Alaska Airlines launched a new nonstop service from Seattle to London on Thursday, marking a significant step in its European expansion, even as the aviation industry grapples with sharply higher jet fuel prices. The move comes at a time when most carriers are absorbing a substantial portion of increased fuel expenses, according to an airline executive.
Andrew Harrison, Alaska’s chief commercial officer, said that most carriers are covering only 50% to 70% of the increased cost of jet fuel, with the rest eating into profits. The comments were made to Business Insider during the launch event atop a London skyscraper.
Rising Fuel Costs Challenge Airline Profitability
Jet fuel prices have surged following geopolitical tensions in the Middle East, particularly after the conflict involving Iran. Fuel is typically an airline’s second largest expense after labor. While many European carriers hedge against fuel price fluctuations using financial derivatives, most U.S. carriers do not, leaving them more exposed to price spikes.
United Airlines CEO Scott Kirby said in March that his company plans to fully offset the increase in fuel prices, but that would require an additional 8.5 percentage points of revenue per seat flown. Harrison’s remarks indicate that fuel costs continue to pressure airline margins despite higher airfares and checked bag fees.
Harrison said Alaska focuses on controlling what it can control. He stated that the airline faces crises regularly and feels good about its expansion, which he said provides momentum during difficult times.
Alaska’s European Network Grows
The Seattle to London route is Alaska’s second transatlantic service. It follows the airline’s first such route, to Rome, launched last month. A third route, to Iceland, is scheduled to begin next week. These flights represent a rapid expansion into the European market.
Alaska’s ability to enter the long haul transatlantic market was facilitated by its acquisition of Hawaiian Airlines, which brought a fleet and order book of Boeing 787 Dreamliners. The aircraft operating the London route is equipped with new business class suites featuring sliding privacy doors and lie flat beds. The airline plans to introduce a premium economy cabin on its long haul widebody aircraft by 2028.
Premium Travel Demand Remains Resilient
Despite rising costs, demand for travel remains strong, particularly among higher income passengers. A Bank of America survey of 4,000 people conducted in April found that about 30% of respondents will not change their summer travel plans due to higher gas prices. The same survey indicated that middle and higher income households are increasing travel spending, while Europe remains the most popular destination for vacationers this year.
Alaska is targeting this segment with improved amenities. The airline has equipped some planes with Starlink high speed in flight WiFi, though it is not yet certified for the Boeing 787. Harrison said the airline expects certification in the fall.
Competition and Slot Access
The Seattle to London route is already served by British Airways and Delta Air Lines. Virgin Atlantic is suspending its route for the winter season. Alaska faces strong competition, but Harrison pointed to the airline’s relatively new aircraft and its Seattle hub, which connects to 105 destinations, as advantages.
To access London Heathrow, a highly congested airport, Alaska is leasing a slot from American Airlines, a fellow member of the Oneworld alliance. Harrison said the partnership with Oneworld members provides opportunities in a competitive environment. Because British Airways is also a Oneworld member, Alaska customers can connect to other European destinations on BA flights.
Forward Outlook
Alaska has set a goal of operating 12 international destinations out of Seattle by 2030. The airline plans to announce additional routes later this year. Harrison said the international expansion is a large investment that will build a foundation for long term growth, adding that the company is building for the future.
