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.
Under the new agents and office workers contract, the hourly wage will range from $10.60 to $22. Peacock said the bonus is nice, but "you can't go to the bank and get a bank loan based on a bonus." The contract does, however, put workers near the top of the industry in pay and benefits, the IAM says. Another feature of the contract is that it will provide up to 80% of Alaska agents with the option to work at home at the same rate of pay as reservations center workers get. Alaska's success has come despite a route system that is two thirds leisure-oriented. About 15% of capacity is in Hawaii, while 9% is in Mexico. The focus, however, remains the Pacific Northwest, from Alaska to Oregon. Alaska benefits from its dominant position at Seattle-Tacoma International Airport, a key gateway to Asia. This makes Alaska an attractive alliance partner for Delta ( DAL); Delta has its code on about 100 Alaska routes, while Alaska has its code on about 80 Delta routes. About half of Alaska's departures compete with low-cost carrier flights.