Horizon Air Backs Out of California and Into a Box of Its Own Making
It's been an interesting week for the team at Horizon Air (ALK). First there was a leadership change. Then, a major schedule change was announced. Now, looking at the airline, I find myself wondering . . . where do they go from here? The company has boxed itself into a corner and now needs to find a way out.
The senior management change was pretty straightforward. President and CEO Jeff Pinneo decided to retire, or so they said. In his place, parent company Alaska Air Group's CFO Glenn Johnson will step in. Could Pinneo have simply been looking to retire? Certainly. He'd been running the show for 8 years and had been with Horizon for much longer than that. But he's also only 54 years old.
In situations like this, I always wait to see if any big changes are announced soon after the leadership change. If so, you can usually bet that meant that the changes at the top were not exactly voluntary. Just two days after this change, Horizon quietly announced some relatively major schedule changes. That makes me think that Pinneo "retired" instead of retired, if you know what I mean.
The current Horizon strategy has been to circle around the 74-seat Q400 turboprop. That took some adjustment for smaller cities when it completely retired its smaller turboprop fleet, but the other end of the spectrum is most interesting. Horizon still has a fleet of 70 seat jets it has been trying to get rid of, but those do fly some long, 3 hour segments that can't really be flown well with the Q400s. You can see how their flying breaks down on this chart.
So the 70 seat jets are used for longer runs, as they should be. The slower props are fantastic on shorter flight lengths, but on longer ones? Yeah, not so much. The cabins are louder and it takes more time to fly. That doesn't mean the airplanes can't work on longer legs, but it does mean that they need to fly only specialized missions.
Thanks to the Great Circle Mapper, I was able to put together a map showing which routes over 500 miles are operated by which Horizon airplanes.
Interesting, no? The props primarily fly longer haul from California while the jets fly longer haul from the Pacific Northwest. Why is that?
One reason might be competition. A route like LAX to Eureka or Sacramento to Spokane probably looks pretty bad on paper when flown by a jet. So connecting smaller cities like that still provides enough of a benefit that people would be willing to fly. But from Seattle and Portland, it's a different story. Those are more competitive markets and there are other alternatives. Beyond that, the lengths are further as well.
The longest Q400 route is 744 miles from San Jose to Spokane, but there are 800+ mile routes on jets, like Long Beach to Seattle at 965 miles. The latter also has nonstop on big jets from JetBlue. Good luck.
So I watched this latest schedule change eagerly. They're shifting again. Idaho Falls, one of the old-time small cities in the network, will be dropped completely. Other routes being dropped all have a California city on the other end.
Horizon has made a strong move into California over the last few years by serving some of the smaller cities around the state and in nearby states. It looks like many of those are proving to be losers. Horizon will stop Los Angeles flights to Flagstaff and Prescott (in Arizona), Boise (in Idaho), and Redmond (in Oregon). Eureka and Redding will lose flights to Seattle. And the recently started Sacramento to Santa Barbara flights will end.
What is Horizon doing with all those planes that will no longer be needed? Well, it's going to replace four of the 17 jets, which will be leased to another company.
So many of the routes that are long and thin and were thought to be able to support Q400s are going away. Meanwhile, those Q400s are filling in for the CRJ-700s that are leaving. That's fine for now, but what about when all those CRJ-700s go? Horizon has boxed itself in to a small market and there aren't going to be many growth opportunities.
They need to do something if they don't want to remain stagnant. Could this small schedule change be a hint of things to come? I wonder.