Alaska still plans to take 25 total 737s from 2012 through 2015, but that total is number is now composed of nineteen 737-900ERs and six 737-800s, while it was previously composed of sixteen and nine aircraft, respectively. The carrier will now take three of each variant next year, while it had previously said it would take four -800s and -two -900ERs. In addition, Alaska now plans to accept delivery of nine -900ERs in 2013 instead of two -800s and seven -900ERs.

For those keeping score, here’s a comparison of the 2012-2015 delivery schedule from this week and one from a January 25 investor update:

There were a couple of other interesting data points in the investor update. Mainline PRASM for November was up 6.7% year-over-year, exceeding a 5.0% increase in October. Changes in advance booked load factors for December and January had increased since Alaska’s latest guidance. In addition, Alaska said its fourth quarter cost per available seat mile (CASM) excluding fuel and special items for the fourth quarter would be 7.87-7.91 cents,  right within a prior guidance of 7.85-7.95 cents.

Of course, Alaska adding flights to Hawaii isn’t anything new, and it appears to have been a very successful market for the Seattle-based carrier, but it seems Alaska has traditionally avoided going head-to-head with Hawaiian on routes to Honolulu. Sure, Alaska does compete with them on flights from Seattle and Portland, but that makes sense to me since I think it’s safe to say both cities are home markets for Alaska (plus, Portland-Honolulu was added as Delta was leaving the market).

From my viewpoint, it seems that Alaska has historically competed against Hawaiian a bit more indirectly. For example, according to DOT traffic data for July, Alaska had more flights to more destinations from Maui than it did from Honolulu. So in the Sacramento-Maui market, Alaska offers a nonstop flight while Hawaiian has connecting service. But now that Alaska has had a few years to grow in the market, it now seems more willing to compete head-to-head with Hawaiian.

All of these additions will continue to make the Hawaiian market interesting to watch. Other items to follow include Allegiant’s Hawaiian plans, and Hawaiian’s international growth. The carrier has diversified its network in recent times, adding service to destinations like Osaka and Seoul, and has also been forging partnerships with other airlines, including V Australia and ANA.

First, it appears that the airline has slightly adjusted its 737 orderbook (again). Previously, the carrier would be taking 12 737-800s and 13 737-900ERs through 2015. Then Alaska disclosed last month that the breakdown was now 10 -800s and 15 -900ERs. As a result of that change, the first -900ERs are now arriving next year instead of 2013.

The airline’s latest update now says that it will be receiving 9 737-800s and 16 737-900ERs through 2015, as 737-900ER deliveries in 2013 have increased from five to six, while 737-800 deliveries for that year decreased from three to two.

Also interesting is Alaska’s estimate of economic fuel cost, at $3.30/gallon. The company broke down that price as follow:

Our economic fuel cost per gallon estimate for the fourth quarter includes the following per-gallon assumptions:  crude oil cost – $2.09 ($88 per barrel); refining margin – 95 cents; taxes and fees – 17 cents; cost of settled hedges – 9 cents.

That breakdown would indicate that Alaska’s hedging program is negatively impacting its fuel price. Of course, nine cents of $3.30 is a very tiny sliver — but it’s still a negative hedging impact nonetheless.

The Seattle-based carrier is still slated to receive 25 new 737 aircraft from 2012 through 2015, but Alaska has converted two 2012 deliveries from the 737-800 to the 737-900ER. The airline, which originally ordered the 737-900ER in January, will now receive 15 of the type through 2015.

Thanks to the order conversion, Alaska will now receive its first 737-900ER a bit earlier than planned. The airline was originally to begin receiving 737-900ERs in 2013. Alaska also noted in the filing that its 737-900ERs will seat 181 passengers. Alaska had previously said the type would seat 178 to 184 passengers.

Also worthy of note is the airline’s foretasted third quarter fuel price of $3.22. That’s higher than the number shared by Alaska a month ago, but considering that I wrote about it last month — I wanted to point out that Alaska’s fuel price estimate includes a 3 cent benefit from settled hedges, while the airline had previously estimated a 2 cent cost a month ago.

Fortunately, Alaska really shined over the weekend with its response to the issue. The airline issued not one, but two press releases during the day on Saturday as the situation developed. The carrier’s Twitter page was loaded with responses to customers. In addition, presidents of Alaska and Horizon recorded a video apology on Saturday and posted it on YouTube:

Click here to view the embedded video.

