Alaska Sticks With Its Own Brand But Learns a Little From Virgin America Before Killing It

The long-awaited branding decision has been made, and as expected, Alaska will be retiring the Virgin America brand in the next couple of years. I had the chance to speak with Alaska’s Chief Commercial Officer and EVP Andrew Harrison as well as VP of Marketing Sangita Woerner yesterday about the changes that come along with this decision. The airline has made a conscious move to chart its own course with an old-school strategy and buck competitive trends, especially in the transcon market. I can appreciate the decision that was made and how it was done. That, of course, is no guarantee that it’s the right decision. But part of the fun will be watching to see how things turn out.

You can see a lot of the basics in the release put out by the airline, but here are some highlights.

  • The Virgin America brand will disappear, likely in 2019.
  • The basic Alaska service premise will be kept. The airline is focusing on a good onboard experience for all with elites getting plentiful upgrades into larger premium cabins. New interiors will be introduced.
  • The design of the new interiors is something that’s been in the works for awhile in preparation for the introduction of the 737 MAX fleet. The new interior will build on what has already been done with recent upgrades.
  • The A320s will be converted from 8 First/12 Main Cabin Select/126 or 129 coach to 12 First/18 Premium/120 coach. The A319s will see a similar treatment as they’re all brought into the Alaska fleet. That will start happening in 2018.
  • There’s no plan on whether the Airbuses will be kept for the long term, but they have 5 to 6 years left on lease for a good chunk of them, and Alaska says the reconfiguration will easily pay for itself.

  • First Class will be a downgrade over what Virgin America has, but it’ll be better than Alaska’s current offering with 41 inch pitch and footrests.
  • Alaska will infuse parts of the Virgin America culture and brand into the Alaska experience. Music will be important, and food and beverage will be upgraded. The bulkhead will go from a native-Alaskan style motif to something more modern. Mood-lighting lives on, but it will be blue, not purple.
  • The decision has not been made on what to do about in-seat video, but the airline is “leaning” toward having people bring their own devices. I’d say the new tablet-holder in coach is a pretty good indication of where things are going (though these are only for the Boeings as of now.) There will be power at each seat. Satellite wi-fi and free streaming content will be available for all.

  • Even if in-seat video goes away, Alaska is exploring whether it can keep the order-on-demand system Virgin America has on its fleet (which I love). According to Andrew, “we want to keep it,” but he acknowledges that there are service flow issues that would need to be resolved.
  • There will be no separate transcon product. Alaska has made a clear decision not to try to compete with flat beds selling for under $1,000. In Andrew’s words, “we want to be very efficient, very low cost and productive, and have low fares.”

There you have it. But what’s interesting is how Alaska arrived at this decision. The airline spent months doing research and divided travelers into 13 different segments. In the end it focused on a leisure/enthusiast group that made up about a quarter of the air travel market. These are people who like to trade up to a more premium product but find price to be important. It’s about a third business travel and two-thirds leisure travel. And that’s the market Alaska really focused on.

Looking deeper into the research, the team found that Alaska’s brand was strong in some areas but really no worse than neutral anywhere. In California in particular, there were some segments that knew Alaska but those that didn’t provided the airline with a “blank canvas” to leave an impression.

I asked how the “snotty millennial techie Bay Area” segment felt about that. That’s the segment that I assumed loved them some Virgin America. Though that shockingly wasn’t a direct correlation with one of the Alaska-studied segments, Sangita acknowledged that there were some segments where Virgin America peaked, but then in other segments, Virgin America had troughs. The Alaska brand didn’t have those same kinds of valleys.

With that, the airline realized that there was value in Virgin America, but not enough to keep the brand flying. Instead, the airline opted to try to use the Virgin America brand elements to update the Alaska brand. The airline likes using the words “modern, warm, and welcoming” to describe the new Alaska brand.

That will be reflected in the new uniforms, the cabin design, and the general advertising/marketing voice of the brand. (Remember, right after the merger they had some edgier ads than you’d have expected from Alaska before.)

While the branding work and soft product has some Virgin America flair to it, the underlying strategy and economics scream Alaska. With the legacies all moving away from the old model of having more rewarding frequent flier programs that offered plentiful upgrades, Alaska saw an opportunity to not change. That continues. Virgin America didn’t believe in having a lot of premium seats and didn’t believe in free upgrades. That will change.

Alaska believes in using aircraft space efficiently. That means it will eliminate the tremendous room given to relatively few First Class seats on Virgin America. It also means getting rid of hard bulkheads that don’t help the bottom line and don’t actively improve the passenger experience.

