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Alaska Air Group’s Strategy to Drive Growth in 2016 and Beyond

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Snapshot

In its recent Investor Day conference, Alaska Air Group (ALK) highlighted some of its key steps that have resulted in a strong financial performance in 2015. The airline expects this growth to continue in 2016.

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Partnerships and alliances

Alaska Air Group (ALK) has been successful in maintaining healthy partnerships with some major industry players, including Qantas Airways, Emirates Airlines, Hainan Airlines, and AeroMéxico. These agreements have helped ALK increase demand and provide its customers with a wider global reach.

Premium seats

Alaska Air Group plans to launch a premium economy class, which is expected to add ~$5 million to its profits in 2016, $50 million in 2017, and $85 million in 2018.

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Loyalty programs

The airline noted that both its mileage plan and affinity card memberships have grown by more than 43% in the last five years. These memberships grew by 15% and 11%, respectively, in the last year.

The airline stated that it plans to make enhancements in its industry-leading credit card in the upcoming year, which could add ~$60 million to its revenues.

Mobile app

The popularity of ALK’s mobile app has helped it garner a larger share of bookings and check-ins. The airline said its mobile revenues have grown by about 56% in the last four quarters, and about 60% of its bookings are from its own app. ALK expects mobile to add significantly to the company’s growth in 2016.

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Onboard products

Investments in providing better onboard products such as power outlets at every seat, upgraded food options, streaming entertainment, self-tag options for travelers, and improved mobile technology. These products have helped the airline enhance its customer satisfaction experience. Alaska Air Group noted that it plans to add about 48% more space for cabin luggage and provide in-flight Wi-Fi services in the coming year as well.

The PowerShares Dynamic Leisure & Entertainment Portfolio ETF (PEJ) invests 2.7% of its holdings in Alaska Air Group (ALK). It also invests 5% of its holdings in each of Delta Air Lines (DAL) and United Airlines (UAL), 2.5% of its holdings in Allegiant Travel Company (ALGT), and 2.4% of its holdings in JetBlue Airways (JBLU).

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