As the Airline Deregulation Act of 1978 has slowly consolidated the American airline industry down to only three major players, smaller players such as Alaska Airlines have begun to see the effects of much bigger players encroaching on their territory. While both American and United have strong west coast hubs in Los Angeles and San Francisco, respectively, Delta has begun to form its newest west coast hub in Seattle, where Alaska has long held the vast majority of its customers. This significant pressure means that Alaska needs to take action quickly, and yet somehow its best opportunity may lie in American Airlines.
Alaska, which is valued at a mere fraction of what Delta is (Delta’s $38 billion in revenue vs. Alaska’ $5 billion), has left Alaska racing to find ways to compete with an airline that offers greater international service, a larger domestic footprint, and a well-known name outside the Northwest corner of the United States. Alaska has struck back at Delta by adding new routes in Delta’s hub in Salt Lake City as well as three new routes from Los Angeles. What Alaska truly needs is another big player to be willing to go up to bat for it, making it clear who the true home airline is for Seattle.
Alaska began its relationship with American back in 2003 when they implemented a codeshare agreement. While this may seem like a small step, it effectively enables those traveling on Alaska or American to connect to each others’ flights and have their bags transferred as well as passenger details. Most recently the two carriers have added reciprocal lounge access for select members with an Admirals Club membership to access the Alaska Board Room, as well as vice versa for those with Alaska Board Room memberships. This means that Alaska Board Room members can use not just Admirals Clubs in the United States, but globally as well, a significant boost for Alaska customers looking to travel outside the country. This leaves many to wonder, why is Alaska still partnered with Delta, and why would American be interested in helping Alaska?
The reality is that Delta and Alaska have been slowly drifting apart for some time, and seem to be simply waiting for their contract to expire. This past March, Delta announced that its frequent travelers that choose to fly on Alaska will no longer earn Delta Medallion Qualifying Dollars (MQDs) which are used to earn status, with the reason being that Delta downgraded Alaska from a Group 1 partner to a Group 4 partner. At the same time, Delta added MQD earning ability for the vast majority of its other partners, implying a major shift in its attitude toward Alaska. Unfortunately, this partnership seems as though it will be only on paper moving forward.
American on the other hand sees a significant gap in the routes it serves in the Northwest. The airline currently has no hub in the Northwest with its closest hub being in Los Angeles, meaning it is missing a significant amount of opportunistic air traffic from a large part of the United States. Not only does this imply they are missing local domestic traffic, but also those who are wishing to connect to American’s stronger international territories such as Latin America. By partnering with Alaska, American could create a good size feeder system for its international traffic, as well as utilize Alaska’s significant experience operating in this territory. The codeshare with Alaska already allows American to gain revenue it would’ve otherwise not had, and the carrier has a significant opportunity to gain more customers without the high upfront cost of moving more flights to the region such as gate rental, landing fees, new employees and more.
This opportunity seems to be beneficial to both sides, as a partnership with American would help give both airlines’ customers more flight options on a daily basis. Currently Alaska customers are able to travel the globe thanks to some of its newer partners such as Emirates and Cathay Pacific, but the American network will give customers in the Northwest the opportunity to fly to more cities in the United States, as well as more destinations in Latin America, South America and more.
While mutually beneficial partnerships seem to be tough to come by in this industry, a partnership between American Airlines and Alaska Airlines would not only offer more flights for both airlines’ customers, but provide greater opportunity for each to grow and fight back against competitors like Delta that have invaded Alaska’s home base in Seattle.
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