Alaska Airlines had their Investor Day yesterday, and was incredibly transparent in sharing some interesting statistics in their presentation (you can watch their webcast here). I was especially fascinated by what they revealed about their Mileage Plan program, in particular when it comes to award redemptions.
Possibly the most interesting thing they shared is a chart breaking down Alaska’s mileage redemptions by airline redeemed on:
84% of Alaska’s award redemptions are for travel on Alaska. Then another 12.5% of redemptions are on American and Delta (and it’s interesting to note that even though Delta is Alaska’s biggest partner, more than twice as many redemptions are on American, which really just reflects how little saver award space Delta releases).
But the truly shocking part is that only 3.5% of miles are redeemed on all other carriers, including Cathay Pacific and Emirates. Of those 3.5% of redemptions, 40% are for travel in first or business class. That means only ~1.4% of Alaska miles are redeemed for first or business class travel on partner airlines other than American and Delta. Interestingly, in the past 10 years the number of award redemptions on partner airlines has actually decreased — 10 years ago only 74% of redemptions were for travel on Alaska, while 26% of redemptions were for travel on partner airlines.
So while I was somewhat quick to dismiss Alaska’s award chart changes which were announced a couple of days ago given that they only applied to redemptions on Alaska and didn’t impact saver level coach awards, it probably impacts a lot more members than I would have thought, given that 84% of people are redeeming their miles for travel on Alaska. It’ll be interesting to see whether the number of redemptions on partner airlines increases, given that most airline partners are now bookable online, and available for one-way redemptions.
Speaking of Mileage Plan, they also revealed that of the three million Mileage Plan members, roughly a million have their co-branded credit card. That seems like a lot.
Another interesting fact revealed during the presentation is that on average five first class seats are paid for per flight. Most of Alaska’s planes have 16 first class seats, so that means roughly a third of Alaska’s first class seats are paid for, while the rest are upgraded into. While Alaska thinks their cabin layout contributes to half of their cost disadvantage compared to low cost carriers, they’re committed to keeping first class since they think it’s something Mileage Plan members value. In order to hopefully sell more first class seats, Alaska will be introducing more first class fare buckets. Presently they only have a single first class fare bucket, which probably makes them the only airline where that’s the case. By introducing more fare buckets they’ll better be able to segment the first class market.
Alaska’s partnership with Delta was also brought up, and whether they’re actually friends or enemies, given Delta’s expansion in Seattle. As you’d expect they answered that they’re constantly reevaluating partnerships. They hinted at the possibility of their partnership with American growing, which could make sense of Delta’s growth in Seattle continues.
Anyway, lots of interesting insights, so be sure to check out the presentation.
(Tip of the hat to MileCards)
I wonder if it's b/c there are households like us who have 4 or just because they whore out their card on every flight?
Currently in Hawaii via nonstop flights for two (exit row seats) for $630 RT nonstop daytime flights with companion fare. CX is aspirational but this is doable and reasonable for average working folks with AS CC.
I've perused their entire presentation. Like others, I was surprised at the low level of int'l redemptions. I've never used AS miles domestically and given all the talk amongst FT members, I really thought it would be higher.
@Lucky: Of the 2 scenarios you presented in #17 above, I think #2 is most plausible. Don't think the DOJ would allow a DL/AS tie up. And, nor would I, if I were King of the World. ;^)
I'm not at all surprised by a million Alaska credit cards out there. Everyone in Seattle has one! Seriously, I used to work retail and saw that card more than any other by an order of magnitude (Hawaiian Airlines was the next most common...). I imagine Portland and all of Alaska are similar.
On the redemption front, I'm also not surprised at the low number of non-Delta/AA partner awards. Given that Alaska is not...
I'm not at all surprised by a million Alaska credit cards out there. Everyone in Seattle has one! Seriously, I used to work retail and saw that card more than any other by an order of magnitude (Hawaiian Airlines was the next most common...). I imagine Portland and all of Alaska are similar.
On the redemption front, I'm also not surprised at the low number of non-Delta/AA partner awards. Given that Alaska is not part of a branded alliance, I'd venture that the casual Alaska flier isn't even aware that you can use miles on KLM, Cathay Pacific, Emirates, etc. Alaska doesn't really advertise the option, at least that I've seen, so unless you're poking around the website looking for alternative ways to use your miles, you might not come across it. The partnerships with Delta and AA are much more visible.
@ William -- I'd say long term is probably 2-5 years. My guess is that American and US Airways first want to get their merger figured out, and I wouldn't be surprised if after that they form a much closer partnership with Alaska (if Delta hasn't taken them over by then).
