March 5, 2018, © Leeham Co.: Nothing is as frustrating to a journalist as interview a great subject who doesn’t offer up anything especially useful.
I had a brief sideline interview with one such person at the US Chamber of Commerce Aviation Summit 2018 last Thursday in Washington (DC). Great guy. Not much information.
Brad Tilden, CEO of Alaska Airlines, wasn’t going to be drawn into a discussion of two hot topics facing his carrier. Tilden had just come off an airline CEO panel, where he in his typical Boy Scout charm and enthusiasm opined about the state of the industry, praised the progress of the integration of Virgin America into Alaska and commented on a host of issues. But two topics didn’t come up.
I asked him about the competition vs Delta Air Lines in Seattle, where the two airlines are locked into a major market share battle. I also asked him about the fleet planning now that Alaska operates the Airbus A319, A320 and A321neo inherited from the acquisition of Virgin America. Alaska hitherto has been an all-Boeing 737 operator and recent, Ray Conner, former CEO of Boeing Commercial Airplanes and a good friend of Tilden, joined the Alaska board of directors.
“I think we’re doing great,” Tilden said of Delta’s challenge. “Our whole attitude about this is competition makes you better. We’ve used the competition to double down on being the very best airline we can be.”
Alaska is expanding its North Satellite terminal at Sea-Tac. The satellite will have 20 gates when the project is done, from 16 today. The carrier, with its sister company, Horizon Air, also has the entire C Concourse and some gates on another, for a total of about 33 gates, depending on the flying, Tilden says.
Delta is the leading driver in the airport’s expansion of its International terminal. Delta several years ago also asked the airport for a total of 33 gates.
Asked to comment on the apparent parity, the normally articulate Tilden stumbled, finally saying, “I don’t want to talk about a number (Delta will have). We’ve got a 52% or 53% share there. I do not want to be quoted talking about them.”
Tilden was no more forthcoming about planning for the combined Airbus and Boeing fleets. In the past, Tilden strongly hinted the Airbuses would go. But LNC has pointed out the leases for the smaller Airbuses extend to 2024 and the leases for the 10 new A321neos (four of which have been delivered) are 12-year leases committed by Virgin before the merger. Virgin has 30 A320neos on order, which Alaska said can be canceled for a relatively small forfeiture of deposits (in the $24m range, if I recall correctly).
Thus, it appears Alaska will be flying the Airbuses at least through 2030. The carrier is currently evaluating the operating economics of the Virgin fleet and comparing them with Alaska’s 737s.
Alaska ordered 37 Maxes, well under what it needs to replace the 737NGs as they age. Virgin operates more than 60 leased A319s and A320s, so it, too, is under-ordered.
There is a big opportunity for Boeing and Airbus to win a major order for more than 100 airplanes from Alaska. Boeing, with its typical arrogance, is certain it will win. Given Tilden’s tilt toward Boeing, the odds seem to be in Boeing’s favor. With the addition of Conner to the Alaska Board, the odds seems to increase.
Tilden, however, wasn’t forthcoming when I asked how he liked the A321neo so far.
“I think the important thing to say is we’re super, super proud to have the Boeing product,” he said. “The 737 is running great. We do have some Airbus airplanes now as a consequence of our acquisition of Virgin America. We’re still getting to know the airplanes.”
With Conner now on the Board, does this mean Boeing is a lock for future orders?
“The responsibility of the company and the Board is to make the right long-term decisions for the fleet,” Tilden said. “We don’t want to make fleet announcements before we make fleet announcements. I will say we’re thrilled to have Ray on the Board. He’s an extraordinary guy.
“I don’t think we have anything useful to say about the fleet,” Tilden said. I’d agree with that.
I asked Tilden what he thought about the prospective Boeing NMA/797. Once again, Tilden wasn’t helpful.
“I don’t want to be quoted about that,” he said. “I don’t know enough about it. You can quote me saying that.”
It’s always good to talk with Tilden, if in this case not especially productive.
Last week, LNC reported that Southwest Airlines CEO Gary Kelly expects the airline fleet eventually will comprise about 60% of smallest 737.
An ex-Boeing salesman is skeptical. Anytime a smaller airplane is deferred, he says, by the time the build date approaches, market demand invariably prompts the customer to up-gauge to the next size.
For Southwest, this would be the 737-8. It also will represent quite the leap in size. In WN’s configuration, the 737-7 will seat 155. The 737-8 seats 175.