And Now an Update on Delta’s Efforts to Push Alaska Away

With yesterday’s post being about JetBlue and American breaking up, I figured I’d keep the theme going today with a discussion at the other end of the country. Delta and Alaska have been heading toward a break-up for months now, and while it hasn’t happened, it really should. If I were Alaska, I’d be out the door. But until then, Delta will just keep pushing, trying to entice loyal Alaska fliers to make the switch while it continues to grow.

Delta Deals SkyMiles in Seattle

I last checked in on the deteriorating relationship between Delta and Alaska at the end of last year. At the time, Delta had built up its presence substantially in Seattle, saying (disingenuously) it needed more feed than Alaska could provide for its international network. Alaska had retaliated with some extra flying in Salt Lake City and a strengthening of international partnerships, but that was about it. Now what’s happening?

Well, there have been smaller skirmishes, like the War of 2014, Super Bowl Edition. (Delta became the official airlines of the Seahawks last September so what did Alaska do? It responded by naming star Quarterback Russell Wilson as the Chief Football Officer for the airline.) But the real news is that Delta is really digging in its heels and aggressively trying to switch flier loyalty.

We’ve seen more Delta service rolled out since that post, including Seattle to Palm Springs, Phoenix, Tucson, and Jackson Hole. Oh, and Delta has beefed up Seattle to both Honolulu and Anchorage with more frequency as well. Not enough? Well Delta has also pulled its code from Alaska flights on competing routes. That means you will no longer see Alaska flights sold under the Delta codeshare between Seattle and Anchorage, Houston, Las Vegas, Los Angeles, Phoenix, San Diego, San Francisco, San Jose, and Vancouver. Wait, Houston? I thought that was weird as well. Not sure what that’s all about, but maybe Houston-Seattle is the airline’s next route.

With all this happening, what is Alaska doing? It seems to be quietly making plans for the future. In its last earnings call, Alaska said it was planning for revenues from Delta to drop. Andrew Harrison, VP of Planning and Revenue Management for Alaska, said this:

[There is] about $230-or-so million that Delta puts on our metal. What I would tell you is that the nature of the contract is changing, and at the end of the day, we are operating way upside, where the strict contractual terms are. So I think as I shared in Investor Day, you’re going to see and continue to see a reduction in the amount of traffic that Delta is putting on our metal, and that’s not surprising to us.

Alaska gets about 3.5 percent of its revenue from Delta but it sees that number dropping, as it should. Meanwhile, American generates about 2.5 percent of revenue. I would bet we’ll see that number rise over time.

So what happens now? If I’m Delta, I clearly have a plan to build my own hub in Seattle regardless of who else is there. So I will keep building and building while maintaining the partnership with Alaska as long as I can. After all, if they can use the Alaska loyalty in the local area to help build up their hub, then they can entice people to come over when they’ve reached critical mass. (They’re already doing all kinds of double miles and other promotions to steal Alaska loyalists.)

If I’m Alaska, I’d want out as soon as possible. It seems to me that Delta underestimates the strength of Alaska’s loyalty in the region. If Alaska pulls away now, it will hurt Delta. But can Delta be replaced within the Alaska network? Sure.

Alaska already took the first step by giving elite qualifying miles to travelers on every partner. So you can fly Korean to Seoul or BA to London and you’ll get your elite miles. On the redemption side, it’s interesting to note that while Delta gets 4 percent of Alaska redemptions, American get a much larger 8.5 percent. So clearly American provides more utility in that area and a tighter relationship might help grow that, providing more options.

I know many of you think this is a plot by Delta to take over Alaska, but I don’t see how it works out well. As has been pointed out by many, the more Delta adds now, the more competition it would take away in a merger. That means the Department of Justice will throw a hissy fit. And with Alaska’s market cap at over 20 percent of Delta’s, Delta would have to pay quite a premium to even try to take them over. Alaska is an extremely healthy airline financially so even Delta shenanigans aren’t going to do more than dent the airlines revenue. I don’t see how a merger comes together..

If I’m Alaska, I’m planning for a future without Delta, and the same goes if I’m an Alaska Airlines flier. If I’m Delta, I’ve already planned for that future alone. It’s just a matter of executing.

