Kevin Schofield's writings, observations, and other pointless distractions
Alaska Airlines and Delta Airlines have had a strong partnership for several years, but it looks like it’s unraveling quickly.
A long time ago (in airline years), there was Northwest Orient Airlines, which was a major carrier from North America to the Asia-Pacific Region. It subsequently dropped the word “Orient” for the obvious sensibilities, and built a partnership with KLM to extend its route network to Europe. Seattle was a major international hub for Northwest, until the difficult economy caused them to pull back from their Asia-Pacific routes, and from Seattle.
Then they got bought by Delta, and started rebuilding their Asia-Pacific network. They also partnered with Alaska in order to leverage their dominant west coast position, extending the impact of the trans-Pacific routes.
Alaska continued to expand their domestic network, adding routes from Seattle and Portland to major cities across the United States — with the exception of Salt Lake City, Detroit, Atlanta and Minneapolis; they had minimal flights there. Why? Because they are Delta’s hubs. Delta, in turn, focused its domestic flights from Seattle on those same hubs.
But now Delta seems to have changed their minds. They have been rapidly expanding their Seattle domestic flights. Alaska has responded by adding flights to Delta’s hubs. Now Delta seems to have upped the game again, by announcing a broad expansion of west-coast flights as well as additional European flights. Seattle is now a full-fledged hub for Delta, and Alaska is the one in their sights.
There are two established west-coast carriers: Alaska and Southwest. But they have different strategies, serving different airports. Delta is very carefully targeting Alaska’s major airports: San Francisco, San Diego, San Jose, and LAX. They are even going after Anchorage and Portland; yes, that’s right, Delta is adding flights between Portland and Seattle. But they are staying away from Southwest’s airports: Sacramento, Oakland, Ontario. The message is super clear: the gloves are off, and they want a big chunk of Alaska’s west-coast business.
I’m trying to think of what Alaska could do to respond, beyond adding flights to Delta hubs. For the most part, west coast air travel is competitive enough that it’s not terribly profitable for any of the carriers, and Delta’s foray will just increase price pressure. So the airlines will need to protect their profitable routes. For Alaska, that’s Hawaii and Mexico. For Delta, that’s its international flights. For Southwest, it’s less about routes and more about their killer operational efficiency that no one else can match.
Delta could hurt Alaska further by adding flights to Mexico and Hawaii. Alaska can’t threaten Delta’s international franchise — it really has no ability to do flights of that length. Alaska has stayed in the black despite the heated competition with Southwest by stealing a few pages from their playbook; they fly only two kinds of planes: 737s and smaller regional prop planes, which allows them to standardize gates and equipment and to easily swap personnel between routes. But 737’s have a limited range, and Alaska stretches that to the limit with its cross-country routes. The only leverage that Alaska has over Delta is that it has built a fairly extensive network of direct flights from Seattle; Delta can get people here from almost anywhere by connecting them through one of their hub airports, but then a flight to Asia becomes a three-leg journey, and many travelers don’t want that hassle. But that’s pretty small potatoes compared to the pain that Delta can cause Alaska.
I’m curious as to what Delta believes that they need to go down that path. Were they not getting enough revenue from their code-share agreement with Alaska on the domestic flights connecting their international passengers to Seattle? Did a business negotiation go wrong? Are they under pressure to grow the business? Hard to say. It will be interesting to see if they stick it out with their partnership, or call it quits.
Here’s what is clear though: this is good news for consumers, especially those of us who live in Seattle. More direct flights to more places, more competition, lower prices (hopefully).