williwaw

Some excerpts from the call yesterday. I just pulled out some items I thought you all might like. Trascript has more on Airbus leases, Love Field, Paine Field, and loyalty program numbers.

Earnings and Performance
In the second quarter, total revenues grew 6.1% to $2.3 billion and a 1% increase in capacity as unit revenues increased 5.2%, well ahead of our initial guide of 3.5%. Our pretax margin was 15.8%, 300 basis points better than prior year and our adjusted earnings per share improved 31%.

Milestones in Past Quarter
Looking back on the second quarter, here are some of our biggest accomplishments. First, as Brad mentioned, our employees were awarded with our 12th consecutive JD Power Award, a true testament to the exceptionalism of our people. I couldn't be more proud of the hard work they put in every day to take care of our guests and run a great operation.

Second, we are now realizing the full run rate of the $330 million of revenue initiatives and synergies we launched over the last several months. This includes the increased benefit from the cross-fleeting of our higher gauge lower unit cost Boeing aircraft into the most capacity constrained markets with overflow demand. We should see the biggest impact from these changes during the peak summer travel season in Q3.

Third, we completed the painting on all of our Airbus aircraft and we are 25% through the interior renovations, which will provide more premium seating and increased revenue per aircraft.

Fourth, after a rough operational start to the year, due to the Pacific Northwest storms, we have claimed our way back to first place year-to-date for on-time departures and second-place in DOT on-time arrivals and I'd be happy to address the nuance of these two measures in Q&A. For the second quarter, we were first among the top carriers in both of these categories.

And on the regional side, Horizon is topping the leader board when it comes to operational performance, number one in the regional industry year-to-date by a wide margin. I want to give a shout out to the entire team at Horizon for a complete turnaround in their performance over the past couple of years.

Hawaii and Transcon Routes

We beat industry RASM by approximately 190 basis points this quarter. Ex-MAX related unit revenue outliers for some carriers, our revenue initiatives and synergies delivered on that goal. Breaking Q2 down further, I'd like to provide a bit more detail on the year-over-year unit revenue increase. First, in terms of challenges. Although not as impactful as the first quarter, we continue to see softness in Hawaii pricing due to the significant year-over-year growth in overlapping weighted competitive capacity of 6% to 7%.

[In response to Q&A on general efforts to push up Hawaii fares across the industry] Yes, I think for - on the Hawaii side, there has been marginal attempts at pushing things up a little bit. There has been nothing major at all. I think what really we're fighting here is significant seat increases year-over-year in this marketplace. And so, but we are filling the airplanes although you know at cheaper fares. But again, that's one of the assets that we have here with First Class, Premium Class and new Saver Fare product, all of these things are working to help, in some cases, overcome some of the softness in the fares.

A quick note on transcon markets. I want to thank all of our operational and commercial teams that have rallied around improving our performance in this region. We've made several changes including more focused marketing, cross-fleeting and a concerted effort to improve both cancel rights and on-time performance.

Most importantly, our station and in-flight crews have been focused on delivering consistently great guest service, all to help improve the financial performance and guest experience of these important routes and it's working. Although we have a ways to go, we did experience significant improvement in RASM and double-digit increases in California transcon margins year-over-year and we see continued momentum as we head into Q3.

Shift to Amadeus RM

In fact, we recently announced that we are implementing a new state-of-the-art Amadeus Revenue Management system, which will be fully deployed by next year - by the middle of next year and will result in better revenue performance in our 2020 and beyond. With the structural changes we've made to our revenue model, we continue to feel confident in our 2019 objective to outperform industry RASM and look forward to building on this solid platform for used accounts.

Question:
You've been very clear and consistent on that. And then just for my follow-up piqued my interest with the Amadeus RM system upgrade middle of next year. What specific capabilities do you think this will provide for you? And is there any sort of transition risk around that as you rotate over to that system? Thanks.

Andrew Harrison
This is Andrew. That's a great question. We always worry about transition risk. We're working off honestly 20-year-old technology and we've had to design and build a lot of technical reports to manage around that. So this will be next generation state of the art. It will also allow us to do O&D pricing, which today we just don't have any capabilities for and it's also going to be allow our analysts and our teams to be much more focused on the macro matters, and the system will take off a lot of the heavy lifting there doing at the individual analyst level, so we can get better results.

So we'll talk to you more about that as we move into 2020, it's an initiative we have real revenues tied to that. We're not ready to share that yet. And then on the revenue risk is always risk, but the team has a fantastic plan as they are going to start to layer in markets independent from the system, so a little bit of an overlap, if you will. And so we're going to do this in a measured cautious manner, so that we don't expose ourselves to any real significant revenue risk.

Brandon Pedersen
We're not going to go to true or O&D pricing out of the gate, we'll stick with - change vendors but go to segment pricing and then in time, we'll move to a --

Andrew Harrison
O&D will be later on when we are ready to pull the trigger on that and we'll start with certain regions and will turn those on, in the new system and then we'll just continue to roll them out.

Question
Yes, thank you very much. And I just continue on with the Amadeus quickly, why choose Amadeus is my understanding is it the best aspect of that is the international component, does that suggest maybe a more of an international focus going forward or was there some other reason for that vendor selection? Thank you.

Andrew Harrison
Without going into details. We did a very starrer RFP looking at all the vendors and it came down to cost, it came down to capabilities, it came down to what our RM Team needed and wanted for our network today and our future network. So that's, that was the decision.

Brad Tilden
But to be clear, I don't think new international service. I don't think that was a big driver.


Full transcript: https://seekingalpha.com/article/427...all-transcript

sltlyamusd

milypan

sfozrhfco

At the moment the improvements were largely due to the fact that the calendar changed from winter to spring/summer Transcons make money in peak season and then generally always do. If things are radically improved in calendar Q4/Q1, then we can say that things are turning around.

fly18725

rustykettel

eponymous_coward

Alaska Air Group reports second quarter 2019 results | Alaska Air Group Inc

But that "Although not as impactful as the first quarter, we continue to see softness in Hawaii pricing due to the significant year-over-year growth in overlapping weighted competitive capacity of 6% to 7%" seems to be WN marching into CA-Hawaii markets. It's tough all over.

UAPremierExec

The current revenue management system is 3rd party. ARI (Amadeus Revenue Integrity Solutions) have been lightning focused on updating its products while others are just kinda offering status quo. Amadeus in general has been a lot morr aggressive.

But what this means is a lot more dynamic pricing, and yes. the opportunity for hidden city ticketing.

chrisl137

It also means they'll be more competitive in general on flights with connections - they end up with a lot of silly non-competitive prices for routes that I might actually book because it's all priced as end-to-end segments. It might be a step on the way to improving the network as well - the pricing currently doesn't work well for spoke-hub-hub-spoke routing, even if the hubs made geographic sense for doing that (which they don't much of the time).

beckoa

This also grabbed my attention...

jjmadison

I agree with that. Pre-merger, one used to be able to sometimes find last minute IAD-LAX-SFO flights that were cheaper than IAD-SFO. Since the merger, IAD-LAX-SFO has been idiotically overpriced. That now makes sense if status-quo AS RM was really as rudimentary as was indicated on the earnings call. In retrospect, AS should have moved to the VX RM system over a year ago. Their lack of foresight has been leaving money on the table, forcing price-conscious customers to fly with their competitors on last-minute transcon bookings.

eponymous_coward

milypan

ft543

Chugach