What Will Alaska’s East Coast Presence Be Like?

Count me among the many people who are utterly confounded by the $2.6 billion Alaska-Virgin America merger (or as I’ll call the silly airline from here on out, Allergen America). I don’t need to rehash the numerous reasons why this is a strange choice for Alaska and an odd fit overall, but given that Alaska is touting this as a step toward becoming a West Coast powerhouse, it’s worth looking at what this new route map will look like from the other side of the country.

Of course, Virgin America serves the gamut of East Coast cities from its San Francisco hub, so Alaska will gain those routes and its presence in those cities will remain limited to its role as a carrier to and from SFO (and, to a lesser extent, LAX). What’s interesting to me is to see how suddenly the landscape changes in the New York area and in Washington, D.C., assuming no divestment or swap of existing routes.

Alaska-Virgin-Merger-Details

NYC: Two airports, eighteen nonstops a day

In New York, Alaska will have a fairly notable presence:

  • 5 nonstops daily from JFK to San Francisco
  • 6 nonstops daily from JFK to Los Angeles
  • 3 nonstops daily from Newark to San Francisco
  • 3 nonstops daily from Newark to Los Angeles
  • 1 nonstop daily from JFK to Seattle

Alaska will be the only major airline to offer transcontinental service to both Newark and JFK. Combined, Alaska will have 8 nonstops a day to SFO and 9 a day to LAX. In comparison, Alaska’s partner American offers 5x daily service between SFO to JFK, and 12x daily service between LAX to JFK, while Alaska’s (estranged?) partner Delta offers 7x daily service between SFO and JFK and 9x daily service between LAX and JFK.

In other words, as Alaska has seen its alliance with Delta become less than cordial, and its alliance with American is starting to show some wear and tear, Alaska apparently has decided to fight back and hard. There is no doubt that Alaska is trying to compete directly with its two biggest “partners.” Of course, Alaska will have to up its onboard hard product and notoriously dismal wifi, to truly compete, but there is no uncertainty that Alaska intends to be taken seriously. (On the other hand, their in-flight catering, at least, stands out.)

Strangely, though, Alaska will still only have one (poorly-timed) flight a day between New York and Seattle, and none to Portland. This merger doesn’t change that. So much for being the Pacific Northwest’s “hometown airline.”

Unless…

Unless, that is, Alaska wants the 18 nonstops out of New York, but not (all) to CaliforniaIt apparently took some wrangling and some time just for Alaska to secure the once-daily nonstop between Seattle and JFK, and even then the flight is a redeye. In theory, could Alaska pare down its California-New York routes and operate something like:

  • 5x daily service JFK-Seattle
  • 2x daily service Newark-Seattle
  • 3x daily service JFK-Portland
  • 1x daily service Newark-Portland
  • 2x daily service JFK-SFO
  • 1x daily service Newark-SFO
  • 2x daily service JFK-LAX
  • 2x daily service Newark-LAX

Again, that’s purely hypothetical and speculative, but it would sure make a lot more sense for Alaska. Currently Delta has the monopoly on JFK-SEA and JFK-PDX routes, so this would allow Alaska to compete with Delta directly on its home turf, a war it can win — while ceding frequent JFK-LAX/SFO nonstops to American, Delta, and JetBlue, where it can’t quite compete on product.

WAS: Three airports, twelve nonstops a day

What’s more interesting to me is what will happen in Washington, D.C. Alaska actually has a fairly unique presence at Washington National Airport already, where it currently has 8 slot exemptions beyond the statutory 1,250 mile “perimeter,” which is already an enormous amount. When the merger is complete, Alaska will have, from National Airport:

  • 2x service to Seattle
  • 1x service to Portland
  • 1x service to San Francisco
  • 1x service to Los Angeles

That will make Alaska the carrier with the most long-distance destinations from Washington National, essentially doubling down to create a major presence there by adding San Francisco to the mix.