[Original drug dealer photo via Shutterstock]

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43 Comments on "And Now an Update on Delta’s Efforts to Push Alaska Away"

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Jared Hanner
Member

My question is, why hasn’t Alaska terminated its relationship with Delta already? It seems that Delta is expanding every day, cutting code shares and just “using” Alaska where it needs it, until they add new routes. Alaska is helping Delta take over their routes.

noahkimmel
Member
@Jared, Sure, AS could cut ties with DL now as Cranky has indicated. And yes, it will hurt Delta. But AS has a responsibility to be the best it can be, not to hurt delta more than it hurts itself. As long as the partnership generates profit, its hard to cut it off unless you can show more profit in the future. Maybe there is a strategic argument about losing less fliers to DL, and offering a stronger independent network than DL’s independent network. But DL has already said they will turn SEA into a hub. I think cutting ties… Read more »
A
Guest
I’ve flown Alaska a couple times and never understood the loyalty over any other airline, then again I’m not from Seattle. Of all the places I’ve lived the locals all had a certain disdain for the dominant local carrier. My guess is that Delta is trying to tap that market. I mean, I’m sure they know people in Atlanta loathe them but fly DL anyway because it’s basically the only option for most routes. Are there people in SEA that are disgusted with an Alaska near-monopoly that will switch just to spite them? I’ve got to imagine there are some,… Read more »
eponymous coward
Guest

“near-monopoly”?

AS has 50% market share in SEA when you combine their mainline and regional (QX) traffic. AS almost always has a competitor on a route unless it’s to small towns in the Pacific Northwest like PUW or BLI. For example: LAX is served by AS, VX, UA and DL. DEN is served by AS, WN, F9 and UA.

SEA isn’t MSP or DTW.

Randall
Guest
As a very loyal Alaska flier (Gold status) and shareholder, I can tell you that the biggest reason AS has loyal customers is they treat us like real people. They have happy employees–and it shows on almost ever flight. They have a corporate culture that has earned employee love/loyalty along with customer endearment. I am willing to spend a few extra bucks to keep my loyalty with AS, even when DL or Virgin A or someone else may have a lower fare on a route. Mind you: AS can’t gouge me and keep my loyalty, but I rarely feel like… Read more »
David SF eastbay
Member
Interesting to see what locals think of DL. Will it be the home town feeling that hey AS is our airline so DL stay out, or favoring the little guy AS against the big bad DL, or remembering that because of DL, Western and Northwest are no longer around which were both big in the area, or thinking I can travel to more places beyond the west on DL then AS. DL has a lot of building to do to make SEA a hub. Will they start taking flights away from SLC to use the aircraft to build up more… Read more »
noahkimmel
Member

dont over-analyze. Most locals think of destination-price-schedule. If DL builds fast enough, they will steal significant traffic. AS has a loyal following, to be sure, but the product is not necessarily vastly different like a VX of B6.

Southeasterner
Guest
“Alaska had retaliated with some extra flying in Salt Lake City ” I think this is an understatement. Looking at the Alaska route map in the inflight magazine yesterday it looks like Salt Lake is the focus of some major expansion, specifically into CA and TX, key routes for Delta. I’m guessing traffic and profits on these routes are just as good if not better than the seasonal and leisure focused flights to AK and HI respectively. It seems like we are painting the picture of Alaska as the victim but I’m getting more of sense that they are the… Read more »
Southeasterner
Guest

Speaking of Seattle….

http://blogs.seattletimes.com/today/2014/03/helicopter-crashes-near-fisher-plaza-and-komo-tv/

News helicopter just crashed near the Space Needle killing at least 2 but others in critical condition.

IO
Member
I will throw-out this for consideration. Delta thought it needed to act on a west coast gateway before United and American hit their stride. They selected SEA given that overall, for them, it may provide better Pacific operating margins than LAX, SFO, PDX. Yes, LAX and SFO may have higher local traffic which tends to be higher yielding, but it also means a tough margin fight against AA and UA, specifically UA. They acted on the strategy of getting close to AS so AS would be comfortable selling itself (AS meet our mgt. and our money that can be made… Read more »
James
Guest

SFO for DL has two main problems: the weather and United.

Most people in the Bay Area can fly out of more than one of the three local co-terminals easily(SFO, SJC, OAK). Strategically for domestic flying, I think San Jose would be the better bet for a NorCal hub. It seems to have capacity and is close to all the major tech companies in the South Bay/Peninsula and routinely is cheaper and easier to fly through than SFO.

Re: LAX, we already tried that and de-hubbed them about the same time that DFW and MEM were dehubbed.

David
Guest

If you need more proof of the breakup, In the past few weeks, Alaska has moved out of the South Terminal at Atlanta Airport into the North Terminal with all the other airlines. This leaves Delta all alone in the South Terminal.

