Travel Procurement

research note from Cowen & Co.’s Helane Becker noted the combined company will control 16 percent of the market in San Francisco and 11 percent at LAX.

Ultimately, Alaska’s West Coast capacity will increase to 22 percent, with transcontinental capacity growing from 5 percent of the market to 14 percent. The combined carrier will offer 1,200 daily departures with hubs in Seattle, San Francisco, Los Angeles, Anchorage and Portland, Ore. “With the purchase of Virgin, Alaska obtains eight additional gates in San Francisco, six gates at LAX, two gates at Dallas Love Field, 12 slots at LaGuardia, 23 slots at JFK, 15 slots at Newark and 10 slots at Washington National,” Becker wrote.

The addition of such key destinations, especially in the New York metropolitan area, opens doors for Alaska, perhaps establishing it as a more worthy competitor to American Airlines, Delta Air Lines and United Airlines. “For consumers and smaller businesses, the benefits associated with increased network breadth and improved in-flight experiences are indisputable, in our view,” Baker wrote.

Whatever opportunities the combined network brings, they will be confined to the United States. All

“I would be lying if I didn’t admit
sadness that our wonderful airline is
merging with another. Because I’m not
American, the U.S. Department of Trans-
portation stipulated I take some of my
shares in Virgin America as nonvoting
shares, reducing my influence over any
takeover. So there was sadly nothing I
could do to stop it.”
“In 2007, when [Virgin America] started
service, 60 percent of the industry was
consolidated. Today, the four mega airlines
control more than 80 percent of the U.S.
market. Consolidation is a trend that sadly
cannot be stopped. Likely feeling the same
competitive pressures as Virgin America,
Alaska Airlines approached Virgin America
with a proposal to merge.”
“Our Virgin airline has much more to do,
more places to go and more friends to make
along the way. The important thing now is to
ensure that once Alaska witnesses firsthand
the power of the brand and the love of Virgin
America customers for our product and guest
experience, they too will be converts and the
U.S. traveling public will continue to benefit
from all that we have started.”

STILL HAVE

QUESTIONS?

LOYALTY: After the acquisition closes, Alaska will envelop members of Virgin America’s Elevate loyalty program into its own Mileage Plan program, according to a letter from senior vice president of sales and planning John MacLeod to Virgin America agency partners. He said the carriers would provide “updates and details on program integration as we move closer to completing the transaction.”

RESERVATIONS: Both Alaska Airlines and Virgin America use passenger services systems furnished by Sabre, dodging the difficulties of integrating reservation technology, a process that has bedeviled others in the past. As for other technology, Alaska Airlines executive vice president and chief commercial officer Andrew Harrison said, “Virgin America is a newer company, so we are going to be looking hard at technology, especially across the commercial realm.”

but a handful of their destinations are domestic. Neither belong to the Oneworld, Star Alliance or SkyTeam global alliances, though Alaska has codeshare agreements with several international carriers, most notably American Airlines. Virgin America has codeshare agreements with China Eastern, China Southern and Singapore airlines, as well as Virgin Australia.

A Chance at Corporate Growth Alaska Airlines has a “relatively small” base of corporate business in Seattle, but execs expect that to change, they said during the company’s first-quarter earnings call, citing Southern California and the Bay Area, in particular, which aligns with Cush’s estimate that 70 percent of Virgin America’s corporate clients are technology companies.

Alaska already has a corporate-sales presence in San Francisco but also plans to leverage the Virgin team’s relationships with tech companies in the area, many of which also have operations in Seattle. “We don’t have exact numbers, but that will evolve, and corporate will become a more important part of our network,” senior vice president of communications Joseph Sprague said.