Belatedly Pondering Alaska’s Dallas Plans

Alaska Airlines, DAL - Dallas/Love Field, Virgin America

I’m well aware that it’s been about three weeks since Alaska announced its plans for serving Dallas/Love Field, but I’ve been thinking about it a lot since then. Why do I care? Well, I don’t see a world where Dallas is all that important for Alaska, so I’m trying to find a good reason why the airline is bothering at all. I’m coming up short. It seems like Alaska is trying to solve several problems and in the end, it’s just creating an operational headache.

This issue goes back to Virgin America’s decision a few years ago to try to expand outside of its LA and San Francisco bases. It had covered the big destinations from those cities, but it had more airplanes on order. So it desperately looked for a place to, ahem, spread its wings. When American and US Airways merged, the feds forced them to give up their 2 gates at highly-constrained Dallas/Love Field as well as slots at both Washington/National and New York/LaGuardia. Virgin America started formulating a plan.

The idea was to snag those 2 gates at Love along with slots at National and LaGuardia. Due to perimeter rules at both those airports restricting the distance airlines can fly, Virgin America couldn’t use the slots to fly to its hubs in LA or San Francisco. Instead, the airline would build a mini-hub at Love Field. It would use those two gates to fly east to DC and New York as well as west to its bases in LA and San Francisco. It would fill in the rest of its Love gate capacity by flying a few flights to Austin. Those were never meant to be more than placeholders. Eventually those Austin flights were so miserable that they disappeared and Virgin America started a Vegas flight. This allowed Virgin America to put airplanes somewhere, but with no growth prospects and little relevance to the rest of the system, it was still a puzzling move.

When Alaska acquired Virgin America, the intent of the merger was clear from the outset. Alaska wanted to replicate its success in the Pacific Northwest down in California. It had already started to build up medium-size airports like San Jose and San Diego. But with the addition of Virgin America’s portfolio at LAX and San Francisco, it could now begin to serve the needs of Californians in a much more comprehensive way. Whether that strategy pays off remains to be seen, but it’s at least very clear. How Dallas fits into the mix, however, is not.

Alaska indicated it would keep its gates at Love Field after the merger, so then the question became… how would the airline decide to utilize them? There were several competing needs.

  1. Act as a new destination from Pacific Northwest markets complementing the service to Dallas/Ft Worth that already exists.
  2. Act as a way to maintain service from LA and San Francisco to the Dallas area since it had no DFW service from there.
  3. Act as a way to grow connectivity from smaller California cities into the Dallas area.
  4. Act as a way to continue to maintain those slots at National and LaGuardia since Alaska couldn’t use them to serve any of its west coast markets due to the perimeter rule.
  5. Act as a way to piss off Southwest since it desperately wants those gates.

So what did Alaska decide to do? ALL OF IT.

  1. Alaska will fly twice daily from Seattle and once daily from Portland. One of the Seattle flights will be on a Virgin America A320 while the other flights will be on Embraer 175s.
  2. Alaska will keep three daily flights to Dallas from both Los Angeles and San Francisco. These will be operated by Virgin America Airbuses.
  3. San Jose and San Diego will each get one daily flight to Dallas on Embraer 175 aircraft.
  4. LaGuardia will keep 4 daily flights while National will retain its 3 daily flights.
  5. I’m sure Southwest is pissed.

For you math whizzes out there, you can see this adds up to 18 daily flights, or 9 on each gate. I’ve played with the schedules and can’t quite figure out how all of this positioning is going to work, but it does appear there will be 5 aircraft that spend the night in Dallas with a lot of towing required to get airplanes on and off the gate. Virgin America struggled to run a good operation with such tight constraints in Dallas, and I expect Alaska will have trouble as well.