Carl
Member
Here are a few comments as a Seattle resident who is a frequent flyer, with elite status on AS, DL & UA. First off is that in my opinion DL has by far the weakest frequent flyer program, and they are about to make it weaker. Redeeming on DL is a major PITA with both extremely limited availability, crappy web tools, and no one way awards. While they promise to fix the latter two, I’ll wait to see about the tools. And there almost certainly another devaluation built into the move to five tiers. Meanwhile they are about to cut… Read more »
Consumer Mike
Guest
DELTA is the master of “Bait N’ Switch” when it comes to Customer Service and the SKY MILES Frequent Flyer Program. Most folks that try and gather and use FF miles for use on a flight have found it VERY difficult, if not impossible to ever “cash-in” on a useful flight to their destination. Reasonable FF seat availability has always been a mirage on the DELTA loyalty program. Recently we have seen a major devaluation of SKY MILES by DELTA – except for those willing and able to pay for Business and First Class travel. Basically, DELTA is saying “We… Read more »
robert.rolwing
Member
DESPITE WHAT HAS BEEN SAID, AND IT HAS ALL BEEN SOOOO GOOD AND INTELLIGENT, maybe I AM CRAZY,BUT I AND WALL ST. ,STLL THINK DL IS GOING AFTER ALASKAN AIRLINES TO TAKE THEM OVER AND HAVE A MEGA HUB AT SEA , GROWING ON THE WEST COAST,THUS HELPING TO STRENGTHAN THEIR LAX HUB AND COMPETE BETTER WITH UA AND TRY TO LOCKOUT AA FROM GETTING A GOOD CITY FOR A 2ND HUB / IF DL IS SUCCESSFUL ,they will drop the overlap to satisfy the Justice Dpt and maybe even drop PDX A SECOND TIME TO CUT COST / SAFE… Read more »
Consumer Mike
Guest
Robert, DELTA does not really need AS to meet its growth plan in the selected target areas. It also appears that I am not alone in thinking that AS is really not interested in hanging a 4-sale sign on their window. I, personally, do not see a union of the two airlines at this time. DELTA, as any other airline, is entitled to dip their toe in the water and test new markets. Being successful is another matter. The new (Parker run) AA will be positioning itself in the near future, which should add pressure to the new DELTA moves.… Read more »
BF12
Guest

Who is Alaskan Airlines?

Darkwater
Guest

The US partner of Malaysian Airlines?

MeanMeosh
Guest
One of the more specific merger conspiracies I’ve read concerning AS & DL is that DL is intentionally trying to cut AS’s legs out from under it so that it can depress AS’s stock price, and then swoop in and do a hostile takeover. I personally find that theory rather unlikely, though I suppose anything’s possible. To me, this smells more like a situation of: DL asked AS to do a JV agreement (like what they wanted to do with KE), AS refused, and so DL decided to play hardball. I think Noah summed it up pretty well, though, as… Read more »
jaybru
Member
Fascinating stuff, as usual. Doesn’t affect me directly here in the DC area, but indirectly, of course. I believe the primary, I say primary purpose of every airline is to figure out how to kill off its competition, that is without getting DOJ and guy named Cranky all up in arms. Secondarily, there is this selling tickets to prospective customers. This is so messy and why bother. I do believe an acutal sale of a ticket is an admission of a failure: “We got ourselves in a jam and just had to dump some inventory as we work to kill… Read more »
Nick Barnard
Member
Its been a bit fun watching all the Alaska Air and Delta emails fly by my inbox, but I’ve unsubscribed from them.. (As part of a general cleaning up my inbox.) As a local, Alaska provides consistent service to where I need to go. (Well.. except for flights to the Midwest.. Which I recently managed to get a US Airways ticket for, but not fly a single flight I was originally ticketed for. As a result I got UA and AA.. (US got a bit crazy tight on their connections.)) Although, I’ll admit I’m a pretty consistent price shopper, I’m… Read more »
JeffinMass
Guest

Unfortunately worldwide DL has a much stronger presence. Unless AS joins forces with many international airlines or joins an alliance they will lose international feeder traffic if they have any now. It is obvious that DL needs another west coast hub to fly west and they chose Seattle. I personally would hate to see any demise of AS by either AA or DL. On the other hand I miss Empire and Piedmont airlines terribly.

Don
Guest
I’m just an interested bystander in all this but I’ve never really understood why people would question Delta’s decision to build a hub in Seattle using its own metal. DL is investing in some international service out of SEA and, in my opinion, it would be foolish to depend on another airline, in this case Alaska, to essentially operate the hub for them. AS could pull out of the agreement at any time and DL would be stranded with virtually no domestic feed. When AA filed bankruptcy, I assumed DL would pursue AS at that time. As many people have… Read more »
haloastro
Guest

How do you know that DL’s statement(s) that AS cannot provide enough feed for their connections in SEA is(are) “disingenuous”?

Daisy
Guest

Oh man, I can’t stand Delta. I have flown with them a few times and their customer service is consistently sub par. They’ve “lost” my bags more than once, only for the bags to be found somewhere, and they have cancelled flights more than other airlines. If I were Alaska, I would be definitely preparing for a future (and a much better one) without Delta.

