The announcement that Alaska Airlines is acquiring Virgin America surprised some industry watchers.
Alaska Airlines was not the most obvious suitor for Virgin America, perhaps, but despite both airlines having a focus on the US West Coast, there is surprisingly little by way of route overlap.
Alaska Airlines will operate 225 routes this month, compared to Virgin America’s 38 routes. However, there are only 6 routes served by both and they are San Francisco (SFO) to Seattle (SEA), Portland (PDX), Palm Springs (PSP), Puerto Vallarta (PVR) and Los Cabos (SJD), as well as Los Angeles to Seattle.
So what the merging of route networks does is strengthen the Alaska Airlines position on the West Coast and also adds cross continent operations between the major West Coast hubs at San Francisco and Los Angeles to the East Coast hubs at New York and Washington. In April, Virgin America is scheduled to operate 1,228 frequencies on these routes between San Francisco/Los Angeles and New York/Washington. That’s 41 a day, and more than 6,000 daily seats. Furthermore, it allows Alaska Airlines to take control of its revenue management without reference to the cut price fares which Virgin America has been known for. We should see Alaska Airlines yields rise.
So, domestically, this seems to work and gives Alaska Airlines a little more presence in the market. But what about internationally? Alaska Airlines has code sharing agreements with more than a dozen airlines including Cathay Pacific, Hainan Airlines, Korean Air and Qantas. With the interline relationship with Delta winding down, there is clearly an opportunity here for Alaska Airlines to consider new or strengthened relationships with Asian carriers. Certainly if Hainan were looking for new routes to serve to America’s west coast, the link with Alaska is looking good.
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