Alaska Airlines has reported an understandably weak performance in the second quarter of 2020. While grappling with a loss of over $200 million, the airline has nevertheless managed to drive down its cash burn by around 70%. Even so, the group is still facing up to the prospect of furloughing as many as 7,000 workers in October.
Significant loss, but with some highlights
Alaska Airlines today reported a significant loss of $214 million over the second quarter of 2020, the largest loss the airline has suffered in history. This came amid a slew of unprecedented statistics, such as flying at capacity levels that were 75% below the prior year and total revenues that were down 82% for the quarter.
As bad as this number was, the airline’s management was keen to stress that its comparable with the wider industry, and potentially better than some competitors have achieved. Kicking off the investor call today, CEO and President of Alaska Airlines, Brad Tilden, was clear about the drastic impact coronavirus has had on the profitability of his airline. He said,
“This global health plan dynamic an industry devastation is economic devastation is worse than anything we’ve been through before … I’m very confident that we’re taking the right steps to get us through the crisis and to ensure our long-term success
“Our crews and workers have continued to provide our guests with remarkable care … changing policies have introduced a great deal of complexity to our operation, and our people have handled this complexity with poise and grace, educating our guests about the in airport and on board policy changes and providing them the best and safest experience possible.”
The airline proudly reflected on the lowering of its cash burn over the most recent quarter, which it said was the fastest drive down in the industry. Alaska’s cash burn declined from over $400 million a month in March down to $120 million by June, a staggering reduction of 70%. However, the airline did admit that July’s cash burn would likely be higher due to the slowing of ticket sales and the variable cost of incidental flying.
Facing up to 7,000 workers too many
Alaska is planning for capacity to be down 35% in the fourth quarter. Against management’s wishes, this does mean that some of the workforce will need to be cut. The airline estimates that around 7,000 of the 23,000 strong workforce could be furloughed, although it says it is aiming to minimize the number of involuntary furloughs as far as possible.
30% of the workforce is on some sort of voluntary leave of absence already. However, the airline will send out WARN notices to potentially impacted workers on August 1st. Tilden was reticent about this, saying,
“Our employees did nothing to cause or contribute to the economic environment that has led us to make these challenging decisions. They’ve given everything they’ve got to push Alaska and Horizon forward. These two facts make these decisions incredibly difficult.”
Alaska is also reducing its management positions by 300 people, around 15% of the current workforce. These come on top of a reduction of around 200 which had already been enacted.
Official oneworld invitation received
During today’s earnings call, Tilden took the opportunity to officially announce the airline’s formal invitation to join the oneworld alliance. He said,
“Our alliance teams and many others have continued to lay important groundwork for our future by moving our partnerships with American and oneworld forward. We’re pleased to announce that we’ve received our formal invitation to join the oneworld alliance and we have challenged our teams to accelerate their behind the scenes efforts to push for our entrance by the end of the year.”
In summary, while it’s been a tough year, Alaska is looking positively towards the future. Its new networks, new alliance position and close relationship with American Airlines should give it the strength it needs to return to profitability as soon as the situation allows.
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