By JOHN GILLIE

March 1, 2005

When Alaska Airlines took delivery of its last new Boeing 737 a year ago, the new plane wasn`t equipped with leather-covered seats in coach and exotic upturned winglets.

When airline officials accepted delivery of Alaska`s first Boeing 737-800 earlier this month at Boeing Field in Seattle, the new plane came loaded with those two extra-cost options.

The inclusion of those extras during a time when Alaska and other major airlines are struggling to eke out a profit is visible evidence of how the changing financial landscape is changing one airline`s economic decisions. Alaska is headquartered in SeaTac, Wash.

Alaska - with more than $800 million in available cash and credit - is one of a few major airlines with the financial wherewithal to spend thousands of dollars more now for a better-equipped plane that will save millions in long-term operating costs.

Both leather seats and performance-enhancing winglets cut Alaska`s operating costs.

The 8-foot-tall blended winglets, for instance, will reduce the new aircraft`s fuel costs, engine maintenance and noise signature, said Alaska executive vice president Gregg Saretsky.

Designed and built by a joint venture of Seattle-based Aviation Partners Inc. and The Boeing Co., the winglets are expected to cut fuel expenses about 5 percent. For a plane the size of the 737-800, that means yearly savings of more than $110,000 on fuel alone.

Because the winglets enhance takeoff and cruise performance, pilots can use less power to achieve the same performance. That translates to less engine wear and better efficiency.

Alaska pilot Mike Swanigan said the winglets will save Alaska money in other ways on transcontinental trips.

From time to time on the westbound leg of Alaska`s Miami-to-Sea-Tac route, high winds force the airline`s non-winglet-equipped 737-900s either to make a quick stop to take on more fuel or to lighten the plane`s weight by taking fewer passengers, he said. With the extra range the winglets give the airplane, those stops will be unnecessary and diverting paid passengers to other airlines will be a thing of the past.

Saretsky said Alaska previously hadn`t opted for winglets on its 737s because the savings weren`t high enough.

``With the high price of fuel, the economics changed,`` Saretsky said. ``Airlines used to think the price would come down to historic levels. We think they`re going to stay high.``

Neither Boeing nor Alaska would say how much extra winglets cost, but industry sources said they add about $500,000 to an airliner`s cost.

Leather seats are another instance when paying more money up front saves long-run money.

Leather costs considerably more than the cloth-covered coach seats Alaska now flies. But the payoff is that they`re easier to clean and last more than three times as long.

Cloth seats must be reupholstered about once every three years. Leather lasts for a decade.

``We think they provide our passengers with a more luxurious environment, too,`` Saretsky said.

Beginning with the third 737-800 that Alaska accepts this year, those leather seats will be part of a new design called ``Spectrum`` by their maker, B/E Aerospace Inc. Those seats are thinner in the lower back area, allowing a bit more knee room for passengers.

The new-design seats are also lighter and mechanically simpler. About 30 percent of mechanical flight delays are caused by malfunctioning seats, Saretsky said. A more rugged seat will mean fewer delays.

Alaska wants to extend the savings from winglets and the new seats to more of its 108-plane fleet. It plans to equip its whole 737 fleet with the new seats and its 737-700s with winglets as they undergo major maintenance.