Alaska Air Group announced today that Alaska Airlines has reached an initial agreement for SkyWest Airlines to acquire the five remaining CRJ-700s in Horizon Air’s fleet and operate them under a capacity purchase agreement. Alaska also announced it is considering the deployment of Horizon Q400s on some state of Alaska routes.
Andrew Harrison, vice president of planning and revenue management, and Joe Sprague, vice president of marketing, answer questions related to these two moves.
Why is Alaska entering into a CPA with SkyWest?
Harrison: Horizon’s financial success depends on its transition to an all-Q400 fleet so it can reap benefits equivalent to what Alaska gained from its own transition to the Boeing 737. That leaves a few longer routes that, for competitive and economic reasons, we need to keep serving with regional jets. SkyWest will fill that need.
What routes will SkyWest be flying?
Harrison: We’re still evaluating that and expect to have an answer in the next month or so. As always with major market changes, we’ll let employees, vendors and airport authorities in these cities know before we announce publicly. What I can say at this point is that SkyWest will primarily be flying the CRJ-700s on some of our longer-haul West Coast routes currently served with the aircraft, but not all of them. Those others will be served by Horizon with the Q400.
Why not have Alaska fly its own jets on these routes?
Harrison: We’ve found that larger jets don’t work well on these routes.
Why is SkyWest flying these routes instead of Horizon?
Sprague: Horizon will not be able to capture the economies of a single fleet until all of its CRJ-700s are gone. In addition, with hundreds of regional jets in its fleet contracted to fly for numerous other customers in similar CPA arrangements, SkyWest has economies of scale that Horizon cannot match.
When will the last five CRJ-700s begin leaving Horizon’s fleet?
Harrison: The current plan is for the last five Horizon CRJ-700s to transition out of Horizon’s fleet starting in April. All current Horizon CRJ-700 flying will either be flown for Alaska with a Horizon Q400 or with a SkyWest CRJ-700 by summer. In order to get the SkyWest CRJ-700s painted in their new livery, some of the flights may need to be temporarily operated with SkyWest 50-seat regional jets until all the CRJ-700s are repainted.
What will be the livery on the SkyWest CRJ-700s flown for Alaska?
Sprague: These SkyWest CRJ-700s will likely sport a version of the Alaska livery. A final decision on this is expected shortly.
Many of our competitors offer a first class cabin on their regional airline partners. Will there be a first class on these SkyWest-operated Alaska flights?
Sprague: Some the majors offer first class on their regional partners as a way to attract very lucrative international business and first class passenger connections. The vast majority of our customers on these SkyWest-operated routes are traveling domestic point-to-point and are very price sensitive. Our experience is that relatively few customers purchase first class seats on our short routes. We believe we’ll gain more revenue by having more seats in a single-class configuration, lowering our per-seat cost and allowing us to remain competitive with the likes of single-class competitors like Southwest and JetBlue.
Will SkyWest offer complimentary Northwest wines and microbrews like Horizon?
Sprague: Yes. This enhances the inflight experience for all customers, including those who would have preferred a first class cabin had it been available.
Why would we want to operate Horizon flights in the state of Alaska?
Harrison: In looking at the average demand for air travel on some intra-Alaska routes, we see in many cases that demand could be accommodated with a 76-seat Q400 and at a lower cost. Replacing Alaska mainline flying with the Q400 would allow us to reduce costs and lower fares on the routes and give us the opportunity to re-deploy 737s on other routes where they can be more profitable. Our commitment to air cargo in the state of Alaska remains unchanged, and that service will continue to be provided primarily by Alaska Airlines, due to the size and quantity of cargo involved.
When could we see the first Horizon Q400s in the state of Alaska and where would they operate?
Harrison: It’s too early to tell, because it’s not a done deal yet. Scheduling people in my group and operations folks at Horizon and Alaska are working up possible scenarios. Should we decide to proceed, it would likely involve two or three Q400s and would not take place before the end of this year. Once we arrive at any decisions, we’ll get the word out.
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