American and Alaska Start Behaving More Like Competitors as Partner Ties Loosen

Remember how concerned the Department of Justice (DOJ) was about the American partnership reducing competition if Alaska and Virgin America were allowed to merge? Well, that was wrong. The merger has only helped to stoke competitive fires, and in recognition of that, American and Alaska are scaling back their partnership even further beginning January 1, 2018. This may have come as a surprise to a lot of people, but it’s not hard to see why this is happening.

What’s changing? Well, American AAdvantage members will now only be able to earn miles on Alaska flights if they’re bought as an American codeshare. On the flip side, Alaska Mileage Plan members will only earn miles on domestic American flights that are sold under the Alaska codeshare. (On international flights operated by American, Alaska Mileage Plan members will still earn miles as always.) Note that this applies to both redeemable and elite-qualifying miles. Also, reciprocal benefits for elite members including priority boarding/seating and free checked bags will go away.

What’s going on here? After the Delta and Alaska partnership faltered, American was waiting with open arms for that big lovable Eskimo. The airlines spoke glowingly about each other. Yet now, they’re taking a step back, because, well, they are competitors first and foremost… and now more than ever thanks to the Virgin America merger. In fact, without that merger, I doubt we’d see these changes.

I think this quote from the Alaska FAQ says it all.

Alaska and Virgin America serve 80 percent of the top routes that Mileage Plan members have historically flown and earned miles on with American.

If Alaska really serves 80 percent of the top routes that people earn/redeem miles on, then it has tremendous incentive to cut back the mileage partnership with American to push its customers on to its own aircraft. While we don’t know American’s percentages, there’s no question that its overlap must be far greater after the Virgin America merger as well. Since these airlines always want to put people on their own metal first, it makes sense to take away the incentives for people to do otherwise.

This doesn’t feel like the Delta/Alaska partnership which was clearly going to end at some point. To me, this looks like a resetting of the relationship considering the new reality of a larger and more competitive Alaska. There is still benefit from having the partnership, however, and these airlines can still leverage each other’s networks. Alaska will still have its code on American flights that go where Alaska doesn’t. Think specifically about flights beyond the Dallas/Ft Worth and Chicago/O’Hare hubs into smaller cities like Waco or Little Rock. At the same time, American has its code in the West on Alaska flights to cities it doesn’t serve, like Wenatchee or Ketchikan. They both stand to benefit from this kind of partnership, and in fact, it helps increase competitiveness in the US industry by making both airlines more relevant in places where they otherwise would not be.

Now that the codeshare is the gateway for earning miles, I would bet that we see changes to which flights and routes see the codeshare. It will become a much more strategic weapon to help gain presence, especially for Alaska.

This does hurt both airlines in some ways. The current Alaska loyalist who needs to fly outside of the West Coast frequently may be pushed into the arms of Delta because there aren’t mileage earning opportunities with Alaska in as many places domestically anymore. This also takes away the ability for Alaska loyalists to fly the American transcons in the premium cabin from LA and San Francisco to New York. So yes, this will hurt some. But with less risk than there used to be thanks to the massive expansion by Alaska through its own growth and through acquisition, the math must show that there’s more to be gained by Alaska by scaling back this partnership than there is to be lost. The same goes for American.

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30 Responses to American and Alaska Start Behaving More Like Competitors as Partner Ties Loosen

  1. Alex Hill says:

    Except American doesn’t have its code on EAT (Wenatchee) flights. As a multiple-time-a-year EAT flyer based in PHL, that’s a significant annoyance and really hurts.

    I can hope that AA and AS will both expand their codeshares on routes to small cities (the EATs for AA, the CHOs for AS) and more consistently offer competitive fares on trips that involve codeshares to the final destination, but I’m not optimistic.

    • CF says:

      Alex – It sure does. For example, today, AA 7454 goes Seattle-Wenatchee.
      The Philly-Seattle flights don’t match up with that connection well so you’d have to double connect from Philly, but that doesn’t mean they don’t have the codeshare.

      • Alex Hill says:

        Sure enough, but really strange. I tried searching the schedule in the AA iPhone app this morning before writing my comment, and it doesn’t even let me enter EAT as a destination (whereas it did let me enter KTN and found flights as part of a connecting itinerary from LAX). And AA has never included EAT as a square on their map for cities with codeshares (something I check every time I’m on an AA plane for the first time in a given month). I did check from LAX rather than from PHL, knowing that the PHL-SEA connections are an issue with flights to EAT (whether on AS or AA from PHL-SEA).

