Alaska Airlines takes income hit, revamps reward program
Published Saturday, July 26, 2008
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Stumble It!FAIRBANKS — Alaska Airlines’ net income took a hit in the second quarter because of the rising cost of crude oil, and now the most widely used mileage plan on the West Coast is having to re-evaluate its reward program and management.
The company reported a net loss of $14.1 million, or $0.41 per share on Thursday.
At this time last year, Alaska Airlines reported a $47.2 million profit.
“Skyrocketing fuel prices have eclipsed the improvements we’ve worked so hard to achieve in every area of our business,” Bill Ayer, Alaska Air Group’s chairman and chief executive officer, said in a statement.
The company’s stock took a dive Thursday when it sunk to $1.77, an almost 9.4 percent decrease.
Ayer referred to this as “the most difficult period in commercial aviation history,” in a press release on Thursday.
A press conference was held following the release and made available online to investors and customers.
“Our program has always been one of the most generous in the industry, with lower award levels and more robust benefits than any other carrier,” said Steve Jarvis, Alaska Airlines’ vice president of marketing, sales and customer experience. “With the current state of the industry and impact on fuel prices on our bottom line, we’re forced to refine our program to make it viable for our airline while maintaining its strong value for our customers.”
The airline’s frequent flier program was initiated during a time when flight costs were much lower.
“When Alaska Airlines introduced its popular 20,000-mile ‘Saver’ award 13 years ago, we were paying less than $20 a barrel for crude oil,” Jarvis said.
As of Friday, the cost for crude oil was at about $136 a barrel.
The frequent flier program will increase its mileage plan requirement to receive travel rewards as of Nov. 1 and will add a $25 fee for redeeming travel with other airlines.
The popular “Coach-Saver” plan will increase its requirement from 20,000 miles to 25,000 miles, as well.
A full detailed description of the changes to the mileage plan is available on www.alaskaair.com, the airline’s Web site.
Alaska Air’s sister carrier, Horizon Air, has made management cuts by 13 percent recently, but plans to make further cuts in management and more capacity cuts in the future.
Alaska Airlines has not announced if capacity will be cut by grounding aircraft or reducing the number of flights available.
The company expects to cut back on staffing to save $7 million.
The Airline plans to have a decision published in early September regarding what action it will take.
Community Discussion
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Years ago a saver award was 15,000 miles. (I suppose that there was a reason for leaving that bit of information out). Then it was 20,000. Now 25,000.
I guess that I should've used my miles, huh...
Meanwhile, Tesoro's rewards program, offering either 300 Alaska Airlines Miles, or a whopping $5.00 worth of free gas for a full booklet of 24 stamps, hasn't increased in value since gasoline was roughly $1.25 to $1.40/gallon here. At least back then, if you traded in a full booklet, you got over 3 gallons of gas as your 'reward.' Now you get a smidgeon over a gallon... or 300 Alaska airlines miles, in exchange for what amounts to buying some of the most expensive gas in the area.
24 stamps, at 8 gallons per stamp, times $4.50/gallon, equals $864.00 for either $5.00 worth of 'free' gas, or 300 frequent flyer miles with Alaska Airlines, equalling all of $2.88 in fuel per mile.... Yeppers, that's some kinda' reward system.
At that rate, my next 'free' ride on Alaska Airlines will be..... Never mind, I'll be feeding the worms by then.. I didn't have much incentive to fly with 'em anymore, anyway, what with TSA's indignities, and the resulting significantly increased rates of theft of personal items fro luggage, now that the government has taken over baggage screenings in their mission to "keep us safe."
Fuel is a pass-on cost. They need to stop using it as a scapegoat.
I wonder how many flights a day will be cut from Fairbanks once tourist season is over? Wonder how much more in rent they have to pay at Uncle Ted's window to the future airport in Fairbanks, bet they would like the old one back.
Alaska Airline has been sticking it to Alaskan's for decades. They know it and we know it...
In my opinion, I think Alaska Airlines has been more than fair. As someone who travels more than twice a month, I have found their service to be courteous and their flights on time. They have given everyone plenty of warning that the rates are rising, and they aren't adding a charge on top of miles like so many other airlines are doing. The prices of food and everything else are rising every day. Fairbanksans are paying much more at the grocery store than Anchorage shoppers, and I'm not sure that is appropriate. Alaska Airlines extra bag charge to go out of state is reasonable, and I think it was an enlighted way to handle their extra costs for fuel. Travelers within the state still can bring up to 3 pieces, last I checked, and that shows they have a commitment to Alaska.
Yes, it is hard to pay more for things, but, this is the world we live in now.
Thank you
Fuel prices go up, ticket prices go up. Just glad they gave us a warning before putting the new plan in place... i just booked my vegas ticket using miles.
If you check the stats, Alaska Airlines went from being one of the most frequently on-time airlines in the country, to being one of the least frequently on-time..
They haven't been 'routinely on time' for a long while now. Pretty much since shortly after their lax maintenance attitude toward the MD-80s that ultimately resulted in the plummetting of Flight 261..
Yes, earned miles are now worth more because 20,000 miles now buys you a $300 ticket that used to cost $200 (an increase of 50%). However, in order to earn 20,000 miles today one must spend 50% more than before. Thus, the price of oil is completely irrelevant to the cost of running the miles program. Instead, they are using the increased price of oil as an opportunity to gouge the consumer. Moreover, I challange the legality of reducing the value of already earned miles by unilaterally changing the terms of the contract between Alaska Airlines and its mileage program customers. Bottom Line: Alaska Airlines should be ashamed of its actions.
We have been at Alaska Airlines mercy for many years now... Can you say price gouging!
Maybe if gas goes down and I get a passport I will still be able to leave on a trip!! Border Patrol here I come.
When i read Dirks post about when gas was 1.40 a gallon i must admit i wept and longed for the good old days when ten dollars would keep my lawn mower fueled for the whole summer so far this summer i have spent twenty six bucks on gas for mower damn gas hog. I know this was off topic sorry.
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