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Alaska Air Group SWOT & PESTLE Analysis

ID : 52553953| Jun 2019| 15 pages


Business Sector :Aviation

Operating Geography :USA, Canada, Mexico and Costa Rica

About Alaska Air Group :

Alaska Air Group incorporated in 1985 is headquartered in Seattle and serves 44 million customers over 115 destinations in 4 countries. It operates two airlines, Alaska Airlines and Horizon. In 1932, two airlines were founded – Barnhill & McGee Airways and Star Air Service. These two airlines, along with others, merged over the years till Alaska Airlines was formed in 1944. It has the fifth highest passenger traffic among all American airlines. Virgin America has been a member of Air Group since it was acquired in 2016. In 2018, Virgin America and Alaska combined operating certificates to become a single airline, and legally merged into a single entity. Alaska Air Group had over 23,000 employees as of January 2019.
Alaska Air Group's vision is "To become the favorite airline for people on the West Coast."

Alaska Air Group Revenue :

$8,264 million – FY ended Dec 2018 (YoY increase of 5%)
$7,894 million – FY ended Dec 2017

Competitive Analysis of Alaska Air Group

The SWOT analysis for Alaska Air Group is presented below:
1. Long track record of financial outperformance
2. Customer friendly loyalty program
3. Competitive advantage through low fare and high value model
4. Focus on continuous improvement and cost efficiency
5. Rapid progress in labor integration
6. High level of employee engagement
1. Dependency on West Coast markets
2. Integration impacting margins and financial position
1. Popularity of social media
2. Synergy between online and offline channels
3. Opportunities in airline retailing
1. Fuel price fluctuations due to unpredictability in crude oil prices
2. Highly competitive industry
3. Loss of partner airlines
4. Disruption of operations due to system failures
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Detailed SWOT Analysis of Alaska Air Group



1. Long track record of financial outperformance: Alaska Air Group has a long track record of financial outperformance compared to the airline industry in general, over 2010-2018. Pre-tax margin of the airline industry was 10.4% during this period, whereas Alaska has seen a margin of 15.1%. Free cash flow margin of Alaska was 7.8%, very much higher than the industry figure of 2.1%. Alaska has shown a return on invested capital of 16.7% compared to 13.6% in the industry. The adjusted net debt to EBITDAR ratio of 0.9x compared to the industry figure of 1.8x. Alaska has also shown 9 years of positive free cash flow compared to just 6.2 years of the industry. Alaska Group has seen a stellar 2018 with a market capitalization of $7.5 billion, revenue of $8.3 billion, passenger traffic of 46 million and 1300 departures per day.

2. Customer friendly loyalty program: Alaska Airlines keeps improving its frequent flyer program, unlike other airlines who are actually devaluing their programs. Alaska’s program is one of the few programs that still awards miles based on the distance flown, irrespective of ticket price, which makes it easier for customers to win the perks of the program. Alaska’s partnership with multiple airlines like American, Fiji, Emirates and Finnair allows customers to use their Alaska miles to fly with many other airlines around the world. Alaska miles are also cheaper than most other carriers. Their parental leave policy puts the loyalty status of new parents or any others undergoing big life changes on hold for a year. The mileage plan of Alaska allows customers to earn and redeem to more than 900 destinations, with low redemption prices. The Alaska Airline Credit Card has many benefits compared to the Credit Card of Delta. The annual fee of Alaska Credit Card is $75, compared to $99 of Delta. The $99 companion certificate of Alaska Credit card is also popular, whereas Delta does not have any such offer. After the Virgin America merger, the loyalty revenues have increased by $280 million to $1 billion annually. The Group has won 11 consecutive JD Power awards for high customer satisfaction.

3. Competitive advantage through low-fare and high value model: The company’s low fare model is a source of competitive advantage by providing high value to the customers. Alaska provides the highest guest relevance in the West Coast due to its cost structure being 20% lower than legacy carriers. The Saver Fare product introduced in 2018 offers greater choice for passengers by allowing them to buy and pay for the ticket type and amenities that they want. Products like these, as well as enhancements to onboard products, will enable the company to deliver significant value to passengers. The high value that Alaska provides has won many awards for the company. The passengers also get generous rewards and the feel of a premium product at a lower price.

4. Focus on continuous improvement and cost efficiency: Alaska Air’s young fuel-efficient fleet of aircraft cuts fuel costs and reduces investments on new aircraft for a few years. 60% of the company’s fleet consists of the new Embraer 175 aircraft whose operational efficiency helps the airline cut costs. This is a part of the company’s focus on continuous improvement which helps in keeping costs low and enhancing customer experience. Upgrade of interiors, addition of new food and beverage to the in-flight menu, expansion of in-flight entertainment options are other ways of fostering customer loyalty. Alaska is among the most fuel efficient carriers in USA, with a value of 81.4 ASMs per gallon, behind only Spirit. The average fleet age of Alaska is just 8.3 years, again trailing only Spirit.

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Check Out Analysis of Other Relevant Companies

References used in Alaska Air Group Analysis Report

1. Why Little Alaska Airlines Has the Happiest Customers in the Sky

2. Annual report

3. Domestic market share of leading U.S. airlines from January to December 2018

4. 5 Trends for the Global Airlines Industry

5. Socially Conscious: How Airlines are Using Social Media to Drive Brand Engagement

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Alaska Air Group SWOT & PESTLE Analysis - SWOT & PESTLE.COM

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In-text: (SWOT &, 2020)

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Alaska Air Group SWOT and PESTLE analysis has been conducted by Nipunn V and reviewed by senior analysts from Barakaat Consulting.

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Alaska Air Group SWOT & PESTLE Analysis
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