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.
—Additional reporting by
Michael B. Baker