Businessmodel of Alaska Airlines

Customer Segments

Alaska Airlines has a mass market business model, with no significant differentiation between customer segments. The company targets its offerings at all consumers seeking low airfare.

Value Proposition

Alaska Airlines offers six primary value propositions: innovation, pricing, cost reduction, performance, risk reduction, and brand/status.

The company has embraced innovation from the beginning, with examples including the following:

• Became the first airline to use the Head-Up Guidance System, used to reduce disruptions caused by fog, during a passenger-carrying flight (1989)
• Became the first U.S. airline to offer flights and sell tickets through the Internet (1995)
• Became the first airline to integrate GPS with Enhanced Ground Proximity Warning System (EGPWS) technology (1996)
• Became the first U.S. airline to provide an online check-in option (1999)
• Introduced wireless check-in using a wireless device or web-enabled phone (2001)
• Became the first scheduled-service passenger carrier to operate a flight using Wide Area Augmentation System (WAAS) technology (2009)
• Became the first airline to use iPads in the flight deck (2011)
• Offers service at check-in kiosks, enabling travelers to avoid ticket counters
• Offers biometric (fingerprint) access options for members of its Board Room lounges The airline offers a pricing value proposition. When customers book a reservation on its website or through one of its agents, the lowest available fare at the time is identified. If a customer finds a cheaper fare for the flight on the company’s or a rival’s site, it will refund or credit the difference.

The company reduces costs through various initiatives. It offers discounts through group deals and vacation packages. It also enables travelers to earn bonus miles for flying with its global partners.

The company has demonstrated strong performance through tangible results. It was the first airline to guarantee checked baggage delivery to the carousel within 20 minutes.

The company reduces risk. 100% of its aircraft technicians have completed the requirements for the Federal Aviation Authority’s “Diamond Certificate of Excellence” award – representing the 14th consecutive year it has received the honor. Alaska Airlines also posts travel advisories on its site.

The company has established a strong brand due to its success. Combined with sister company Horizon Air, it transports 32 million customers annually to over 110 cities with an average of 970 flights daily. It provides more non-stop flights from Seattle than any other air carrier. Lastly, it has won many honors, including “Highest in Customer Satisfaction among Traditional Carriers in North America” in the J.D. Power North American Airline Satisfaction Study for nine years in a row (2008-2016) and the #1 major North American carrier in on-time performance by FlightStats (2016).

Channels

Alaska Airlines’ main channel is its website, AlaskaAir.com, which accounts for 60% of its revenues.

Its other major channels are traditional travel agencies (23% of business), online travel agencies (11% of business), and reservation call centers (6%). The company promotes its offering through its social media pages, TV and online advertising, sports sponsorships, and participation in conferences.

Customer Relationships

Alaska Airlines’ customer relationship is primarily of a personal assistance nature. Customers are transported by a pilot and receive in-flight service from flight attendants.

That said, there is a self-service component in the form of the ability to book reservations online. In addition, customers can sign up to receive updates on discount offers through e-mail.

Key Activities

Alaska Airlines’ business model entails providing quality service for its passengers.

Key Partners

Alaska Airlines maintains partnerships with 16 other airlines that provide benefits to its customers. The alliances fall into the following categories:

• Frequent Flier Agreements - Offer mileage credits and redemptions for the company’s Mileage Plan members.
• Codeshare Agreements - Allow one or more marketing carriers to sell seats on a single operating carrier that services passengers under multiple flight numbers.
• Interline Agreements - Allow airlines to jointly offer a competitive, single-fare itinerary to customers traveling via multiple carriers to a final destination. The company’s specific partners are as follows: Aeromexico, American Airlines, Air France, British Airways, Cathay Pacific Airways, Delta Air Lines, Emirates, Icelandair, Hainan Airlines, KLM, Korean Air, LAN S.A., Fiji Airways, Qantas, Rav’n Alaska, and PenAir.

Key Resources

Alaska Airlines’main resources are its planes and its human resources, who include the agents who book reservations, the customer service staff members who provide support, the pilot staff members that fly its aircraft, and the flight attendants that provide on-flight service.

Cost Structure

Alaska Airlines has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. In 2015 it lowered its unit costs (excluding fuel) by 0.7%, representing the sixth year in a row of such annual reduction.

Its biggest cost driver is likely cost of services, a variable expense. Other major drivers are in the areas of sales/marketing and customer support/operations, both fixed costs.

Revenue Streams

Alaska Airlines has two revenue streams:

• Passenger Revenues – Revenues generated from the sale of tickets for flights (mainline and regional).
• Other Revenues – Revenues generated from freight and mail services as well as the sale of ancillary products/services such as on-board food and beverages and bag check-ins.