How to run a profitable airline

Alaska Airlines provides the blueprint to running smarter, more profitable airline.

In a time when the airline industry in the United States is consolidating and airlines are getting larger -- with the most recent merger happening between two of the industry's largest airlines, U.S. Airways and American Airlines -- it's a much smaller airline that's consistently turning profits.

Alaska Airlines isn't a household name outside of the West Coast of the United States (except for maybe the free wine it offers on some flights). Its 124 planes pale in comparison to United's more than 700. And its passenger rank is near the bottom of the busiest 10 airlines in the country. But its profit margins are some of the industry's best. Four of the last six quarters Alaska Airlines has seen the largest profit margin of the largest U.S. airlines. The last few years are no fluke. In the past 39 years, the company has been profitable in 33 years. So what's the secret to the company's success? According to a profile by the New York Times, innovation and data.

As the name suggests, the company does a lot of business in Alaska. But Alaskan airports have some of the most treacherous weather conditions in the world for flying. To be successful, the airline has to be able to fly in and out of one of its top regions, bad weather or not. So the airline innovated, developing satellite guidance technology to make it easier and safer for pilots to fly in and out of airports during poor weather conditions. The technology has helped the airline lead the industry in on-time performance the past three years. Last year, 87 percent of its flights landed on time. The technology has been so successful that the U.S. Federal Aviation Administration wants to implement the technology on a larger scale throughout the U.S.

But a focus on data has also been a key to the company's success, the New York Times reports:

Alaska can keep costs down in part because it measures obsessively. The airline has established 50,000 points of data to improve its on-time performance, from the time bags are loaded and passengers board to when the pilot pushes back from the gate. It also figured out that if it could shave just a minute of taxi time from each flight, it could save 500 minutes, or over eight hours, a day — the equivalent of flying an extra plane daily, said Ben Minicucci, the chief operating officer. If such small efforts allowed the carrier to free up a plane, it could generate $25 million to $30 million in revenue a year.

While airlines are obsessing over getting bigger, Alaska Airlines is showing that bigger isn't always better. It's smarter business that matters most.

Alaska Airlines, Flying Above an Industry’s Troubles [New York Times]

Photo: Flickr/AvgeekJoe

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