Sure, 11 of the 18 flights are on 76-seat Embraers, so they should be able to get quicker turns. But you still need everything to go right. And considering perennially-delayed San Francisco and New York/LaGuardia count for 40 percent of the operation, it’s going to be a complete mess. To go back to the five points I made earlier one more time…

  1. Alaska already has up to 4 daily big jets from Seattle and 2 daily flights from Portland to Dallas/Ft Worth. That benefits from the connectivity at codeshare-partner American’s hub. Love might add a little utility for some people, but it hardly seems worthwhile to run the split operation there.
  2. LA and San Francisco would likely benefit more from flights to DFW than these Love options, because they could connect further into the American network. Since these airlines are no longer allowed to codeshare on hub to hub flying, Alaska now has no way to get people in LA and San Francisco to American’s DFW hub.
  3. San Diego already has 3 daily nonstops to Dallas on Southwest while San Jose has 1, so it’s not like Alaska has a service advantage. I’d think these cities would also benefit more from DFW service for the same reasons as mentioned above.
  4. LaGuardia and National provide no benefit to the network. Sure, Alaska can squat on those slots, but will it ever be able to use them to get to the West Coast? It’s unclear. How long do you keep losing money (I assume) before you decide it’s not worth it?
  5. Ok, so pissing off Southwest has to be fun.

In the end, I just don’t see enough strategic value to bother with the operational hassle, no matter how much fun it is to be able to prevent Southwest from growing at its home airport. I know the Alaska team is smart, so I’m just trying to find the angle that made sense to them. Three weeks after the announcement, I’m still searching.

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54 comments on “Belatedly Pondering Alaska’s Dallas Plans

  1. Wasn’t one of the AS/VX merger conditions that they couldn’t divest the within-perimeter DCA and LGA slots or the DAL gates? If so, DAL seems like the least-bad place for them to fly from DCA and LGA, since they at least have artificially-constrained competition.

    1. Alex – They can get rid of them, but they can’t do it without DOJ permission. And they can’t sell them to American at all. Basically, DOJ wants to ensure that it goes to a low cost carrier or new entrant. Personally, I’d love to see Alaska try to sell the gates at Love to Southwest. DOJ generally gives Southwest anything it wants, but this would be incredibly anti-competitive since Southwest already controls all but those 2 gates at Love (with Delta still fighting for space).

  2. There have been a number of very chat-worthy airline topics of late so it isn’t a surprise this got pushed back… it’s still worth discussing.
    AS is ultimately doing what it was expected to do which is to build its own bulk on the west coast even if it meant stepping on AA’s toes which this move does. Since AA and AS cannot codeshare on routes to each other’s hubs, AS’ own DFW service lost a little value. Building Love Field helps them compete in the DFW area against AA which obviously has a bigger presence. DAL does add more dots to AS’ west coast network which helps them gain a viable size against the big 4. AS can’t expect to be nationwide from the west coast but it can fill in as many dots as possible.
    This move also is a stick in the eye of both DL and WN who are fighting over increased access. The FAA has repeatedly delayed a ruling on the charge that the City of Dallas is not enforcing DL’s request for accommodation not only for remaining with its current 5 ATL flights but increased access for more flights which DL made years ago. If AS left, the situation would likely be resolved. the FAA has to now rule which means that WN will likely have to give up even more gate space and give DL the space to expand. DL was happy to let AA and WN knock each other out with low fares but Dallas metro fares are increasing so this is a good time to push for resolution of the case.

    As for the schedule, you are right that it is tight; ATC delays in the NE are what will likely mess up being able to operate reliably. The E175 is a good placeholder. AS does have its nonstop from DCA to the west coast. They are clearly still trying to figure out what will work with all of the new routes they have added and it is a given that not all of them will last.

    1. Tim – You say “Since AA and AS cannot codeshare on routes to each other’s hubs, AS’ own DFW service lost a little value.” But I think the opposite is true. Previously, Alaska could have just sold LA or Seattle to DFW under its own code on American flights. Now it can’t so it needs its own metal even more.

      1. AS could have sold Seattle to DFW on either AA or AS metal as well as beyond connections. Now it can only use its own code so, IIRC, it can sell LAX to DAL on its own (contracted) E175s but not AA’s LAX-DFW. DOT data does show that AA and AS did carry some of each other’s traffic which explains why AA reduced PDX and SEA to ORD, which is why DL is starting SEA to ORD.
        I suppose there are different ways to look at it but AA and AS are competitors instead of cooperators more than they were before – and that is what the DOJ wanted.

