Why Alaska is getting rid of several dozen jets in high demand by airlines after only flying them for roughly 5 years

• Alaska Airlines is retiring its 10 remaining Airbus A321neo aircraft on September 30.
• The carrier will pay millions to get out of lease contracts and hand the planes off to other operators.
• The phase-out comes as Airbus confirmed its popular A321neo variant will have delivery delays in 2024.

Alaska Airlines is on track to be an all-Boeing operator by year's end.

In a recent earnings call, the Seattle-based carrier said the remaining 10 planes in its Airbus A321neo fleet will be retired by fall 2023.

Alaska once had 72 Airbus aircraft after merging with Virgin America in 2018 and has already gotten rid of its A319 and A320ceo aircraft as of January 2023.

"This cements our future as a single fleet operator by 2024," Alaska CFO Shane Tackett said in the earnings call.

With all of the Airbus planes gone, Alaska will only operate Boeing 737 jets in its mainline fleet. This includes over 200 jets, including the -700, -800, -900, -900ER, and MAX 9 variants.

The MAX is particularly advantageous for Alaska because it has the range and efficiency to replace the A321neo, especially on longer routes.

"A single fleet of Boeing MAX aircraft will significantly improve per-seat economics as a result of larger gauge and improved fuel efficiency," Alaska said in its 2023 annual SEC filing. "This advantage will serve as the baseline for high-margin capacity growth over the next several years."

Currently, Alaska has firm orders for 105 Boeing 737 MAX jets to be delivered through 2027, with rights for an additional 105 through 2030.

Parting is such sweet sorrow

While Alaska's simplified fleet will reduce its overall yearly costs, getting out of the A321neo lease contracts will not be cheap. 

According to the 2023 SEC filing, the aircraft have lease expiration dates through 2029 and 2031. Leasing in the aviation industry is incredibly common, with over half of the world's 23,000 commercial planes being owned or managed by lessors.

It is a cost-effective strategy, and airlines can get planes quicker than if they ordered directly from the manufacturer, but getting out of the contract typically means costly exit fees and penalties.

"As a result of the acceleration, the carrier expects to incur approximately $300 million to $350 million in special fleet transition charges through the end of the year," Tackett said.

However, Alaska's VP of fleet & finance, Nathaniel Pieper, said in the earnings call that the cash benefits of retiring the A321neos outweigh the cost of making lease payments on parked planes.

"[We've had] late-stage discussions with a bunch of parties, lessors, financial firms, other airlines," he said. "And, our objective is to paper the transaction for the 10 aircraft by the end of the second quarter."

Fortunately for Alaska, it's likely the high-demand aircraft will be quickly snatched up by other operators, especially since they have an average age of just five years.

Airbus also recently announced the A321neo variant — which currently represents over half of Airbus' aircraft orders — will have delivery delays of up to three months in 2024, Reuters reported.

This could create an uptick in the demand for spare A321neos as airlines cope with potential scheduling disruptions — similar to American Airlines adjusting its summer 2023 network due to paused Boeing 787 deliveries. 

However, Airbus told Reuters that it does not expect the delays to have an impact on its production goals for 2024 and beyond.

Neither Alaska nor Airbus responded to Insider's request for comment.

According to Cirium data, Alaska's last two A321neo routes will operate on September 30 between Los Angeles and Seattle and Los Angeles and Newark Liberty International Airport in New Jersey.

Tackett said transitioning Airbus pilots will be trained on Boeing jets by the fourth quarter of 2023, saying the strategy "will set [Alaska] up for a clean 2024 from a pilot training and dual fleet cost headwind standpoint."