The low percentage of partner redemptions really took me by surprise. The fact that they did release award chart increases and they were only...
@ William -- I'd say long term is probably 2-5 years. My guess is that American and US Airways first want to get their merger figured out, and I wouldn't be surprised if after that they form a much closer partnership with Alaska (if Delta hasn't taken them over by then).
The low percentage of partner redemptions really took me by surprise. The fact that they did release award chart increases and they were only on their own metal suggests to me that maybe those are all the devaluations we'll see from them for now.
What do you consider long term? as in the next couple years perhaps?
and knowing what we do now about partner redemptions do think the possibility of partner awards increasing substantially is unlikely since their not often redeemed for in the first place?
@ Vik -- I think for Alaska there are two plausible long term scenarios:
-- They merge with Delta
-- They cut ties with Delta and increase their partnership with American
Both could work, but I don't think the current abusive relationship with Delta will last much longer.
Interesting... I don't really think of Alaska miles as anything else but an easy way to Emirates F... I guess most people who redeem do not care about aspirational products.
@ Matt -- Interestingly it's as a percentage of flown segments by carrier. In other words, a roundtrip on Alaska from San Francisco to Seattle counts the same as a Cathay Pacific roundtrip from San Francisco to Hong Kong.
@ Terry -- Not just you, it's among the most uncomfortable first class products out there, in my opinion.
@ snic -- That would be interesting indeed. My guess is that the percentage of partner redemptions on United is MUCH higher for many reasons:
-- United allows you to mix partners while Alaska doesn't. It really is a challenge to book an Alaska international partner award, whereby it can be incredibly rewarding if you know how to, but if you don't, it's a challenge.
-- Alaska only recently began allowing most partner...
@ snic -- That would be interesting indeed. My guess is that the percentage of partner redemptions on United is MUCH higher for many reasons:
-- United allows you to mix partners while Alaska doesn't. It really is a challenge to book an Alaska international partner award, whereby it can be incredibly rewarding if you know how to, but if you don't, it's a challenge.
-- Alaska only recently began allowing most partner redemptions on their website, and only recently began allowing one-ways on partners, both of which should increase the number of partner redemptions.
-- I would guess United's customer base is much more global/international. Alaska only flies domestically, so proportionally they probably attract more passengers that travel almost exclusively domestically vs. internationally.
So I would imagine at United the percentage of passengers redeeming on partner airlines is much, much, *much* higher.
@ Craig -- I wondered the same thing. If the latter I think we account for about half of the cards. :D
@ TravelinWilly -- Sorry, I didn't phrase that well. I took out the word other from "other low cost carriers." They're benchmarking their costs compared to low cost carriers and legacies, so I shouldn't have had the word "other" in there.
What chance of a future AA/US and AS tie up? The route networks seem to line up really well
Lucky, when you say "But the truly shocking part is that only 3.5% of miles are redeemed on all other carriers, including Cathay Pacific and Emirates."
Is that chart showing percentages of *redemptions* per carrier or percentages of *miles*? I'd assume redemptions just from looking at the picture, but I didn't look at the actual webcast. And since international partner redemptions are the most expensive ones, that could mean a higher percentage of miles are...
Lucky, when you say "But the truly shocking part is that only 3.5% of miles are redeemed on all other carriers, including Cathay Pacific and Emirates."
Is that chart showing percentages of *redemptions* per carrier or percentages of *miles*? I'd assume redemptions just from looking at the picture, but I didn't look at the actual webcast. And since international partner redemptions are the most expensive ones, that could mean a higher percentage of miles are used on partners even though the number of bookings are fewer.
Any Mileage Plan member who does not have the Alaska CC is a bit foolish as its companion fare is probably the best deal of any CC.
@Terry -- AS has the worst domestic F seats. Period. They have zero padding.
Is it just me or their first class seats look/are super old and uncomfortable? (I've never been on an Alaska plane.)
Hm. I wonder what a similar pie chart would look like for United. If only 3.5% of Mileage Plus miles are redeemed for elite cabin awards on partners, why the massive increase in miles cost for these awards? Is there any reason to think the fraction is significantly greater over at Mileage Plus?
It also shows why they can afford to be quite generous with some of their CX/EK redemptions. If more people were redeeming for international travel, I can see those International Partner redeptions being devalued!
Given that the majority of Americans only travel domestic, it makes sense that less than 5% of award redemptions are on partner airlines.
Alaska is a LCC? I've never perceived them as such. Do they refer to themselves as a LCC?