    1. it is…. DL remains there with 5 flights/day to Atlanta I believe 4 717s and one 320 for the summer, WN is required to accommodate them.
      WN says they could expand further above the 10 flights/day per gate if they could but the district judge said that WN can’t add flights until the DL access case is resolved.

      My gut says that at some point WN will figure out how to operate 12 or more flights/day from 16 gates. Everyone said that 10 flights/day is not possible but LUV has been doing it. DL also did about 10 flights/day from LAX but they had the benefit of being able to operate redeye flights to the east coast and used larger aircraft. Either way, I suspect that WN will give up or be forced to give up at least one gate to DL and possibly a few additional flights/day will be available to a newcomer on another gate shared by DL. The courts have had no problem seeing that WN controls a higher percentage of gates at Love Field than any other airline does at any airport even remotely the size of Love Field. Regardless of what some think WARA and the Wright Amendment says, restraining competition is never permitted by US law. It is clear that the Dallas area does not need any restraint of competition between Love Field and DFW and all that exists is that WN has a hub at Love Field on top of AA’s dominant position at DFW but there is not anywhere close to the free entry of competition that exists in other cities and the judges that have handled and commented on the case can see that.
      The significance to AS is that they are simply forcing resolution of the issue and are happy to allow DL and WN to fight it out in court – even at a very slow pace. Virgin America got into Love Field by DOJ orders who tried to interfere with what the market could support and they have a protected but still not likely viable position at Love Field where they are trying to figure out how to use the assets they inherited

  3. Cranky,

    Independent of the DFW/AA factors most of these are at least rational, SAN maybe less so. If AS is deciding to evaluate DAL catchment as seperate from DFW it may not be as bad as you see. It seems the choice is really between building out the schedule, as they have done, or pulling out of DAL. Plus doesnt AA still actually own the gate rights but are required to sublease them per the merger settlement?

    1. jeff – I don’t recall if American still owns the Love gates, but even if it does, it will never be allowed to use them. I agree it’s possible that Love Field may prove an attractive addition for some people, but it’s not going to matter on many of these flights, including the 7 daily that head east instead of west where Alaska has no presence. Alaska shouldn’t be trying to appeal to the Dallas traveler, so it’s really about where people from the west coast want to go. I find it unlikely that enough people are so set on Love that this is going to be worth it.

  4. Isnt the AS/AA codeshare going away on some flights due to anti competitive reason when AS bought Virgin and a lot of the routes affected are DFW to the pacific northwest?…..AS will compete with WN on a few routes to the west coast and pacific norhwest, even if only one flt, lower fares….

    1. Yes. In approving the AS/VX merger, the DOJ required AA and AS to stop codesharing on routes from the west coast to AA hubs, essentially, to encourage AS to serve those routes with its own metal.

    2. MC – To clarify a bit further, Alaska can no longer codeshare from, say, LA or Seattle to DFW. But it can still codeshare on all the flights beyond DFW for connecting purposes. So if Alaska were to fly from LAX to DFW, it would then have built in connection opportunities.

  5. I’ll bet SWA wishes they’d played ball with DAL when they cut that AA/United back door deal.

    Now they’re really screwed.

  6. I see AS falling out of Love (sorry — someone had to say it!) the moment someone with an appealing amount of cash in hand arrives on the scene. They’ve got their hands on a marketable commodity, and they know it.

    1. As long as the DOJ remains involved in the case, the assets are not marketable but the Trump DOJ or DOT has not weighed in on any high profile aviation issues. The Obama DOJ’s order for Virgin America to notify the DOJ if it chose to divest the Love Field gates is still in force and it isn’t clear if there will be any changes under the Trump Administration.

      whether any of this matters long term to AS remains to be seen but they have the number 2 position at DAL right now. Further, using E175s on many routes is likely to push up their average fares and Virgin America had higher average fares than WN on many routes.

      The DOJ and DOT need to stay out of the issue and allow judges to decide the case based on airport access requirements, WARA, and competition laws. If AS can make the market work, so be it but giving them a protected market is wrong as is preventing anyone that is big enough to challenge both AA and WN – which is what Delta is willing to do at least in DFW/DAL to its hubs and is the only carrier that met the accommodation requirements which judges and the FAA have to decide govern this case or they don’t.