Perhaps the most interesting move is the decision to not compete in the transcon flat-bed movement. Alaska saw what everyone was doing, saw the fares in the market, and decided it just didn’t fit with the Alaska strategy. So instead, it will pass on having a separate subfleet and will appeal to people who want value and free upgrades. That could be a gamble, but on the other hand, if Alaska loyalists want to fly in a premium cabin on transcon, they can fly American and still earn their miles.

As Andrew said, Alaska wants to “be disciplined and play to [its] strengths, not be all things to all mankind.” It’s going to be a different kind of airline. At first blush, I’d call it a boutique value airline, if that makes any sense. With massive, rapid growth coming for Alaska in California, there’s a lot at risk here. The airline is betting that overall, the Virgin America strategy wasn’t the right one, but there are good elements of the brand and product that it hopes to adopt and combine with what Alaska itself already does well. There’s risk there, but you can’t say Alaska hasn’t done its homework.

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46 Responses to Alaska Sticks With Its Own Brand But Learns a Little From Virgin America Before Killing It

  1. Alex Hill says:

    The focus on tablets/BYO entertainment device coupled with streaming could come back to bite AS (and AA and DL) if the tablet/laptop ban proves to be due to a real security concern that gets expanded to domestic flights and not a thinly veiled stick-it-to-the-Middle Eastern airlines ploy.

  2. Miss Informed says:

    I’m all for seatback screens disappearing — the sooner the better! I wouldn’t mind them so much if they were turned off by default, but my experience is that it’s usually hard to figure out how to turn them off. I despise being forced to have flickering advertising in my face… and with seats so close together these days, the advertising really IS in your face! Absolutely nothing more than blatant advertising passed off as entertainment. Being a retired librarian, I have to rejoice at the prospect of tablets and laptops being banned in flight, too. BOOKS are the low-tech solution. Open a book and turn on your brain! Long live the biblio-revolution!

    Confession: I always travel with at least 2 or 3 books, a tablet and a smart phone. I don’t like the idea of possibly having to leave the tablet in my checked luggage in the future, but if it happens, OH WELL.

    • jean delisi says:

      Putting laptops and tablets in the cargo hold is a safety risk. There have been three crashes I know of that is a result of lithium batteries and fire including a UPS 747. If there is a real terror threat using these devices, people should be required to leave laptops and tablets at home.

      • Andy says:

        Lithium batteries are fine if they are in the device. It’s when spare batteries are stored externally that it becomes a problem.

    • Oliver says:

      I usually read books on long flights, but my back prefers Kindle eBooks (from the library usually) over a pile of paper books. But kindles are banned, too.

  3. Tim Dunn says:

    Alaska is sticking with a model as close to Southwest’s as possible… low costs, high volume, west coast focused. The real question is how well their model will be accepted in the transcon markets which Virgin America was built upon but where they lost a lot of share because their transcon product was dated. Alaska says that a premium transcon product (and a subset of aircraft to support it) isn’t worth the investment but with AA, DL, UA and B6 all have a premium lie flat product, it is hard to argue that AS will compete for the same pool of revenue without that type of product. The product at the “top of the food chain” does matter to frequent and high value customers who are further down the food chain but who aspire to move up because of their loyalty.
    AS’ unwillingness to go with AVOD also will bite them in the transcon market given that B6 and DL are both sticking with AVOD on as many aircraft as possible. Even AA and UA’s decision not to put it on their future domestic aircraft means little because they have mid-con hubs, something AS does not.
    AS seems to have taken a model that works well based on the historic AS route system and business model but which seems a major step down from what Virgin America offered, even in its dated form. Indications are that there will be an outflow of customers from AS that will go to other airlines. Given that there is more than a month before AS and DL terminate their partnership, the defections will likely be heavily split between AA and DL on the west coast with UA getting a higher percentage of traffic from SFO and JBLU gaining passengers even while being smart enough to not get caught up in the bidding process for Virgin America which AS is now carving up anyway.

    • southbay flier says:

      Of the legacies, I know that DL uses every plane type that flies the premium transcons for international flights as well. So, it’s not like it’s a special fleet just for SFO/LAX-JFK. I think UA does the same, but I’m not as sure. Only AA has a special fleet for its premium transcons.

      I still don’t think I would pay more for a lie flat seat for a domestic flight with the exception of a red eye, and I avoid red eyes anyway since I hate them. So, if I ever had to to to NY, AS would become an option for me.

      As for AVOD, I like it. I can do something on my computer and watch TV at the same time. I like that. If nothing on, I like the moving map.