After all of these efforts by Alaska, their customers (spoiler alert!) began to appreciate the airline’s candid public response, at least based on the airline’s Facebook page. Here’s one notable example:

I was notified about the delay when I checked in online early in the morning, I called Reservations and got a truthful explanation of what had occurred, and then was thanked for my patience when I arrived at the airport….And now you post what appears to be an honest apology online. Thank YOU for treating all of us like a valued customer. I hope the same respect, kindness, and consideration that you’ve shown us today is returned by us to all of your hardworking employees — you all deserve it.

There was certainly some negative feedback as well – there were some negative posts on FlyerTalk, for example, but that thread also has comments commending Alaska and Horizon management for being honest and upfront about the issues.

Now, let’s compare this to another airline that recently had technology issues…Southwest. The airline faced a double whammy of technology problems, as one of the carrier’s main telecommunications providers experienced a service outage while Southwest was also upgrading its website for its new Rapid Rewards program. While the airline did post an apology after the fact, Southwest was very quiet during the event, and later said it didn’t see any issues with the way the issue was handled.

To be fair, Southwest probably still handled this situation better than other airlines would have, but I hold the carrier to a higher standard because it has made such a big deal about utilizing social media to communicate with customers.

In conclusion – mega kudos to Alaska for quickly, genuinely apologizing for a major operational issue. By doing so, the airline told it customers that it takes its pledge to be “North of Expected” very seriously.

1. Fuel prices. Alaska currently expects its economic fuel cost* for mainline flights to be $2.74 for the first quarter, up 29% year-over-year. One would have to assume other airlines are seeing such dramatic increases. The run-up in fuel prices has just been incredible.
2. Unit revenues. The airline says that RASM for mainline flights in February was up 1.1% year-over-year, to 12.70 cents. PRASM increased 2.1%, to 10.70 cents. Alaska provided addition context to these gains, saying that they “are compared to RASM and PRASM gains of 16.7% and 13.1% in February 2010, respectively – among the highest RASM and PRASM gains in 2010.”
3. Capacity growth plans. According to this latest update, Alaska plans that full-year mainline and consolidated capacity will increase 8-9% and 6.5-7.5% compared to 2010. This plan is the same as was forecast in January. I only find this interesting as other airlines (like American and United) have been adjusting capacity plans downward in response to higher fuel prices. Of course, this forecast could eventually change.

*Alaska’s definition of economic fuel expense:

Economic fuel expense is defined as the raw or “into-plane” fuel cost less any cash we receive from hedge counterparties for hedges that settle during the period, offset by the recognition of premiums originally paid for those hedges that settle during the period. Economic fuel expense more closely approximates the net cash outflow associated with purchasing fuel for our operation.

I have to say – I really like how the new paint scheme looks. And while it is a little bit sad to see the Horizon retire its brand, the fact that the Horizon name gets such prominent placement on the fuselage is very rare among US-based regional airlines.

Thanks to Russell for letting me post his photos – you can find more of his aviation photography on his Flickr page.

Here’s a chart of the previous and new delivery schedule through 2014:

A little bit of background on the 737-900 – Alaska was actually the launch customer for the type, taking deliveries of twelve aircraft from 2001 to 2004. Overall, the -900 wasn’t all that popular with customers, with only 52 were delivered.

In 2005, Boeing launched the new 737-900ER, which offered multiple improvements over the original type, such as more passenger capacity thanks to more exits and a flat rear pressure bulkhead, increased maximum growth takeoff weight,  and additional range (which varies based on options for auxiliary fuel tanks). The aircraft entered service in 2007 with Lion Air, and so far nearly 300 of the type have been ordered. One can view the aircraft as Boeing’s closed replacement to the 757-200, and the  closest competitor to Airbus’ A321.

So why does this airplane make sense for Alaska? Well, let’s look at an example in Boeing’s press release – Seattle to Orlando. Right now, it appears that the largest aircraft Alaska can toss on the route is a 737-800, and the airline operates two flights per days with that aircraft type. Let’s say Alaska wants to increase supply because demand is strong. Well, that means a third flight needs to be operated with a 737-700 or 737-800, and that comes along additional costs like additional flight crew. Those costs could make an increase in capacity uneconomical. But, if an 737-800 is an upgraded to a 737-900ER, then maybe the additional capacity makes sense, especially as the 737-900ER should have lower unit costs than the 737-800 (partially driven by less fuel consumption per seat).

