A report today revealed that Alaska Airlines might be planning to ditch its Airbus aircraft and return to being an all-Boeing airline. With plans for the early retirement of its owned A320s and leases on most of its other Airbus fleet due to expire in the next few years, the airline is ideally positioned to transition away from Airbus.
Alaska’s Airbus fleet to be reduced
Before 2016, Alaska Airlines operated an all-Boeing fleet, even having the slogan “Proudly All Boeing” emblazoned on the front of each aircraft. But, with the acquisition of rival Virgin America, it inherited the smaller airline’s fleet of Airbus planes, all but 10 of which were leased. It also has cancelable orders for 30 A320neo jets.
Since that time, Alaska Air’s management has been looking at the contrasting benefits of operating a mixed fleet against returning exclusively to Boeing aircraft. Any final decision has been repeatedly put off for various reasons. However, as reported today by The Motley Fool, the COVID-19 crisis may have finally prompted the move.
The pandemic prompts action from Alaska
The global pandemic led Alaska Airlines to ground many of its aircraft, and the airline revealed that 12 Airbus planes, including all 10 of the A319s, were permanently parked. Alaska intimated that the Airbus jets would be replaced eventually by the 737 MAX aircraft that have already been ordered. The carrier has also retrained 240 Airbus pilots to fly Boeing 737s.
Furthermore, in an SEC filing last week, in which Alaska confirmed its intention to borrow $1.9 billion under the CARES Act, was a statement that “management has authorized a plan to retire ten owned Airbus A320 aircraft earlier than previously scheduled.” While it doesn’t state when the aircraft will be retired, it will most likely be in the next five years. To retire them now would incur an impairment charge of between $115m and $125m, which wouldn’t make sense in the current climate.
Of the leased Airbus planes, the majority of leases are due to end between 2021 and 2025. Only ten A321neo aircraft have leases that extend to around 2030. But Alaska Airlines could end those leases early and, with the sale of the owned A320s, aim to once again operate an all-Boeing fleet by around 2025.
Good time for a Boeing deal
The timing of Alaska Airlines’ potential return to an all-Boeing fleet is ideal. Boeing has suffered the double blows of the grounding of the 737 MAX and the coronavirus crisis. The manufacturer has only recorded firm orders for 52 of the planes. Boeing is reportedly trying to sell canceled 737 MAX orders to several airlines ahead of the aircraft being recertified.
For Alaska Airlines to replace its Airbus fleet, in addition to replacing its oldest 737s, it would require an order of over 100 of the 737 MAX aircraft. A deal on that scale would be a significant boost for the beleaguered aerospace giant. Alaska should be able to negotiate a big discount and get its renewed all-Boeing fleet at a bargain price.
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