  4. Geoff says:

    There’s something to be said for seeing a market (NYC-SFO/LAX) with 4 players and saying “we can either be a copycat, or we can stake out a unique market position and value prop and be something different to a specific audience”.

    There’s also something to be said IMO for not getting blinded by the bright lights of 2-3 routes that are only a small part of your 200+ route portfolio.

    Finally, I think AS did a good job promoting “Free Upgrades!” yesterday, but what got drowned out a bit was “Mile earned for mile flown, redeemable on global partners”. That’s a HUGE win for the former VXers and is something you don’t get on AA/DL/UA.

    • Tim Dunn says:

      AS’ problem is that they are competing with the big 3 that are trying and to a large degree deliver being all things to all people. B6 is pursuing a similar strategy. It rings as a bit hollow to argue that AS will really compete for the same passenger set at the same price as other carriers because they have great brand loyalty at home. Airline routes have two ends and other carriers compete aggressively for the opposite end of those routes. AS has more than a handful of transcon routes that it will be offering a different and in some cases an inferior product, even if you focus only on those routes where a lie flat product is being used by one or more competitor. B6 is adding Mint to one market after another.
      It is great to argue how well AS has done in SEA but let’s remember that until DL decided to start building a hub there, no one else really cared about SEA enough to aggressively go after the same passengers AS carries. By buying Virgin America, AS is now competing very aggressively in very high revenue markets with lots of competition. If I am indifferent as to which carrier I will use for my travel, I am going to use the one that gives me the most perks for the least amount of investment on my part. AS can try to be the most generous airline in the perks department but that just means they have less potential for increasing their own revenue.
      AS might well succeed in transcon markets because it has low costs but even low costs are not worth as much on long-haul flights as they are on shorter flights. AS appears to be taking the philosophy of offering as little compared to other carriers as it has to in order to be one step above WN while being willing to give away lots of its product in order to keep customers loyal. I’m just sure I am convinced that is a viable strategy esp. in the highly competitive markets that AS bought VX in order to compete in.

  5. flyingcat says:

    I fail to see any element of Virgin America that will survive, other than we need to look less Alaska centric. I think Blue moodlighting is standard on the 737 MAX. My gut feeling is that other than moving away from the carpeted bulkheads all of these enhancements would have happened anyway without Virgin America. Plus Alaska would never, ever play any of the music Virgin had on their playlist.

    • Bernardo Ng says:

      What’s the playlist Virgin America plays? Like is it a specific playlist or band or type of music or songs or what music do they play?

  6. A says:

    I do like the tablet holder. On the planes without seatback screens I tend to get a sore neck staring down at my tray table for a two hour movie or whatnot. Now what the FAA does with allowing them on board is another matter. If they get banned to the cargo hold then I think Alaska made a bad decision, especially with their focus on a more leisure/budget traveler. Time will tell.

    Again my question is what does any of this do for the east of the rockies flier that has no hometown/regional loyalty to AS…and isn’t flying to LA or Seattle 90% of their time? Their entire route structure is based on O/D traffic from 3 states. Am I wrong? Sure, you have the possibility of getting a domestic F seat but other than that what differentiates them from from WN? Why not copy WN on the route structure as well with some point to point flying east of the rockies and then we’ll see what AS is made of beyond their loyal west coast audience.

    • Alex Hill says:

      Well, five states (Alaska and Hawaii count too).

      AS is, wisely I think, making a conscious decision not to try to be all things to all people. That means that they’re not going to be the primary carrier for many people east of the Rockies, but their network can serve essentially all the needs of a large number of people based in those five states (relying on partners for intercontinental trips, of course).

      That said, their frequent flyer program and partnerships make them useful even for customers for whom a majority of their flights are on different airlines. I’m PHL-based, and I now credit essentially all of my flights to AS. (Probably half of my flights are to Washington state, BC, Alaska, or Hawaii, which certainly helps, but I also now credit all my AA and BA trips to AS.)

      • A says:

        Honestly after I hit submit I knew someone would bring up partnerships and codeshares, which is valid. That being said with the consolidation in the industry those heydays are numbered IMO. How do you use your AS miles on a European vacation in that world? Guess you go to Hawaii instead? Not that I choose an airline based on where I can get a reward flight but for high profit business travelers the route network matters. Personally I want more competition and perhaps foolishly thought that the virgin acquisition was a move to be more of a national player. Being a WN wannabe on the west coast isn’t a bold move in my mind.

