Alaska works to shore up its ancillary revenues through a myriad of initiatives

After growing  topline revenues by +6% and decreased its selling expenses by -3% in 2Q2019, Alaska Air Group’s outlook for 3Q2019 has improved. It expects its unit revenue to increase between +3% and +5%, compared with previous estimates of growth between +2% and +5%.

Among the drivers of that improved outlook has been a stabilisation in pricing – particularly close-in and business fares that were low during the first three months of 2019.

Alaska’s brighter prospects are also driven by its own efforts to push revenue, including through its version of basic economy: Saver Fares. The company does not break out the performance of its segmented fares but has consistently stated that Saver Fares would generate USD100 million in revenue for 2019.

Bolstering its ancillary revenues is a key focus for Alaska, which admits that its current level of ancillary revenue of USD18.50 per passenger is below those of US legacy airlines. Alaska has several initiatives to drive up ancillaries, including tighter change fees, increased bag charges and upgrades to its food and beverage offerings.

Previously, the airline has outlined plans to offer exit row seats for sale, improving its post-sale revenue management, and engaging in dynamic pricing for premium classes.  Alaska is investing in a new revenue management system to replace its existing 20 year old platform, and the updated technology should help the company improve its ancillary revenue performance.