An Alaska Airlines Boeing 737-9 Max lands at Paine Field in Everett in March. (AP Photo/Ted S. Warren, File)

An Alaska Airlines Boeing 737-9 Max lands at Paine Field in Everett in March. (AP Photo/Ted S. Warren, File)

Alaska Air orders 23 more 737 Maxs to shrink Airbus fleet

Eventually, the carrier will fly only 10 Airbus A321neo planes on transcontinental routes.

By Dominic Gates / The Seattle Times

SEATTLE — Alaska Airlines said Tuesday it has ordered 23 more Boeing 737 Maxs, bringing its total order to 68 Maxs that over the next three years will replace most of the Airbus aircraft in its fleet.

The financial terms Boeing offered would have been difficult to pass up. In an interview, Alaska Air Group Chief Executive Brad Tilden said the airline will have to pay no additional money for the 13 Maxs it will take next year.

“This does not actually require any capital spending during 2021,” he said.

That’s because Alaska had already paid significant pre-delivery deposits on its pending orders of Maxs before the plane was grounded in March 2019. Boeing has now restructured the terms with discounts to compensate the airline and encourage the follow-on order.

The cheap Boeing Maxs will replace all of Alaska’s 51 Airbus A320s and 10 smaller A319s, most of which are on expensive leases inherited from Alaska’s acquisition of Virgin America. And since the Maxs are 20% more fuel efficient and new jets should require less maintenance, Alaska expects to reap big operational cost savings.

“With each delivery, our ownership costs go down, our maintenance costs go down, our fuel costs go down, and the revenue should go up because the Max 9 has 28 more seats than the A320,” said Tilden. “The economics are going to be fantastic.”

For Boeing, such discounts on the Max provide compensation to its customers for months of delayed deliveries, without actually giving out cash. And the deals help build sales momentum to arrest this year’s collapse of the Max order backlog during the COVID-19 pandemic.

The Max was grounded for 20 months after the deaths of 346 people in two crashes. Alaska’s is the second new order, after one from Ryanair, since the Federal Aviation Administration ungrounded the jet last month.

Alaska plans to have its first Max enter service in March, with five more by summer 2021 and an additional seven by year end.

The plan is to speed deliveries in 2022, with Alaska taking 30 Maxs, followed by 13 more in 2023 and 12 in 2024.

The total includes 13 it is leasing from Air Lease Corp. in a deal announced last month. The rest Alaska will purchase directly from Boeing.

Prior to the 2016 Virgin acquisition Alaska was an all-Boeing carrier, and the Max deal will bring it almost back to that by 2023.

Alaska said it will keep its 10 larger, longer-range Airbus A321neos. Those jets largely will be used to fly the popular transcontinental routes due to their superior performance over Boeing’s 737 Max 10 model.

Alaska has already begun running its Airbus pilots through the retraining necessary to fly the Max. Each must complete about 80 hours of training.

The airline acquired about 900 pilots when it bought Virgin, about 830 of whom are still with the airline. Alaska Airlines has about 2,850 mainline jet pilots in total. Tilden said that by 2023, the number of Airbus pilots will be reduced to about 145, flying the A321neos.

Doubling down on the Max now illustrates Alaska’s contrarian strategy of investing in the midst of a historic air travel downturn so as to emerge stronger — “zigging while the others are zagging,” as Tilden put it.

He noted how Alaska expanded flights to the East Coast during the airline downturn that followed the 9/11 terrorist attacks and introduced flights to Hawaii during the global financial crisis of 2008.

Tilden said the airline’s relative strength in available cash, its low fares and its fleet of efficient single-aisle jets — with no exposure to the long-haul international market flown by the bigger widebody jets — will see it through the coronavirus crisis and leave it ready to grow once the pandemic ends, taking market share from carriers that are forced to shrink.

While the 68 Maxs on firm order are purely for replacing aircraft that will be retired, should air travel recover well and allow for growth, the agreement with Boeing also includes options to buy an additional 52 Maxs on good financial terms later.

Alaska has about 200 mainline jets in its fleet today, down from 237 before the pandemic. With the Maxs on firm order, it will go back up to about 230 mainline jets for the next four years. And if Alaska takes advantage of the Max purchase options, the fleet could grow to 300 aircraft by 2026.

In a statement, Boeing Commercial Airplanes chief Stan Deal said Alaska “is well positioned to return to its growth trajectory and strengthen its standing as one of the top U.S. airlines.”

Tilden said the terms of the deal also take account of the risk that the pandemic’s effects may be more prolonged.

“Boeing has been flexible in terms of the timing of payments and timing of deliveries should the recovery from the crisis not be what we expect,” he said.

“We are bullish. No airline would choose to play this hand we are playing right now,” Tilden said. “But if you have to play it, Alaska is probably better positioned than any other airline.”

Tilden added that as well as being good for Alaska, the deal will help Boeing emerge from the Max crisis, bolstering jobs and the region’s economy.

“We’re pleased to be standing side-by-side with Boeing,” he said.

Talk to us

More in Herald Business Journal

Members of Gravitics' team and U.S. Rep. Rick Larsen stand in front of a mockup of a space module interior on Thursday, August 17, 2023 at Gravitics' Marysville facility. Left to right: Mark Tiner, government affairs representative; Jiral Shah, business development; U.S. Rep. Rick Larsen; Mike DeRosa, marketing; Scott Macklin, lead engineer. (Gravitics.)
Marysville startup prepares for space — the financial frontier

Gravitics is building space station module prototypes to one day house space travelers and researchers.

Orca Mobility designer Mike Lowell, left, and CEO Bill Messing at their office on Wednesday, Aug. 16, 2023 in Granite Falls, Washington. (Olivia Vanni / The Herald)
Could a Granite Falls startup’s three-wheeler revolutionize delivery?

Orca Mobility’s battery-powered, three-wheel truck is built on a motorcycle frame. Now, they aim to make it self-driving.

Catherine Robinweiler leads the class during a lab session at Edmonds College on April 29, 2021. (Kevin Clark / The Herald)
Grant aids apprenticeship program in Mukilteo and elsewhere

A $5.6 million U.S. Department of Labor grant will boost apprenticeships for special education teachers and nurses.

Peoples Bank is placing piggy banks with $30 around Washington starting Aug. 1.
(Peoples Bank)
Peoples Bank grant program seeks proposals from nonprofits

Peoples Bank offers up to $35,000 in Impact Grants aimed at helping communities. Applications due Sept. 15.

Workers build the first all-electric commuter plane, the Eviation Alice, at Eviation's plant on Wednesday, Sept. 8, 2021 in Arlington, Washington.  (Andy Bronson / The Herald)
Arlington’s Eviation selects Seattle firm to configure production plane

TLG Aerospace chosen to configure Eviation Aircraft’s all-electric commuter plane for mass production.

Jim Simpson leans on Blue Ray III, one of his designs, in his shop on Friday, August 25, 2023, in Clinton, Washington. (Ryan Berry / The Herald)
Whidbey Island master mechanic building dream car from “Speed Racer”

Jim Simpson, 68, of Clinton, is using his knowledge of sports cars to assemble his own Mach Five.

Inside the new Boeing 737 simulator at Simulation Flight in Mukilteo, Washington on Wednesday, Sept. 20, 2023. (Annie Barker / The Herald)
New Boeing 737 simulator takes ‘flight’ in Mukilteo

Pilots can test their flying skills or up their game at Simulation Flight in Mukilteo.

An Amazon worker transfers and organizes items at the new PAE2 Amazon Fulfillment Center on Thursday, Sept. 14, 2023, in Arlington, Washington. (Ryan Berry / The Herald)
Amazon cuts ribbon on colossal $355M fulfillment center in Arlington

At 2.8 million square feet, the facility is the largest of its kind in Washington. It can hold 40 million “units” of inventory.

A computer rendering of the North Creek Commerce Center industrial park in development at 18712 Bothell-Everett Highway. (Kidder Mathews)
Developer breaks ground on new Bothell industrial park

The North Creek Commerce Center on Bothell Everett Highway will provide warehouse and office space in three buildings.

Dan Bates / The Herald
Funko president, Brian Mariotti is excited about the growth that has led his company to need a 62,000 square foot facility in Lynnwood.
Photo Taken: 102312
Former Funko CEO resigns from the Everett company

Brian Mariotti resigned Sept. 1, six weeks after announcing he was taking a six-month sabbatical from the company.

Cash is used for a purchase at Molly Moon's Ice Cream in Edmonds, Washington on Wednesday, Aug. 30, 2023. (Annie Barker / The Herald)
Paper or plastic? Snohomish County may require businesses to take cash

County Council member Nate Nehring proposed an ordinance to ban cashless sales under $200. He hopes cities will follow suit.

A crowd begins to form before a large reception for the opening of Fisherman Jack’s at the Port of Everett on Wednesday, August 30, 2023, in Everett, Washington. (Ryan Berry / The Herald)
Seafood with a view: Fisherman Jack’s opens at Port of Everett

“The port is booming!” The new restaurant is the first to open on “restaurant row” at the port’s Waterfront Place.