Things in the Sky

I mentioned in my posts from Monday and Tuesday how Alaska’s earnings report was the odd man out in both cases. It’s CASM (cost per available seat mile) with fuel went down, but its CASM excluding fuel went up. Compared to the second quarter of 2007, it’s revenues went up more than its expenses. It’s fuel bill went down 21.8 percent, even though it had one more aircraft, and ASMs increased a modest 1.6 percent.

I was trying to wrap my head around this, and I mentioned it two a friend. He quickly replied: “Two letters, two numbers: MD-80.”

Alaska has been removing many of the fuel-hungry aircraft from its fleet. All of the 737-200Cs were gone last year and were replaced by the 737-400C. Alaska decided to retire the entire MD-80 fleet back in 2006 to transition to a fleet made up completely of 737s as those newer aircraft have better performance. The final MD-80s will be retired in a couple of weeks. Jame Wallace reports that on average, a 737-800 burns about 200 pounds of fuel per hour less than the MD-80 while holding more passengers.

Alaska developed a good fleet strategy back in 2006 to deal with an increase in fuel prices while maintaining capacity. Hopefully some other airline’s can learn from Alaska’s example.