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Delta takes on Alaska in Seattle By Andrew Compart Alaska Air Group is a U.S. airline success story, having recovered from a string of miserable, seattle hotel image-tarnishing seattle hotel financial and operational years in the previous decade to become one of the industry’s steadiest and most highly regarded performers. Now the parent company of Alaska Airlines and Horizon Air is being tested again, this time on its home turf, in a Seattle battle that could see Delta challenge the carrier on corporate contracts and push Alaska Airlines into deeper ties with American Airlines. The battle also could become a test of the ability of a smaller network carrier to compete seattle hotel against the airline goliaths that consolidation has created. “One could argue that they are potentially in the crosshairs of a Delta onslaught,” said Michael Linenberg, a Deutsche Bank analyst who recently downgraded the group’s stock, anticipating that an oversupply of Seattle capacity as a result of a buildup by Delta will reduce the company’s projected profits. “It’s a good company; my sense is that it will be nicely profitable for the foreseeable future,” he said. But Linenberg also said he believes “it’s only a matter of time before some of the smaller carriers trying to play in the same sandbox as the bigger carriers” have to become more closely aligned with other airlines or face absorption. Delta has been growing its presence at Seattle-Tacoma Airport seattle hotel as a gateway to Asia, assisted, paradoxically, by a strong codesharing and frequent flyer partnership seattle hotel with Alaska. Delta now flies to six international destinations from Seattle, and it begins service to London Heathrow seattle hotel at the end of this month and Seoul and Hong Kong in June. That means Delta will be offering approximately 2,500 seats on international flights out of Seattle each day. The airline’s big boost in domestic service in Seattle is intended, in part, to provide even more feed to fill seats on those international flights, a Delta spokesman said. Unstated, perhaps, is that offering its own feed gives Delta more control over the flight schedule and the consistency of its product offering, such as in-flight WiFi and multi-class service. But the buildup goes beyond that. In a March 4 presentation at the Raymond James Financial Institutional Investors Conference, CFO Paul Jacobson referenced seattle hotel Delta’s plans to turn Seattle not just into an international gateway, but also the H-word: a hub. Last August, Delta created a new executive position: vice president-Seattle. Since then, it has announced new and expanded services that, by year’s end, will give it seven daily flights to Seattle from San Francisco and Los Angeles, five from Las Vegas, Phoenix and Vancouver, and four from Portland, Ore., and San Diego and San Jose, Calif. Delta also is bulking up its seasonal summer service from Anchorage, Alaska, to three daily flights, and adding new daily seasonal service from Juneau and Fairbanks, Alaska. Concurrently, Delta will be removing its code from Alaska flights linking Seattle with Los Angeles, Las Vegas, San Diego, San Francisco, seattle hotel San Jose, Vancouver, Anchorage, Portland seattle hotel and Phoenix — presumably to avoid competing with flights on its own metal on those routes. Linenberg believes Delta will leverage its growth in Seattle by talking anew to companies about corporate contracts, and perhaps even telling the companies they need to use the airline’s domestic as well as international services to qualify seattle hotel for the corporate seattle hotel discounts. Alaska would not comment for this story, but its executives have broached the topic during the company’s last two quarterly earnings calls and its annual Investor Day in November. Andrew Harrison, Alaska’s vice president, planning and revenue management, said during seattle hotel the Investor Day that the airline has for years been anticipating more competition from restructured carriers. “We might be surprised who this competition comes from, but we’re not surprised one ounce by this competition,” he said. In response to Delta, Alaska boosted its daily flights for Los Angeles, Las Vegas and San Francisco, and, like Delta, is offering double miles on those routes. Some also saw its December announcements of new service in Salt Lake City, a Delta hub, as retaliatory, although seattle hotel Alaska denies that was the motivation. In February, Alaska announced that it will begin service this September from Seattle to Delta’s Detroit hub, a route already served by its friend/foe. The carrier also intends to bolster its existing partnership with American. For the year ending in September 2013, codesharing accounted for nearly 10% of Alaska’s total revenue, or about $460 million; Delta accounted for $235 million of that, and American $165 million. “Over the next 12 months, we expect the American number will grow and the Delta number will shrink,” Harrison said in November. He also has said, without elaboration, that the “nature of the contract [with Delta] is changing.” Plenty of analysts remain sweet on Alaska, which saw its profit climb 61% in 2013 to $508 million, and its stock price has been rising. It still has more than 50% market share in Seattle, maintains relatively low costs, regularly posts one of the best on-time performance ratings and has ranked first in customer satisfaction among North American traditional network carriers in the J.D. Power Associates annual survey for six straight years. Now it will find out if all of its hard-earned improvements are enough.
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