Alaska Air bets big on premium travel as fuel prices soar

Alaska Air Group is making its biggest push yet into premium travel as high jet fuel prices squeeze profits, investing in lie-flat seats, premium-economy cabins and new airport lounges to attract passengers willing to pay more for comfort.

President and Chief Financial Officer Shane Tackett told Reuters that the investments could eventually add $3 to $4 to earnings per share and increase margins by 2 to 3 percentage points within a couple of years.

The strategy comes as US airlines expand premium offerings. Domestic premium seat capacity across the industry was 27% above 2019 levels in June, nearly three times the growth in economy seats. The expansion also raises the risk that supply could eventually outpace demand and pressure fares.

Starting in 2028, Alaska plans to install 12 lie-flat Aurora Suites on each of at least 25 Boeing 737 MAX 10 aircraft operating on selected transcontinental routes. It will also introduce Premium Reserve cabins on Boeing 787s, Hawaiian’s Airbus A330s and some MAX 10s, while opening new lounges in Seattle, Honolulu and San Diego.

Alaska has not reaffirmed its target of reaching $10 in earnings per share in 2027. "Whether that happens in 2027, or a bit later, it will be highly dependent" on fuel prices and the broader economy, Tackett said.

The airline withdrew its 2026 earnings outlook in April after a surge in fuel prices. Tackett said Alaska’s business is configured to perform strongly when fuel prices are about $3.25 a gallon or lower, compared with a broad US benchmark of $4.40 a gallon on September 28.

Alaska is also targeting up to $4 billion in annual cash payments from banks and other partners through its loyalty programme by 2030 and plans to launch an Atmos debit card in early 2027.

The airline plans to serve 15 long-haul international destinations from Seattle by 2030, up from an earlier target of 12. "This is a must-do for us," Tackett said.

By Aghakazim Guliyev