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.