Photo: Eddie Maloney
Alaska Airline’s acquisition of Virgin America will create the fifth-largest airline in the United States, carrying a total of 39 million passengers on 1,200 daily departures on 282 aircraft.
It will displace JetBlue, which lost a “hard-fought battle” to acquire its West Coast rival, in the No. 5 spot.
Alaska’s “single largest opportunity” arising from the deal is California, chief executive officer Brad Tilden said. “The market is three times the size of the Oregon, Washington, and Alaska markets put together.” The carrier has a significant presence in Los Angeles, but is weaker in San Francisco. The deal will give it a second major hub in the state.
There is already a healthy amount of technology industry traffic between Seattle, Alaska Airlines’ home base, and San Francisco. That 7 out of Virgin America’s Top 10 customers are in the technology field is icing on the cake.
Alaska also will gain valuable gates and slots at Washington and the three New York airports.
Alaska plans to retain its brand, but it also will consider ways to use the Virgin brand as well. “We believe it is driving a revenue premium for Virgin,” Tilden said.
Both Alaska and Virgin use the SabreSonic passenger services system. While that alone will not guarantee a seamless technical integration, it likely will help.
Cultural differences, among both passengers and employees, may prove trickier.
Virgin, a boutique brand, is seen as a “hip” innovator in the customer experience arena, said Henry Harteveldt, travel analyst with Atmosphere Research. Alaska is more traditional, “but both carriers have very passionate core groups of customers.”
Virgin was the first carrier to introduce mood lighting and the ability to order food through the seatback entertainment system.
On the other hand, it has a “mediocre” website and has never had a mobile app, Harteveldt noted, whereas Alaska Airlines has often led the industry in technical innovations like online check-in and bag drops.
Ideally, Alaska will “let its inner hipster Eskimo come out,” he said.
As is the custom when airlines combine, Virgin devotees have taken to FlyerTalk and other sites to mourn the loss of their airline, saying it’s time to burn off their Elevate frequent flyer miles. But Harteveldt noted that Alaska has said it will retain its distance-based program, so some Elevate members might come out ahead.
In addition, Alaska has a much larger partner portfolio, so it will be easier to earn travel to international destinations, he said. “I wouldn’t be so quick to burn through those miles.”
The cultural differences may be even greater among employees. Virgin is a much younger and smaller company, so “the employees are more familiar with each other.” As part of a larger company—and farther down the seniority list—they also may find it more difficult to be promoted, Harteveldt said.
On the plus side, Alaska Airlines is known as a good and fair employer, and the pay is higher.
Harteveldt also is concerned about the competitive dynamics in California. Delta and Alaska Airlines once had a close relationship until Delta decided to grow its Seattle operations. Since then, Alaska’s relationship with American has grown.
“Will that relationship give American more clout in the market?” Harteveldt wondered. “Will we see the same degree of low-fare competition?”