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