      • Chris Miller says:

        Is there a way to see clearly see only the code share markets or flights somehow. I frequently go Alaska to Chicago. Can I get to MKE, MSN, DSM, GRB, DAY etc on American and earn miles and have benefits. It seems that Alaska does not code share on every AA flight between ORD and MKE. Alaska does fly SEA to MKE but many time the options to ORD with a connection are much better.

        • CF says:

          Chris – Alaska does codeshare on American in all of those markets, but you’re right that not every flight will have an Alaska code on it. The best way to see what works is to just go to Alaskaair.com. There isn’t, as far as I know, a simple way to see all options.

          • Chris Miller says:

            The best I found is the downloadable timetable. It looks like there are ZERO code shares between ORD and the above cities. The only code shares are other big markets like Austin, Saint Louis, and Kansas city. Not the small markets which eagle is the only connection to. Now that I understand I may be able to askly nice my Alaska friend to work a deal with AA

            • CF says:

              Chris – You need to do a search on the website. Every one of those cities has options from Seattle on Alaskaair.com. If you can book it there, you can earn miles.

        • Oliver says:

          > and earn miles and have benefits.

          No more elite benefits, code share or not.

  2. Tim Dunn says:

    It should come as a surprise to no one – the DOJ and now AS figured it out – that two domestic airlines that cooperate not only hurt competition but also hurt each other because one side benefits from the partnership at the expense of the other. AS recognized that it now serves most of the markets on which AS/VX passengers used to round out AS/VX’ network. The AS/VX network was designed to allow AS to compete with the big boys and not allow the larger airlines to gain an advantage by having a more robust network. AS wants to use its network advantage for its own benefit while the DOJ said that AS and AA can only cooperate by agreement where neither serve.

    • Oliver says:

      I think this hurts AS a lot more than it hurts AA.

      • Tim Dunn says:

        When AS and DL terminated their partnership agreement, AS said it would cost them – I forget the exact number but I believe it was about $10-15 million/year. DL did not say it would cost them anything.

        Remember that AS and DL did not allow codesharing on any flights the two both operated.

        Still, AS would rather take the risk of losing some revenue from serving as AA’s feeder operation on the west coast and move passengers to AS’ own network.

        Remember, all of these partnerships involved a whole lot of data sharing – so AS has a better chance of going after AA passengers who flew on AS codeshares than the other way around.

        AA might lose some passengers who they cannot fully service on the west coast while AS still will have the ability to extend its network to the east via AA but not allow duplication on routes which AS can fly.

        Since it is very likely that the decision to limit the AA-AS relationship came from AS, it is far more likely that they have figured out how to make it work for them than for AA.

  3. Anthony says:

    I’ve said it before, but watch for some kind of arrangement between Alaska and Jet Blue… perhaps in late 2018 / early 2019 after the Virgin acquisition is more complete. Their route maps are almost mirror images of one another! B6 needs it more than AS does, since B6 lacks a significant US partner.

    • Alex Hill says:

      The problem is that it’s not at all clear to me what B6 and AS do for each other. Their coastal hubs have relatively limited utility for connections, unlike the central hubs AA and DL. Yes, AS can get B6 customers from the east coast to Hawaii and Alaska, but that’s a much smaller market than the transcons and handful of B6 intra-west coast routes on which they compete. So the main impact of a partnership between the two would (from AS’s point of view) be to award AS frequent flyer miles to customers flying B6 on routes on which AS and B6 compete, not opening new destinations for AS customers.

      • Noah says:

        and Hawaii can be done via B6 partnership with Hawaiian.

        So the only areas I see of real synergy are Jetblue customers to the state of Alaska, and AS customers to the Caribbean (that aren’t served via AA). AS could gain from Caribbean, but nothing stops them from launching those routes themselves either now that they serve FLL/MCO/TPA and not sure it is a “big gap” for primarily west cost customer base nor incentive enough to entice new east coast loyalists.

        A merger is unlikely after VX acquisition. Regulatory nightmare, fleet and culture quite different, and not enough pax utility to generate large cost savings or revenue opportunities. A substantial agreement doesn’t make sense as Alex points out as it has high costs for low added utility for existing pax and not many new, incremental pax. A light agreement would work, as both carriers are interline obsessed and may not be too hard for some added traffic on both. But I don’t think it would signal anything more.

      • CraigTPA says:

        I agree, but a limited agreement which would only see a partnership to Alaska (for B6) and the Caribbean (for AS) could be mutually beneficial. AS might also consider putting their code on B6’s Mint product on the premium JFK-SFO/LAX routes, although I’m not sure how receptive B6 would be to that, unless they wanted to increase frequencies, as they don’t seem to have any problem selling those right now.

