Modified Affinity Card Agreement It looks like Alaska has gone to the credit card well, like so many others, by renegotiating its contract with Bank of America. If you get an Alaska Airlines credit card, it's through Bank of America, so there's a lot of money there. Every time you earn a mile, Bank of America has to pay Alaska for the privilege, and in this new agreement, the cost has gone up.
What's even more interesting is that the agreement is actually retroactive to the beginning of 2009, so Alaska will be getting a nice chunk of change. In fact, they'll be pulling down an extra $15 million that will show up in their second quarter earnings.
New Pilot Contract The pilots at the airline signed a new contract, and of course, that will cost the airline some money. The pilots will get a 14 percent raise, but they'll also be giving the company more productivity. There are some other changes as well (such as the closing of the pension to future employees). The net result? Alaska expects it to cost about $23 million more per year on an ongoing basis.
But there are some one-time costs involved in the transition to the new contract. First of all, the pilots got a $21 million bonus at the time of ratification of the contract. They call this a bonus, but I wonder if this was retroactive pay. I don't recall the specific details of the agreement. There is also a $15 million charge to transition to the new sick-leave payout program that was part of the deal.
Bag Fees Alaska introduced its first bag fee during the second quarter, and it's now able to predict some serious extra revenue from it. The expectation is now that Alaska will earn $70 million a year from the first bag fee alone. You hear that Southwest? I appreciate that you guys are holding out, but man, that money has to be tempting.