      The FAA is well aware that ruling for WN has enormous implications for access at other airports and using WARA to justify a protected market is simply not acceptable from a competitive standpoint.

  7. I would think DL would be pissed off as well. They are the ones who are on the outside looking in and really want those gates. But, then again, the less DL has at DAL, the happier WN will be. I think DL would have provided the most competition at DAL.

    1. If nothing else, DL is keeping WN from expanding at DAL until the case is resolved.

      As for AS and DL, they are competitors; I’m not sure why anyone didn’t come to that conclusion five years ago when DL started to build its domestic feed at Seattle.
      Further, based on the financial impact to AS when termination of the AS/DL was announced, it was AS that was benefitting from the relationship from DL and not the other way around so it was AS that had a financial impact from termination of the relationship.

      and the impact to AS from terminating the DL contract was likely less than the impact between AA and AS because of the DOJ’s requirements to end hub to hub codesharing.

  8. Alaska and Delta are not on friendly terms right now. I wouldn’t be surprised if this is as much about keeping the gates out of Delta’s hands, as anything else.

  9. I’ve been wondering if Alaska feels the need for a mid-country hub or focus city of sorts. Chicago or Denver would seem to make more sense though.

    1. Chicago (three airlines hubbing there: United, American, Southwest) or Denver (three airlines hubbing there: United, Frontier, Southwest)?

      Um, no? As in “you might as well dump some Jet-A on bales of hundred dollar bills and light it on fire?

    2. Similar thought to my own. Just as long as they don’t try Kansas City/MCI. Is there an airline that has ever had a “real” hub there and has survived? (Reminder: Southwest doesn’t have “hubs.” according to them). I hear St. Louis has a little bit of excess floor space available, Assuming AS is on friendly-enough terms with AA there might be some possibilities for creative interlining.

      1. Miss Informed – Nope, no hub has ever survived! Southwest is the closest and they do connect traffic, but that airport in KC just really wasn’t built for connections. Weird thing now is watching the local politics.
        The airport wants to build a new terminal and so do the airlines. But they can’t get all the stakeholders onboard. What a mess.

      2. I don’t believe AA holds the leases on the closed and unused gates in STL any longer since their bankruptcy. This is why part of “D” Concourse has been made part of T2

        Some of the “D” Concourse Gates in STL have been made part of Terminal 2 or “E” Concourse for WN for possible expansion. STL has all but handed over the rest of the remaining “D” Concourse Gates to WN if and when they require them.

        The high number end of “C” Concourse has vacant gates and that part of the Concourse is walled off. “B” Concourse is vacant as well and should be used as strictly commuter

  10. AS serves EWR, JFK and LGA.

    AS serves BUR, LAX, SNA, and ONT

    AS serves SFO, SJC and OAK (a hub in SFO and focus city in SJC, no less)

    AS serves DAL and DFW

    I see a pattern here…

    1. eponymous – I see these other markets as different. Alaska has very clearly stated it wants to be be the airline of the west coast, so it’s going to serve multiple airports in each metro area to serve as broadly as possible. That explains the Bay Area and LA Basin multiple cities.

      In New York, LaGuardia is just squatting and slots and sending them to Love. Seems to me this is just Alaska trying to make hay out of a scarce resource that it inherited. The same really goes for JFK and Newark. It only served Newark until very recently. Now with all the slots it inherited at JFK, it’s making a go of it there too. That to me also looks like an experiment.

      That being said, I still think you can make the case for JFK and Newark because of the concentration of wealth in that area and the vast differences in time required to get to JFK vs Newark depending upon where you are. Just look at what United has been saying about leaving JFK being a mistake. You don’t have that kind of thing in Dallas where people go wherever their preferred airline is hubbed.

  11. I agree with Coward in that split ops dosent deter AS in NYC, the Bay or SoCal. That being said…the Metroplex is solid and growing but nowhere near the regional GDP of NYC,the Bay or SoCal.

