Cargo to deliver $150mn profit for Alaska by 2027

Alaska Air Group targets $1bn incremental profit in three years, launch Alaska Accelerate.

Cargo to deliver $150mn profit for Alaska by 2027
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Seattle-based Alaska Air Group, which includes Alaska Airlines, Hawaiian Holdings, Horizon Air and McGee Air Services, announced the launch of Alaska Accelerate, its three-year strategic plan to deliver $1 billion in incremental profit following the combination with Hawaiian Airlines.

"There has never been a more exciting time to be a part of Alaska Air Group," says Ben Minicucci, CEO, Alaska Air Group. "We have built a winning business model that has enabled us to outperform the industry over the past two decades. Now, with the combination with Hawaiian Airlines, we will transform our business and solidify our competitive advantage for years to come.”

The company's 2027 targets include:

*Earnings per share of at least $10

*Double digit pretax profit margins 11-13 percent

*No margin dilution in year 1 following the merger

*Synergy estimates doubled to at least $500 million.

“To win in our industry, you must have relevance and loyalty, and that’s exactly what we are accelerating over the next three years," says Shane Tackett, CFO, Alaska Air Group. "The combination with Hawaiian gives us the scale to be stronger than either of us could have been on our own – giving guests what they want, where and when they want it. And it will drive substantial financial results that will continue to set us apart from our competitors."

The company will begin offering new non-stop flights on A330 aircraft to key Asian markets in 2025 – connecting Seattle to Tokyo Narita in Japan and Seoul Incheon in South Korea.

"Daily non-stop Seattle-Tokyo Narita service starts in May 2025, offering guests an option between the Pacific Northwest and Japan. Non-stop Seattle-Seoul Incheon service is scheduled to begin in October 2025."

The group plans to expand to at least 12 international widebody destinations by 2030, utilising a dozen Boeing 787-9s gained through the acquisition. Hawaiian has so far taken delivery of two, with 10 remaining on order.

Growing cargo business
"As Asia represents 22 percent of the total global air cargo market, the new passenger service between the continental United States and Japan and South Korea are the first steps to directly connect Alaska’s Seattle flagship cargo hub to the world’s most lucrative cargo markets."

The combined network and widebody fleet is poised to double in revenue over the next few years, the presentation added. "The expanded cargo organisation is led by industry veterans and is estimated to unlock margins that are two to three times the system average."

Jason Berry, EVP, Cargo, Alaska Airlines and President, Horizon Air said during the presentation that the cargo business is set to expand in strategic importance for the group and deliver $150 million incremental profit.

"Network synergies ($35 million), Yield and Optimisation ($55 million) and CMI+other ($60 million) will drive profit," Berry said.

He added that the combined network improves schedule quality and profitability (6,000 to 18,000 lanes) and reduces the gap on widebody belly performance.

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