And at the same time, out of Dulles, Alaska will fly to:

  • Seattle (1x daily)
  • San Francisco (3x daily)
  • Los Angeles (2x daily)

Let’s not forget that Alaska also operates (strangely, to me) a once-a-day nonstop between Los Angeles and Baltimore-Washington International Airport.

Does it make sense for Alaska Airlines to operate nonstop flights from Los Angeles to all three of Washington, D.C.’s airports? It seems like a waste of resources to me.

Alaska would be spreading itself thinly between Washington’s three airports, and I can’t imagine that — with DCA slots being highly regulated and at such a premium — the FAA is going to love the idea of Alaska getting two more slots (that is, to/from SFO) at National.

In fact, I would assume Alaska would be forced to divest itself of at least one of those D.C. routes in order for a merger to be approved, which almost defeats the idea of the merger to begin with.

Alaska-Rebrand

Bottom Line

When the merger is complete Alaska will have 18 nonstops a day out of New York (serving three destinations) and 12 nonstops a day out of Washington, D.C. (serving four destinations). For an airline that wants to beef up its West Coast presence, it may have just accidentally beefed up its East Coast presence, too… in a way it might not be prepared to handle.

Alaska’s identity is so integrally tied in to a geographic region — Alaska the state, obviously, and the Pacific Northwest generally. By trying to “claim” California, Alaska has gained 17 nonstops a day from the New York area (where it previously had just one, to Seattle) and has delivered a major signal to its partners Delta and American that Alaska is ready to rumble. Alaska already had a big presence in D.C. anyway, and now gains 5 more nonstops out of Dulles and 1 more nonstop out of National.

Count me as a skeptic. I think Alaska is a quirky and friendly (though not comfortable) airline and it’s fine for a short hop up and down the West Coast. To be honest, I don’t think Alaska has the chops to compete in the transcon business — and buying Virgin won’t change that.

That’s why I think Alaska may not be in this for the transcon routes to California, but rather to use the JFK and EWR slots to muscle Delta out of the way and establish a true dominance in the Pacific Northwest to NYC market.

Comments

  1. Dead right about what Alaska will do with the transcons.

    Say goodbye to the big seats and hello streaming wifi.

    And this has nothing to do with ‘chops’ and everything to do with good business sense.

  2. “Currently Delta has the monopoly on JFK-SEA and JFK-PDX routes…”

    Huh? AA flies JFK-SEA and B6 flies both JFK-SEA and JFK-PDX.

    And AS already has 1x JFK-SEA and 2x EWR-SEA daily.

  3. I am not certain permitting AS another transcon slot at Reagan will be viewed as partricularly anticompetitive. Indeed, I tend to view neither Virgin nor Alaska, separately, as being significant enough presences in WAS to mount serious competition to UA in the transcon market. Combining them may create some real competition.

    BTW, AS operates BWI-SEA.

    And will they ever change their name to reflect the fact that they serve far, far more than Alaska?

  4. Currently, Alaska Airlines flies 2 flights EWR-SEA (AS11 and AS17). So in addition to the one JFK-SEA flight, there are 3 daily flights from NYC to SEA.

  5. AS already flies EWR-SEA
    The people at AS are smart. They probably know exactly what they want to do with the NYC/ WAS area airports.
    It’s all speculation for now and will be revealed over time.

  6. @jfhscott, don’t see why Alaska would need to change their name if Southwest (obvious) and Delta (as in, the Mississippi Delta) can fly around everywhere with their original, regionally-relevant names.

  7. Another waste of a post, you guys aren’t industry experts and you have 0 experience working at a management level on the board of an airline. So just go back to blogging about champagne on flights rather than pretending to know important stuff about mergers

  8. You start to talk about it, but don’t really finish the thought. On all of the transcon varieties, they are up against massively better hard products – UA p.s., AA’s A321s, and all of the refurb DL 75s and 76s. Flat beds, Wifi, pretty good soft products – and all with entrenched frequent flyers.

    If I’m Alaska, why would I spend a ton of money to get my hard product up to snuff, only to still be flighting with the big boys.

