Even though many airlines have been cancelling their Boeing Max 737 orders following two fatal crashes, Alaska Air seems to be moving in the opposite direction, having doubled its orders despite the grounded situation of the aircraft.
Following the merger of Alaska Airlines and Virgin America in 2016, Alaska's management contemplated whether to keep Airbus planes or replace them with Boeing 737s – with the expectation of making a final call by end of 2017. But with the merger execution getting tougher than expected, leading to sharp profit erosion, Alaska's management had to postpone the decision as reducing near-term capex investment became the priority. So, Alaska Air chose different fleet types - Alaska flew only Boeing 737s while Virgin America used Airbus A320-family planes.
There are two main reasons why this decision is crucial. First, there is extra complexity in terms of incremental costs of maintaining mixed fleet. Second, replacing the vast majority of existing A319s and A320s with Boeing 737 MAX may also upgrade Alaska’s fleet to a more efficient technology much faster.
But isn’t it strange that Alaska is investing on an aircraft that is still grounded?
The answer may be no, as with nearly 100 successful flight tests Boeing has already developed software fix, cockpit changes, and enhanced pilot training procedures to prevent any future accidents. It expects that the grounding would be lifted by the summer of 2019.
Alaska’s pending decision to return to a single fleet type may give it the advantage to secure rock-bottom prices for up to a decade of aircraft purchases. As of the end of 2018, Alaska’s mainline passenger fleet consisted of 159 Boeing 737s and 71 Airbus A319s, A320s, and A321neos.