Alaska Airlines is setting its sights on significant growth, aiming to boost profits by $1 billion by 2027. The airline is banking on the rising demand for premium travel and its recent acquisition of Hawaiian Airlines to achieve this ambitious target.
The $1.9 billion purchase of Hawaiian Airlines, finalized in September, has opened new opportunities for Alaska Airlines, granting it access to cross-Pacific routes and wide-body aircraft such as the Boeing 787 Dreamliner and Airbus A330. While both Alaska and Hawaiian Airlines continue to operate as separate brands, the acquisition has positioned Alaska for a major expansion of its international network.
Starting in May 2025, Alaska Airlines will launch direct flights from its primary hub at Seattle-Tacoma International Airport to Tokyo’s Narita International Airport using Hawaiian’s Airbus A330-200 aircraft. This will be followed by another new route in October, connecting Seattle to Seoul’s Incheon International Airport. Tickets for the Tokyo route became available on Tuesday, with tickets for the Seoul flights expected to go on sale in early 2025.
Alaska’s long-term vision includes serving at least 12 international destinations from Seattle by 2030, using wide-body aircraft to transform its route network and increase its global presence.
Strong financial outlook and shareholder confidence
As part of its growth strategy, Alaska Airlines announced plans to repurchase $1 billion worth of shares, signaling confidence in its future performance. The airline also projected pretax margins of 11% to 13% by 2027 and expects earnings per share to exceed $10.
In October, Alaska estimated its 2024 earnings to range between $3.50 and $4.50 per share, inclusive of Hawaiian Airlines’ results. Additionally, the company has raised its fourth-quarter earnings forecast to between 40 and 50 cents per share, up from an earlier estimate of 20 to 40 cents.
These optimistic projections have bolstered investor sentiment. Alaska Airlines shares have surged nearly 40% this year, outperforming the S&P 500’s 27% gain. Following the announcement of its new plans, the airline’s stock rose around 10% in premarket trading.
Expanding premium offerings and new credit card launch
To capitalize on growing demand for high-end travel, Alaska Airlines is enhancing its premium offerings. The airline is working with Bank of America to launch a new premium credit card, designed to generate additional revenue from travelers even when they’re not flying.
Alaska is also evaluating its premium seat configurations across its fleet, particularly on Hawaiian’s Airbus A330 aircraft. Chief Financial Officer Shane Tackett told CNBC that customers are increasingly willing to pay for enhanced comfort, with more passengers opting for premium economy and first-class seats instead of relying on free upgrades.
“When you look at the last two or three years, most of the revenue growth has been in those demand areas, and I think that trend will likely continue,” Tackett said. “We have a great core cabin product, but more and more people want the opportunity to get into premium economy or first class, and we need to meet that demand.”
The shift in consumer behavior has been evident, with a growing number of first-class and premium economy seats being purchased outright rather than filled through complimentary upgrades.
Competing with Delta Airlines in Seattle
Alaska Airlines dominates the Seattle market with a 55% share of domestic passenger traffic, but it faces stiff competition from Delta Airlines, which holds a 24% share. Delta also has a larger share of international passengers departing from Seattle, giving it an edge in global operations.
To enhance its competitive position, Alaska is investing in customer experience improvements. The airline plans to open a new lounge at San Diego International Airport, catering to its premium travelers. Meanwhile, Delta is also expanding its premium offerings, recently opening Delta One lounges in Boston, New York, and Los Angeles for its highest-tier passengers.
Challenges with Boeing aircraft deliveries
While Alaska Airlines is focused on its growth plans, it has encountered challenges related to aircraft deliveries from Boeing. The airline has experienced delays caused by quality control issues at Boeing, including an incident in January when a door plug on one of Alaska’s nearly new Boeing 737 Max 9 jets blew off after leaving the factory without proper latches in place.
These issues, coupled with a recent machinists’ strike that disrupted production, have slowed Boeing’s ability to deliver planes to customers like Alaska, United Airlines, and Southwest Airlines.
Tackett expressed cautious optimism about Boeing’s progress, noting that ensuring quality must remain the manufacturer’s top priority. “It’s not going to happen overnight,” Tackett said. “We’re in a position where we have to emphasize that quality is far more important to us than production speed.”
Boeing’s November plane orders and deliveries, expected to reflect the impact of the strike, are scheduled to be released Tuesday morning.
A strategy for long-term growth
With its acquisition of Hawaiian Airlines, Alaska Airlines is well-positioned to expand its international footprint and capitalize on the growing demand for premium travel experiences. The airline’s strategic investments in new routes, premium services, and shareholder returns reflect its confidence in achieving its ambitious financial goals.
As Alaska Airlines works to compete with industry giants like Delta and navigate challenges with aircraft deliveries, its focus on innovation and customer satisfaction will be key to its success in the coming years. By 2030, the airline aims to establish itself as a major player in international travel, transforming its operations and reshaping its identity in the global aviation market.
