Meanwhile, the carrier's cost per available seat mile excluding fuel, the airline industry's principal cost metric, has declined from 8.73 cents in 2001 to 7.85 cents in 2010. The most important component of the effort to attack cost has been the restructuring of the airline's fleet, once a diverse collection of inefficient aircraft and now composed entirely of Boeing 737s. Last week, Alaska said it will convert the fleet at regional subsidiary Horizon entirely to Q400s.
Labor cost reductions have also helped, as have a wide range of other cuts, all made while avoiding bankruptcy. "We recognized we probably would have ended up there," said Pedersen. "But we went the harder route. We focused on the business and we changed all of the things we could change."Of course, labor cost reductions do not please everybody. "The work group is frustrated," said Kiana Peacock, vice president of District 143 of the International Association of Machinists, which represents about 3,500 agents, ramp and office workers and is the biggest union at the carrier. Last month, about 2,800 agents and office workers overwhelmingly ratified a new three-year contract. The contract "is not everything we wanted financially," Peacock said, but members approved because it includes a side letter that restricts outsourcing through 2015. "That was our main purpose going into negotiations," she said, noting that in 2005, about 475 Seattle ramp workers lost their jobs under a contract provision that enabled outsourcing if an outside vendor was less expensive, creating worries among remaining IAM members.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV