Seattle-based Horizon Air plans to hand over control of its flight planning, marketing and sales to sister carrier Alaska Airlines on Jan. 1, and may shed its independent brand altogether.
Currently, about 55 percent of Horizon’s seat miles are “brand flying,” where Horizon bears the revenue risk and gets a share of joint fares from passengers connecting to Alaska flights. The rest are “capacity purchase agreements,” where Alaska bears the risk, paying Horizon a set fee for flights. This is particularly common on routes where many passengers are connecting between Alaska and Horizon flights.
Horizon Air President Glenn Johnson said in Alaska Air Group’s second-quarter conference call last month that the company was considering changing the mix, while looking to consolidate operations.
“Over the last decade or so, an increasing portion of Horizon’s flying has been dedicated to Alaska, and our aircraft have been well suited for complementing or substituting for Alaska on certain routes,” he said in the call.
Horizon Air posted a loss of $1.2 million in the second quarter and $7.4 million in the first half of 2010.
“(I)t’s been clear for a while that Horizon’s business model no longer worked, as is evident from the financial results,” Johnson said in a message to employees this month.
The change will improve financial performance and “let us focus on what we are best at — operating a safe and reliable airline while providing top-notch customer service in the air and on the ground,” he said.
The change means Alaska will determine where, when and how much Horizon will fly, while also taking over all marketing and advertising, but Horizon will remain a separate airline, Johnson said. He said all affected Horizon employees were being offered jobs at Alaska.
“This is the road to growth for Horizon, where we all ultimately want to be,” he said. “Once we have brought our cost structure in line with market and are clearly on a path toward our (Return On Invested Capital) goal, we’ll be better positioned to make the case for obtaining more aircraft in order to do more CPA flying for Alaska and potentially other airlines.”
While Johnson said, in the second-quarter conference call, that executives were looking “at the costs versus benefits of maintaining the Horizon brand from an external perspective,” Horizon is keeping its brand (including its logo, plane livery and uniforms) for now, he said in the employee message.
“The Alaska brand is better known in most markets, and the industry standard is for CPA carriers to assume the identity of their major airline partner,” he said. “So, it’s still under consideration, but nothing has been decided yet.”