    Worst case, they are sitting on real estate that will grow in value. IF this dosent work then they will walk with allot of cash.

  12. I agree that Alaska isn’t likely to make any money at HOU. I also think it’s wrong for Southwest to get ALL the gates at Hobby. Logic suggests that Delta could make the best use of them. I’m not sure how that ever happens, but maybe it will someday.

    1. Delta is still at Love Field because the judges so far have all agree that it is likely that Delta could win the case to remain based on airport accommodation requirements and monopoly/antitrust concerns.
      The disposition of the Virgin America gates won’t change the outcome for Delta because DL would have either been kicked out long ago if the case was merely about real estate laws as WN has said. It is likely that by AS staying in the two gates, WN will have to reduce its operation to enough gates to accommodate DL if a judge rules that way – and DL has not been kicked out in a couple rounds and by the opinion of at least 3 judges. CF’s original thesis that AS is putting pressure on WN is accurate.
      It is also worth noting that WN just had to vacate temporary slots at Orange County while several airlines – which I believe included AS and DL – expanded.
      Remember that WN is the largest carrier in terms of passengers carried on the west coast and AS knows that. On a mainline basis, AS also has a lower CASM than LUV – which LUV certainly knows.

  13. I thought for sure that AS would move the LGA/DCA slots elsewhere and focus DAL on the west coast. Obviously I was wrong, for the time being. But if LGA/DCA are messing up DAL for AS, there’s no reason why they cant move them to another station down the line. To me, MKE seemed like a no-brainer, LGA/DCA to MKE and on to SEA/PDX/SFO/LAX. But it will be interesting to watch the continual drama that DAL brings to the market.

  14. My 0.01c….it’s probably an AA/AS deal. if AA allows a higher share of the codeshare revenue then that pays for some or all of the losses. This or any other reason, imo, keeps DL from growing at DAL.

  15. With the love field flights, AS reduced DFW-SEA and PDX to 3 and 1 daily, depending on the season. I agree with you that AS needs to concentrate flights to DFW to enjoy AA’s awesome network. It will be a phase and AS will keep evaluating in the meantime.

  16. Alaska is helping AA out by keeping these gates. If SWA got them there would be 20 more flights competing with AA. They should keep them till SWA has something valuable to swap for them. Those two gates are the only potential growth for SWA at DAL so there only going to increase in value.

    1. DAL versus DFW is much like MDW/ORD and HOU/IAH. If you favor Southwest you use Midway or Hobby, if not you use O’Hare or Bush. It’s not really so much about geography, and note how few airlines duplicate service out of MDW/ORD and HOU/IAH. No point nor need for AS to double-up on the Dallas airports to the west. As for DAL to LaGuardia and National it seems hard to see smaller, higher seat-mile costs will help. There’s just not much of a compelling reason for most people to choose AS* on DAL-LGA and DAL-DCA. If you favor Love you favor Southwest.

      I see this more about strategy than making money. Time will tell if the strategy is worth the cost.

      1. I prefer DAL to DFW, and like SWA, but if there is a First Class seat on the route, I will consider it, as I have with Virgin America.

  17. Can AS just sublease these gates to DL for ab exorbitant fee? I doubt they want to help DL but I’m guessing that enough money would solve that.

    1. Delta has already said it won’t pay inflated rates for access to Love Field because federal airport accommodation rules require airport operators to make gates available to airlines that do not have leases and airlines that want to start service where capacity exists at market rates for leaseholding airlines at the airport. Again, the case is slowly working its way through the legal system but the FAA has never waivered in its requirements that airports provide access to airlines that want to serve an airport where the capacity exists. Since Delta is the only airline that completed the request for accommodation at Love Field before Southwest began operations at 10 flights/gate which the airport defines as full capacity, the Love Field accommodation case is solely between DL and WN. Given that AS is staying, the resolution will very likely be either that the basis for DL remaining at Love Field is not valid or the City of Dallas must accommodate DL’s request which could involve space for as many as 15 flights which would essentially require that WN scale back to operating just 16 gates. I expect that if that happens, WN will be free to add as many flights as they want to those 16 gates and would operate at least 180 peak flights/day but WN probably feels it is worth their while to drag the case out while the case moves both thru the regular federal court system as well as thru the FAA which is responsible for Airport Improvement grants and in making determinations if airport accommodation requirements are met as parts of those grants.