Red
Member

Now if DL starts flying SEA-ABQ or SEA-some other non Alaska City I would say they are truly trying to turn SEA into a Large DL hub as the are then going to fight SWA or another AAirline but right now it just looks like they are saying go away AS we want to be #1 in SEA on routes you fly don’t make us buy you

Carl
Member
DL is starting service on plenty of non-hub routes out of SEA, and they will be creating plenty of connecting North American opportunities using SEA as a hub, particularly to/from YVR, ANC, JNU, PDX. The cities they’ve picked to add service so far were picked to maximize connecting traffic for their international traffic to/from Asia and Europe, plus those with the highest O/D traffic from SEA. Really it all makes sense if they are trying to create a hub in SEA – not a hub that competes with ATL or DTW, but one that makes sense in this corner of… Read more »
Red
Member

Funny as soon as I say if DL starts doing SEA-Non Alaska Airports like ABQ Alaska says its going to fly to ABQ and BWI
http://www.usatoday.com/story/todayinthesky/2014/03/28/alaska-air-expands-in-seattle-cuts-routes-elsewhere/7001059/

John
Guest
My girlfriend and I live in AK, fly AS pretty much everywhere, and ‘buy’ mileage tickets to Europe every year or two. DL has been great for this – we use our AS miles to get a DL flight out of SEA, MSP, and even once out of LAX (ouch!). With the KL/AF/DL JV over the Atlantic, we’ve flown on all three airlines in each direction. My question is – what happens when AS and DL cut ties and we can no longer redeem our miles on DL? We (hopefully) will still be able to redeem miles for tickets on… Read more »
JuliaZ
Member
SEA is my home airport and I’m AS and DL Elite. I strongly prefer AS and consider DL as my fallback if AS doesn’t have the schedule and route I want, but not otherwise. AS MVP benefits are better and more consistently available; customer service is always outstanding; even the food you have to pay for is pretty good. DL just sucks on every point, by comparison, especially trying to redeem miles to go anywhere, ever. I often pay the premium price for the AS 2/3 flights to/from DCA as the public transit options from IAD and BWI are appalling;… Read more »
stonyb31
Member

I always like your cover art/photos Cranky, but this one is the funniest yet. I dig the right hand drive little car, and the dealer/delta guys outfit. You have a great sense of humor. Fly On.

Dale
Guest

Two things:

Regarding Northern California AA had a hub at SJC but that was de-hubbed.

Regarding SEA it is Seattle/Tacoma, not just Seattle.

SEA FF
Guest
As a former top tier FF on BA, UA & AA – and now a Gold status AS flyer (having relocated to Seattle years back) – I have all but terminated (other than the heaps of miles on UA and BA) my relationship with UA/AA/BA/DL because AS offers (a) much better scheduling for Seattle direct flights and (b) their FF program and customer service completely annihilate the “service” I received from BA/UA/AA (Note: As a Platinum BA, they used to be really good back a decade or so ago but have declined to be almost rock bottom). A few years… Read more »
Carl
Member
With Delta’s ridiculously difficult award availability, it is not clear that putting flying on Delta is any more rewarding than collecting Alaska miles. However, what if, when the DL-AS partnership ends, which it almost certainly will, what if AS approaches UA to replace DL as AS’s second domestic partner? It’s not as if AS & UA are more competitive than AS & DL are, or even were before the split. Given UA’s reductions in SEA, AS might complement UA quite nicely on the west coast. And if that partnership were to include Star Alliance redemptions, that might be quite nice.… Read more »
trackback

[…] the air). And each week, there’s another juicy tidbit to keep you tuning in for more. I know I just wrote about this recently, but that’s old news. Now we have more shots […]

renhelm
Guest
I am Portland based and have been loyal to Delta and before to Northwest (Platinum for 15 years). I was very unhappy with Delta when it merged with Northwest and considered going somewhere else. I stayed with Delta program and flew Aeroflot, KLM, Air France and Aero Mexico and Alaska collecting MQMs with Delta. Then Delta cut FF-miles with many SkyTeam members so I booked some Alaska and some KLM flights and some Delta. This year I am going to fly Delta only, get my Delta-Amex extra MQMs, collect as many miles as possible. Delta’s devaluating miles even more in… Read more »
Rock!
Guest
I agree with Renhelm about PDX. I have also already be seeing evidence of it being true. As Delta and Alaska fight over SEA; other airline seems to be focusing on PDX. I have been seeing flights added from other airlines at PDX and passenger numbers are rapidly increasing. Many of these flights have been non stop out of PDX, which is nice since the 3 and a million people within 45 minutes of PDX or tired of Alaska and Delta forcing them to connect through SEA. Having lay-overs for destinations less than 4 hours (flight time) from PDX is… Read more »
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