    Oh. Mint. I almost forgot Mint. Is it just that there is so much JFK/EWR – LAX/SFO revenue that it’s worth it to jump in, in several years when the planes are redone?

    I don’t get it.

  9. For an extra 1 billion they could buy Virgin Australia. Air New Zealand wants to sell its 26% and Etihad is a bit lukewarm as well.

  10. Whose to say they don’t alter their route structure? Just because this is what VX is offering now, doesn’t mean it will be this way in 2018 when they become one entity.

    Ben, when the deal was first announced I was like you, “WHAT THE HELL IS ALASKA THINKING?” But then I realized what their plan is. It’s a long term plan, that will really put a thorn in the sides of the big 3, and offer a competitive global network that will make them one of the big boys. Let me unpack it, and maybe you’ll start to see things the way I do now:

    Did you see the list of international partners this deal comes with? The amount of connecting traffic AS is gonna get from all these different international airlines worldwide is going to be obscene revenue. On top of that, AS now controls the west, and has picked up some great West- East coast routes in the process. This will put AS on the map as a real airline that goes almost everywhere.

    With their non-revenue FF program, and huge list of international partners now, in addition to their excellent customer service that surpasses the US3 employees by 1000000%. AS is going to pick up A LOT of customers from the US3 who didn’t pick AS because of their isolation to Seattle. Or for those who didn’t take AS because they didn’t fly to enough places are now going to start taking AS. A lot of previous US3 customers are going to come over to AS now certainly for the excellent FF program, and their wonderful customer service (especially compared to the US3 staff).

    So, tons of international partners, control of the west, a huge expansion across the country to a real airline that virtually flies everywhere that will put a thorn in the sides of the US3, great frequent flyer program with literally every worldwide airline customers will be able to redeem miles on and connect to, terrific customer service, coupled with a coast to coast network? At first I thought this deal was moronic and could not understand why. But the more I ponder, I realize AS wants to become one of the big boys, leave their “Hometown” status behind, and begin their transformation as a real airline, so to speak.

    In short, they’re transition from a “Hometown Airline” to an actual global carrier the US3 are going to have to reckon with, and I think they will end up winning the war. AS’s executive team is very smart, and have made great business decisions for the past decade. Trust me, they have a big plan in mind with this deal, and I’m pretty sure becoming a global carrier is it.

  11. I love these bloggers that write a “headline”, cut and paste information and then $^^&^* there are some pretty smart people running AS and I agree with with “Abe” they have a plan. One has to remember that running a company and making decisions based on long term goals is what they are paid to do not worry about what color shirt their wearing today which is apparently what many bloggers and so called travel experts do.

    This was strictly a business decision based on long term goals. with respect to their “partners” they really have none. per se. They do have agreements based on convenience but no true partnerships.

    I would also submit that EK is also a winner here. They can bring in their passengers for coastal gateway cites and then move them around on AS. Not bad. IF there was / would be an international connection look to EK.

    For the record I am a high mileage AS traveler and will complete my Gold qual in two weeks and should be over 75K by August, All paid FC just saying

  12. Maybe the end game is that JetBlue combines with Alaska and Virgin, to compete with Delta, American and United. The corporate cultures are pretty disparate, but that didn’t stop United and Continental or US and AA.

  13. @Abe
    This wont make them win anything. While they’ll get increased access to SFO and LAX, there’s no way they’ll “win” or “control” the west. VX is still very small in comparison in both SFO and even more so in the fractured LAX market.
    yes, they’ll have frequent flyer ties with lots of airlines. but the revenue coming from that will NEVER be “obscene”. I’ve worked in this area a lot before, and the revenue airlines get from feeding international partners at their gateways is often VERY low. It’s WAY LOWER than what they could get from selling a local passenger a ticket (ie, the revenue they get from flying a person PDX-SEA-TPE (on EVA) is WAY lower than the revenue they’d get from just selling to a local passenger flying PDX-SEA). The connecting revenue from a plethora of disparate airlines doesn’t match having ones own network. Never has and never will.

    AS management is very smart and will undboubtedly do something interesting with this. But at the end of the day this move is more about shutting some competition down, getting access to a few additional gates in the west, and securing some more slots at DCA and NYC area airports. There are probably some people who will find this potentially larger network and increased partners attractive, but it’ll never be the large global airline you portray. Time will tell.

  14. Abe — The list of partner airlines on the merger website is simply a combination of Alaska and Virgin America’s separate partner lists. It is likely that many of those carriers will not partner with the merged airline. For example, Virgin Atlantic certainly will not be a partner (Delta — which owns 49% of Virgin Atlantic — won’t let that happen). It is similarly unlikely that both Qantas and Air New Zealand would be partners. Plus most connecting traffic will likely stay with intra-alliance codeshares.

    Also, the merged entity is still less than 25% of the size of any of the big three airlines by any metric (and less than 1/3 the size of Southwest), so it would still be a long way from being a “global carrier.”

    This merger is about defense. Financial success aside, Alaska needs to reach a critical mass to ensure its long-term survival as an independent airline. The open question is whether overpaying for Virgin America was a step in the right direction towards that target.

  15. You write Alaska’s partnership with AA is “showing some wear and tear” and point to the RDM devaluation as evidence. Come on, that’s more than a stretch. It’s really hard to argue that AA’s across the board devaluation of partner earnings had anything specific to do with it’s relationship with Alaska.

    In fact over the last year AA and AS have actually deepened their partnership, see article from this very blog from August: http://onemileatatime.boardingarea.com/2015/08/05/alaska-american-lounge-access/

  16. That’s a lot of nonstop transcontinental service. Maybe the European partner airlines are a factor in the equation.

  17. @Brad: I never said Delta exclusively operates JFK-SEA/JFK-PDX, but they certainly have a virtual monopoly on it from the PNW perspective. JetBlue’s PDX-JFK flight, for instance, is 1x a day and a redeye, which doesn’t really compete with Delta’s better timed, multiple flights on the same route. Truth of the matter is, the JetBlue flights to the PNW are designed for New Yorkers who need to travel to the PNW. Alaska is (potentially) trying to chip away at Delta’s virtual lock on the PNW-NYC routes. Alaska doesn’t care about a JetBlue one-off (nor do I).

  18. @Nick – you said “DL has the monopoly”. Monopoly means, per a quick google search, “the exclusive possession or control of the supply or trade in a commodity or service.”.
    So yes, by using the word “monopoly”, you implied that DL was the only one on those routes. They are not.
    JetBlue is of course catering to NYC pax, as that is their home town. DL is going for both markets. Either way, if you didn’t mean monopoly, then you shouldn’t have used that word.
    Also, why no discussion of Dallas? VX serves both LGA and DCA from Dallas, so it seems like you missed a big piece of this analysis.

    regardless, this is all just specuation at this point. In all likelihood, AS will just use the slots they got at the East coast airports where slots are still a thing (DCA, JFK, LGA) to hopefully do more beyond perimeter flying (specifically applies to DCA and LGA) nonstop to SEA/PDX. I bet they’ll drop Dallas. And I’d be shocked if they really try to continue to be a force (note that use of the “try to”) on the premium JFK-LAX/SFO nonstops, let alone the routes from EWR.

  19. One thing nobody has yet mentioned is in addition to AS encroaching on AA’s transcon routes: they pick up a number of DFW routes from VX. Currently AS only runs DFW-SEA and DFW-PDX. Assuming they keep the VX routes, they’ll pickup DFW to LAX, LAS, SFO, LGA and DCA.

    While that likely won’t take away any noticeable amount of DFW flyers, it would certainly mean less reliance on AA to service DFW

  20. I imagine that Alaska will use the Virgin America planes as a dedicated sub-fleet for transcon flights on all routes. This will allow them to improve their hard product on longer flights, and be more competitive than their current transcon offering.

  21. This really frustrates AA WAS based flyers who have ZERO ability to fly AA nonstop to SFO from any WAS airport.

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