      If anything, AS’ decision to stay simply forces a solution between DL and WN and eliminates any possibility that the other two gates at Love Field will be part of the resolution of the DL-WN case.

      I’m not convinced like others that AS has the best business case for their operation at Love Field but they very likely can succeed at it

      1. Why would DOJ have a problem with DL getting the gates? It’s not like they’d be leasing them to WN.

        1. Bill – Well, DOJ has historically hated the legacy airlines. Unless this new administration has really done housecleaning (which I doubt), DOJ would probably rather see Southwest have a total monopoly than let Delta have gates.

  18. me and my family travel (SJC/SFO – DFW/DAL) at least once a month. The planes are always packed, doesn’t matter what you fly (VX, Southwest, AA, UA). I think this must be one of the higher margin and under served routes out there. DFW and bay area economy is way stronger than national average and i can tell you there are a lot of bay area people that moved to North Texas.

    I think Alaska recognized that fact, as well as the proximity of LOV to affluent areas of Dallas. I live in north Fort Worth, and as much as I prefer DFW, I think it makes sense for them to keep a those expensive gates at DAL for now until they figure out a longer term plan. The SJC and SAN will be added well into 2018, so they’re a long way out. By the time that happens, they may make additional changes to scheduling.

    I also think this is a short term move. Over the long term, they will consolidate into 1 airport. I sure hope DFW wins though both Delta and Southwest will be happy.

  19. You totally missed the point that people that reside in Dallas FAR prefer Love Field to DFW and step on any flight to major cities from there rather than have to deal with DFW. Everyone knew this, of course, which is why DFW had to be protected from Love long haul by the Wright Amendment for 40 years.

    1. That used to be true from when DFW was built until the early-mid 90s. It was out in the middle of nowhere, and Collin and Denton Counties were basically a collection of farm towns. Not so much anymore. I live in Plano, and it can be a far more brutal trip down the Tollway or 75 to get to DAL than to hop over to DFW depending on the time of day.

  20. I’m surprised no one’s touched on the other bugaboo out there – I’m not even completely sure that AS can operate a split operation at DFW and DAL long-term. My understanding is that under the Five Party Agreement, any airline that wasn’t grandfathered in must surrender gates at DFW if they start service at DAL. I seem to recall that being given as the reason for VX abandoning DFW when they started service at DAL back in 2014. Maybe I’m wrong about this and it’s not an issue after all.

    1. Other than the original agreement to close Love Field in favor of DFW, no airlines other than American and Southwest have ever signed any agreement about what airports they can serve in the Dallas/Ft. Worth Metroplex
      So far as I know, the only airline that would have to surrender gates is Southwest at Love Field if they start service at DFW. There is no requirement in the other direction.

      The whole legality of the 5 party agreement is ripe for being challenged since it provided for the two largest carriers in the Dallas/Ft. Worth market to limit each other’s ability to compete wherever they might want; the DOJ requirement for AA to divest gates at Love Field only amplified those risks.

      Laws have to be challenged by someone and so far no outside airline or entity has challenged it.

      For now, Delta seems content to push the envelope about fighting for Love Field access just a little bit but with AS and DL both remaining at both DAL and DFW, the notion that airlines should serve only one airport in the region is being tossed aside just as it has been in other metro areas.

      Delta’s case is probably helped by AS’ decision to operate out of both airports.

      As for the comments about American and Alaska, as I understand it, AS cannot put the AA code on any of the routes out of Love Field because AA operates the same market from DFW.

  21. I agree that reliably operating nine flights per gate per day will be a problem with LGA and DCA in the mix.

    But next time you’re on a flight from the north side of the DAL concourse, look out the window on the north side of the plane. You’ll see what look to me like a row of remote hardstands – a rarity at US airports.

    I’ve never seen a plane parked there. Most likely they’re intended for emergency IRROPS use (e.g., during thunderstorm and tornado season). I suspect AS is thinking about buying buses now….

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