Alaska Flags Inherited Amazon Deal as Unprofitable
Alaska Air Group is moving to optimize its operations following the acquisition of Hawaiian Airlines 16 months ago, with a key focus on an uneconomical cargo contract with Amazon. At a Goldman Sachs conference on December 4, Chief Financial Officer Shane Tackett stated the dedicated charter arrangement is a "tough business" that requires fixing. The deal, originated by a financially strained Hawaiian Airlines in 2022 after it lost nearly $900 million over three years, has Alaska operating 10 Airbus A330-300 converted freighters for the e-commerce giant on what experts describe as a fixed-fee deal with little room for profit.
We’re excited about the cargo side of the business, but there is optimization that has to happen. [The dedicated charter arrangement] with Amazon is a tough business.
— Shane Tackett, Chief Financial Officer, Alaska Air Group.
Pilot Scheduling Creates Major Operational Drag
The primary source of inefficiency stems from crew scheduling. To service the Amazon account, Hawaiian established a pilot base at Cincinnati/Northern Kentucky International Airport (CVG), the site of Amazon’s primary air hub. This base lacks synergy with Alaska's passenger network, as the airline does not operate widebody aircraft at CVG. This separation prevents Alaska from flexibly deploying these A330 cargo pilots on more valuable international long-haul passenger flights—a core strategic benefit anticipated from acquiring Hawaiian's widebody fleet and its orders for Boeing 787 Dreamliners. The inflexibility clashes with Alaska's ambition to grow as a global carrier, with recent new routes to Tokyo and Seoul and upcoming service to Rome and London.
Cargo Revenue Grows 11% Despite Contract Woes
Despite the underlying issues with the Amazon contract, Alaska Airlines reported that its total cargo revenue increased 11% year-over-year to $146 million in the fourth quarter. However, the company does not break out the financial performance of the Amazon business, which Tackett’s comments suggest is a significant drag. The situation highlights a broader industry challenge of integrating dedicated cargo operations within a passenger airline framework. Other carriers are also seeking better synergies, as seen in Allegiant's recent plan to acquire Sun Country Airlines, partly to gain access to 22 pilot bases to more efficiently manage its own Amazon cargo flying.