The 737-900ER should also offer more attractive costs than Alaska’s existing 737-900 fleet. One way I like to look at it is weight.  The 737-900ER’s operating empty weight reported by Boeing (based on a base two-class configuration) is very slightly (less than 100 pounds) lower than that of the original version, and plus it can seat more passengers. So one way to look at is that there is less empty weight per passenger on the -900ER. Fuel burn per seat is also lower on the -900ER than it is on the base version.

Meanwhile, other fixed costs are better spread out thanks to the 737-900ER when compared with a 737-900 or 737-800. For example, two pilots are still required, and the seating configurations of the 737-800, 737-900, and 737-900ER all require four flight attendants as per FAA regulations. Assuming that Alaksa staffs all of the aircraft types with the same number of FAs, that means labor cost is more effectively distributed among passengers.

Anyway, it’ll be interesting to see how Alaska distributes these. I wouldn’t be shocked if some of them ended up at the high-yield, slot-controlled DCA. Alaska uses slots exempt from the airport’s perimeter rule to serve Los Angeles and Seattle. I was also wondering if Alaska would have the 737-900ERs equipped for ETOPS operations so they could fly to Hawaii. An airline spokeswoman that the -900ER “could be used in certain Hawaii markets, but we have not yet made a decision to order the aircraft ETOPS equipped.”

I’m about to hit 600 words here…how do I tie a bow on this one? I guess I’ll just say I like this move.

A major part of today’s earnings news is some changes at Horizon Air that the company’s management has been hinting at over the past few months. One of the most recognizable is Horizon adopting the mainline Alaska brand. Horzion still gets a decent shout-out on the side, but obviously the Eskimo is instantly associated with Alaska:

Photo Credit: Alaska Airlines.

We’ll see the first Q400 in this color scheme in a few weeks, and Horizon also says there might be some newly-delivered Q400s that fly without a livery as Horizon schedules painting.

While I’m sure this move is very disappointing for many Horizon employees, it makes sense. Over the years Horizon has become less and less independent of Alaska. Having all of Horizon’s flying fall under a capacity purchase agreement beginning this year was, I think, the final step that made Horizon like most other regional carriers. Considering that tickets are booked through Alaska, I think this is logical from a brand consistency sense. At least some of the unique features of Horizon, like free beer, will be sticking around.

Another interesting change at Horizon is that the CRJ-700s will be going away for good this year. That’s not entirely shocking because it’s been planned to eventually eliminate that fleet, but now we have a more specific timeline to play with.

Back in 2010, Horizon said in an SEC filing that it had “entered into an agreement to dispose of eight CRJ-700 aircraft in the first half of 2011 through either sublease or lease assignment to a third-party carrier.”

Now, in an investor update filed today, Horizon says that it will remove all thirteen CRJ-700s this year, four of which will be removed this quarter. ”These aircraft will be either be, leased, subleased, or assigned to a third party,” says Horizon.

Worthy of note is that previously Horizon had said it had “accelerated the delivery of the eight remaining Q400 aircraft on order to 2011 to coincide with the anticipated exit dates of the CRJ-700 aircraft.” That would keep the fleet at the same size in terms of numbers of aircraft with the previously CRJ retirements, but with the changes announced today the Horizon fleet will actually shrink slightly this year.

Anyway, interesting stuff at Horizon going on. Alaska also made some news today with an order for 13 737-900ERs, and I’ll be getting to that later.

I decided to ask Alaska about this move. They said when they launched this route back in 2005, they had two flights, but dropped the second in 2007.

So what’s changed? I was told that demand has been improving due to a stronger economy and that the whole swine flu crisis has now blown over.

I decided to look at the T100 data for the route – the latest month available was February so I compared that to 2009. And as you can see, a boost in traffic really helped loads, with flat capacity. (The only reason I can think of for the 30 seat capacity difference is that Alaska has two 737-800 configurations.)

I was also wondering if Mexicana’s financial troubles had anything to do with the move. Alaska tells me that it does help create an opportunity, but it wasn’t one of the primary reasons since that situation is very much in flux right now.

Right now, Mexicana is scheduled to operate 30 weekly flights from Los Angeles to Mexico City, which is eight less than in July.

So this seems like a good move – expanding as a route that is seeing better performance while taking advantage of a competitor’s weakness.

Plus, this looks great from a utilization perspective – the outbound operates as a redeye and returns to LAX the next morning, and I suspect the aircraft wouldn’t just been sitting otherwise.