        • Alex Hill says:

          Yup. My main point is that AS really isn’t even trying to be the main airline for people outside the west coast. The frequent flyer program lets them get some ancillary customers and makes them appealing to a small subset of those of us east of the Rockies, but I think they’re wisely avoiding getting distracted by going after large swaths of the travelers outside their core market.

    • Itami says:

      Going off of Alex’s point — Alaska has done so well historically because they’ve been very conservative and methodical with expansion. Building up a significant O&D-focused presence outside the West Coast would inevitably run into one of the Big 4 or B6 and they’d have even more on their plate in addition to integrating VX.

      If anything, this acquisition takes them further away from a point-to-point WN-style model (though WN is arguably rather hub and spoke now compared to its history). Alaska’s regional jets plus Virgin’s airport real estate and A319s will allow the combined carrier to better run a set of true hubs in California connecting a larger network of small, medium, and large markets.

    • A – What Alaska is doing is trying to replicate the model it created in Seattle and to a lesser extent Portland and export it to California. The person on the east coast will fly Alaska if the price is right and Alaska can get them there. But it’s all about building hometown loyalty. It has done that extremely well in the Pacific Northwest. The bet is that the same model will work in California, and that’s what I’m not clear on yet. But personally, I like it.

      Separately, I really don’t get all the comparisons to Southwest since they are really nothing alike.
      *Alaska has seat assignments, Southwest doesn’t
      *Alaska has extra legroom seating, Southwest doesn’t
      *Alaska has First Class, Southwest doesn’t
      *Alaska has power, Southwest doesn’t
      *Alaska has a worldwide network of partners, Southwest doesn’t
      *Alaska has built a viable hub operation meant to serve cities big and small with a variety of fleet options, Southwest has none of that

      This isn’t to say Southwest is bad or doing it wrong. It’s simply showing that Alaska and Southwest aren’t even close in experience.

  7. I’m a bit confused by the “new cabins” bit. Didn’t AS just put in a whole new set of Recaro Seats? Are those just going into the trash? Or are they just refitting them with a new seatback?

    • Nick – Sure did. I believe the new cabins were being designed for the new MAX deliveries. The Airbuses will get them too, though I believe they’ll keep the current Virgin America coach seats until they decide to kill in-seat video. I don’t think the 739s have been redone yet (or not all of them), so maybe they’ll switch midstream? Wasn’t clear to me. But I assume the aircraft with the new seats will stay. Maybe I shouldn’t assume though…

  8. Eric says:

    OMG!! Alaska playing it on the conservative side of things!! Shocker!!

    Seriously, great analysis as always Brett. Moving from AVOD to *reliable* high speed is a no-brainer. Less weight, less mx and it’s not a service recovery issue waiting to happen with inop screens. Frills like intra-cabin chat and the order on demand can be easily integrated into the AS app.

    The logic behind the lack of premium transcon is compelling. With ‘everyone else’ going the bells & whistles road the premium experience has become commoditized. Somehow humanity survived US transcons without flat beds and suites for decades. By focusing on a good consistent product while letting everyone else dream up (and invest millions) in the Latest Thing could prove a wise call.

    • Tower18 says:

      Yeah I have a healthy travel budget at work, but not enough for the “Premium” transcon biz class. I might be able to swing an old school business seat, priced right, for my NYC-SFO/LAX flying. Still probably not going to switch airlines though, since the Alaska network doesn’t get me anything else (unless I switch to AA for everything else).

    • Oliver says:

      > Somehow humanity survived US transcons without flat beds and suites for decades

      I think the vast majority of passengers still do. I would never pay my own money for F transcons, my employer wouldn’t spend their’s. So with no upgrade opportunities on the legacies I would be in coach. With AS I will be in coach (PE) with a chance of an upgrade. I am okay with that.

  9. Cantbegrounded says:

    I should be able to use my phone to order a drink. I assume that’s coming. I love Alaska but it takes forever to get the cart to row 30+.

    I’ll miss the screens for flight tracking – but have noticed there are many apps that handle this pretty well.

    • Steve says:

      So I’m supposed to drop everything I’m doing at the front of the cabin, serving drinks, food, etc in a methodical manner to go off running to row 30 because YOU’RE THIRSTY!! VX staff say the seatback ordering is a nightmare for them. They still begin with a cart service, working front to back but, at the same time, everyone that’s impatient is ALSO ordering at their seat. Do they get it any faster? No..sometimes we all just have to wait our turn.

