Days after the Federal Aviation Administration cleared Boeing’s 737 MAX to fly passengers again, Alaska Airlines became the first carrier to expand its fleet of the aircraft.
Alaska announced Monday it will lease 13 MAXs from Los Angeles-based Air Lease Corp (ALC).
Alaska already has 32 MAXs on order directly from Boeing, five of which are expected to be flying by summer 2021. Alaska will begin flying the 737-9 MAX in March.
Following so soon after the plane was ungrounded, the transaction indicates that airlines willing to take new jets in the middle of a historic aviation downturn can get excellent discounted deals.
Alaska is seizing what it sees as an opportunity to advance its business as competitors stumble.
With airlines around the world having parked many of their aircraft because of low demand for air travel, all airplane leasing companies are scrambling to place their jets. ALC had taken 15 MAXs before the jet was grounded and has 126 more on order, the largest commitment to the plane among all lessors.
Alaska, like Southwest in the U.S. and Ryanair in Europe, is seeking to take advantage of the downturn to try to strengthen its position and even increase its market share as rivals contract.
In a Nov. 15 internal message to the airline’s pilots, Capt. John Ladner, Alaska’s vice president of flight operations, cited a maxim he described as “what successful companies do when the going gets tough.”
“Never let a good crisis go to waste,” Ladner said, quoting Harvard Business School Professor Ranjay Gulati, a guest speaker at a recent Alaska leadership planning session.
Ladner reminded the pilots that after the 9/11 terrorist attacks in 2001, Alaska successfully expanded its East Coast routes. Then, during the 2008 global economic downturn, it expanded service to Hawaii.
“Alaska Airlines’ leadership has a proven track record of using challenging times to fortify our future,” Ladner told the pilots. “I’m looking forward to the moves we make to take advantage of this latest crisis.”
The ALC deal will eventually allow Alaska to shed some of the Airbus A320s it acquired with Virgin America in 2016 and replace them with MAXs. The Seattle-based airline had an all-Boeing fleet before the Virgin acquisition and has said recently it wants to retain only the longer-range A321neo Airbus jets.
Brad Tilden, Alaska Air Group chairman and CEO, said the deal is “an opportunity to sell 10 planes that are not in our long-term plans and replace them with 13 of the most efficient narrow-body aircraft available.”
Alaska will sell 10 Airbus A320s to ALC, and subsequently take delivery of the 13 new Boeing 737-9 MAX from fourth-quarter 2021 through 2022.
Alaska said it will lease the A320s back from Air Lease for a short time after the transaction closes.
After permanently parking all A319s and some A320s earlier this summer, this deal leaves Alaska Airlines with 39 A320s in the operating fleet along with 10 A321neos.
In a statement, ALC Executive Chairman Steve Udvar-Házy said the 737-9 MAXs will bolster Alaska’s fleet “just in time as we expect the airline industry will undergo a sustainable recovery starting in 2021.”
In an interview with the Financial Times over the weekend, Ed Bastian, CEO of Delta Air Lines — Alaska’s primary competitor at Seattle-Tacoma International Airport (SEA) — also expressed a potential interest in ordering the MAX.
“We’re talking to Boeing about lots of different things, the MAX included,” Bastian said. “If there is an opportunity where we would feel comfortable acquiring the MAX we’d have no hesitation doing that.”
Delta is the only one among the largest U.S. carriers without MAXs on order, so if it were to buy the jet, that would be a strong boost for Boeing.
Ladner, in his message to Alaska pilots, said Delta “has indicated they are still very interested in stealing market share from us.”
“We don’t intend to allow them to erode our share,” he wrote, adding that in fact the goal is to tighten Alaska’s grip in Seattle, where it currently flies about half of the passengers who pass through the airport.
“In early 2021, you will see us unblocking middle seats and rapidly growing back our stronghold markets, especially in our major hub of Seattle,” Ladner said. “We are aggressively bringing back flying as we begin to execute our plan to broaden our SEA presence and grow our entire network back to pre-COVID levels and beyond.”
In the middle of an unprecedented downturn, Ladner’s message aimed to encourage the airline’s pilot cadre, of whom nearly 800 are currently on extended leave.
“I’m excited to say that we will be bringing a significant number of our pilots back to full flight status in the first half of 2021,” he said.
Boeing stock has surged all of this month in anticipation of the MAX ungrounding and on promising news of potential COVID-19 vaccines. The stock, which was at $144 at the end of October, closed Monday up nearly 6% for the day at $211.36.