        • Olorin says:

          A codeshare between LAX/SFO and JFK makes no sense for AK. They already have lots of their own flights on those routes with Virgin. Why have a direct competitor carry your passengers for you?! Mint wouldn’t make it worth the risk at all.

      • Anthony says:

        I think each carrier would benefit from access to the other’s “yard.” B6’s yard includes upstate NY and all of New England north of Boston, as well as some other eastern cities that don’t support n/s service from the west coast (e.g. Richmond) plus the Caribbean destinations, as others have noted. AS’s yard is not only Alaska, but also all the secondary Pacific Northwest destinations (Spokane, Boise, Eugene, Medford, Victoria BC, etc). Plus, B6 service along the west coast is limited; it’s operated out of LGB (a favorite airport of mine, but perhaps unfamiliar to many easterners), and B6 doesn’t connect SFO/OAK/SJC to SEA or PDX at all,
        Frequent-flier reciprocity between AS and B6 would address these issues. It’s true that for AS, its partnership with AA already provides a lot; that’s why I said that B6 has more to gain than AS.
        I wouldn’t be anticipating a full merger. Not because of equipment or “cultural” differences (those didn’t stop the AS/VX merger), but because it will no doubt take a long time to completely integrate VX into AS. Also, a combined AS/B6 would be a national carrier, yet without the scale or scope to match the big three. I think they work better as a pair of “super-regional” airlines, AS serving the west coast, B6 serving the northeast and Florida.

  4. Richard says:

    As an elite status AA flyer living on the West Coast (SNA/LGB) who makes frequent flights up and down the Western seaboard and Western Canada this hits hard. I have always flown Alaska under my AA plan. Without the AA benefits on AS, Southwest and Jet Blue become more attractive for me. Both are often priced a little more competitively than AS. Schedule convenience will also be a little more open in my mind going forward.

  5. Alex Hill says:

    Cranky, do you know how AS and AA handle codeshare seat availability? Is it an arrangement where AS buys a fixed number of seats on each codeshares flights. Or is AS’s availability tied to AA availability in given fare buckets? Is the amount AS pays AA for an AA-operates codeshare tied to the AA revenue management/fare bucket availability in some way?

    • CF says:

      It just floats based on availability by bucket. There is no block seat purchase agreement. As for payment, it’s hard to know since that’s proprietary between the two of them. But it’s usually prorated by operating carrier. So if someone flies Alaska Seattle-DFW and then American DFW-Waco on an Alaska code, AA isn’t getting much.

      • Alex Hill says:

        Thanks. So does that mean that the benefit to AA in letting AS sell codeshares on DFW-Waco is more the ability to sell a different passenger an AA ticket from DFW (or, perhaps moreso, LHR or South America) to Wenatchee or Ketchikan than the marginal revenue on the AS*/AA DFW-Waco flight?

        • CF says:

          No there’s still money to be made. Since availability is based on what buckets American has made available, it can still be good revenue. A leg like Dallas-Waco never sees good money since it’s nearly all connections and it gets a very small slice of the revenue due to its short length. So a connection coming from Alaska probably isn’t much worse than one coming from AA as long as the capacity is controlled the way it is and it’s not booting a revenue passenger that could be worth more.

  6. I can hope that AA and AS will both expand their codeshares on routes to small cities (the EATs for AA, the CHOs for AS) and more consistently offer competitive fares on trips

  7. Tower18 says:

    The ending of elite reciprocity is a bummer for my strategy as I move from the JFK area to the EWR area. My DL loyalty won’t do me much good based out of EWR, so my plan (only condition is avoiding UA) was to fly AS for my transcons, and fly AA for the rest (another major destination of mine is ORD) as the miles could be pooled in the AS account, and recognized on AA.

    Now I may need to either suck it up and accept DL connections, or deal with split loyalty plans.

  8. paul2 says:

    Does the change in credit for Alaska miles start 1/1/18 even if a reservation was made before they announced this change?
    I recently booked Alaska airlines flights for February and put in my AA numbers to earn points. This was not a code share flight. Booked through Alaska directly. Do you know?

    • CF says:

      Paul – My understanding is that it doesn’t matter when it was booked. It will be for travel beginning 1/1/18.

      • paul2 says:

        Thanks, I was afraid of that.
        I appreciate the response

      • Alex Hill says:

        An Alaska Airlines representative on FlyerTalk has said that you can email in boarding passes for travel booked before the changes were announced (for travel after January 1) and get retroactive credit. But that’s not in writing on Alaska’s web site, and AAdvantage may handle things differently. They’re generally more opaque and bureaucratic to deal with than Alaska Mileage Plan.

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