      • Ron says:

        I loved it and I didn’t see the staff running around at all. They had plenty of time to chat when they brought the drinks. Personally, I think the idea is brilliant. Most of the time, I really don’t want anything, but because it’s offered, I take it. I also spent a lot of money on food and drinks that I probably wouldn’t have if it wasn’t for the seat back ordering. I think it’s my favorite part about Virgin and I wish more airlines adopted it,

        • I’d be really curious how many people would actually get a drink if it didn’t come by and have a cart right in front of them.

          The problem with doing it in only app then you still have to take orders verbally because not everyone will have a mobile device, but they might want a drink..

  10. kelty says:

    I never have understood the appeal of flat-beds to just go across America. Maybe at night, but during the day I want a window seat to go sightseeing over the Rockies, Great Salt Lake, the Grand Canyon, etc. To me, a good reclining seat with legroom is what I prefer.

  11. CP says:

    Alaska, in my experience, has something going for it. I fly them a few times a year–DCA-SEA, ORD-SEA, and up-and-down the West Coast and within Washington State. And I always look forward to it, because I think it’s the best and most consistent coach product in the U.S. I always have a comfortable seat, a clean airplane, an on-time flight, and a pleasant cabin crew. The buy-on-board food is a cut way above most buy-on-board options. There are multiple rounds of beverage service in coach. My bags are quick to the claim when I check them. I say: keep doing your thing, Alaska.

    • Seanny says:

      Agree with you. For the typical flyer on the majority of routes, the AS coach seat is at least as good as United/Delta/American and the service is usually friendlier. And if you get upgraded every now and then, even better!

    • Seanny says:

      Plus, Southwest does huge intra-state business in California and has little competition. If I was a Sacramento flyer who went to Hawaii every now and then on Alaska and learned I could take them to Burbank, Orange County and San Diego rather than Southwest (even if on Horizon) I would happily do so.

    • Frank says:

      As a top tier AS flyer, I think CP nailed it – although I see the ever so popular chess & fruit plate on other airlines now.

      Now if the power guys can figure out a way to get rid of those old school metal boxes under the seats – that would be innovative and make coach much better.

  12. einsteinium2564 says:

    FYI, when you say “blank canvass,” it should really be canvas. Canvass is a verb. Good article otherwise though. It is disappointing that they are doing away with IFE.

  13. Seanny says:

    The challenge with keeping the name “Virgin America” is that it is tied to other “Virgin” airlines from which the new Alaska will be completely independent of. In fact, does’t frenemy-turned-rival Delta own part of Virgin Atlantic? In the long run two different Virgin airlines were always going to be more confusing than the not-really-confusing idea that a plane with “Alaska” on its name be flying to places other than Alaska. And Alaska would have had to pay Virgin to boot.

    • Tim Dunn says:

      yes, DL owns 49% of Virgin Atlantic…. one of several theories as to why DL swapped the SEA- London route with Virgin Atlantic is because most people don’t understand that the Virgin airlines are separate and DL actually has tried to benefit from brand confusion created with the VX-AS merger. Whether true or not, the Virgin name doesn’t have power in the US it once did and that which remains is and will be associated with Delta and Virgin Atlantic.

    • Oliver says:

      More than two Virgin airlines…

      https://en.m.wikipedia.org/wiki/Virgin_Airlines

      Who knew there was a Virgin Samoa!? Maybe SRB can focus on building that up.

      • Alex Hill says:

        Virgin Samoa is essentially a paper airline, a part of Virgin Australia (their 49% owner). They use Virgin Australia-owned aircraft. I’m not sure if they have any of their own crew. Their market is flying people from two cities in Australia and one in New Zealand to Samoa, in cooperation with the corporate parent.

        I agree that it was hard to see how maintaining the Virgin American brand could possibly have worked, in part because they would no longer be even an arms-length partner with Virgin Atlantic or Virgin Australia.

  14. Heidi Kohne says:

    One thing to look for a year or so from now: If regional planes will now include liveries of state universities of California & other markets where Alaska now flies/will fly (other than San Diego State, which is already part of the fleet). It’s always fun to be on one of these college planes, even though the service/food doesn’t change.

    Also, I definitely attest to the hometown loyalty that AS has to us Pacific Northwesterners. I mean, who else has a separate boarding time (between 1st class & coach) here in Portland if you’re wearing something of the Timbers soccer team (which they are a primary sponsor of)? And the local employees are perennial hits of us parade-goers during our Rose Festival, with them doing rehearsed choreography with their rollerbags or light wands as they walk the route with an adorable large 737 balloon. Those touches of positive personality go a long way. Their on-time performance definitely doesn’t hurt, either!

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