now that all of the large nationwide US carriers have reported plus AS, the strength of DL's financial performance relative to the industry becomes apparent. With the strongest revenue performance relative to the entire industry and the lowest costs to all other network carriers and within a few percent of WN, DL is in the position to execute its strategic objectives.
It also is no surprise that DL is focusing its competitive efforts on the west coast where it has the ability to establish its position in key AA and UA markets as has never been possible before based on financial performance.
AS continues to have a healthy cost advantage but noted that its revenue was pressured because of all of the increased capacity that was added in its key markets. They noted that 1/3 of alel of the domestic system capacity additions in the industry were in key AS markets.
The AS earnings conference call is full of questions from analysts about the AS-DL relationship, the effects of the relationship on AS, and how DL's actions are effecting AS.
A few highlights.
AS and DL have a long-term relationship that has minimum requirements for both sides. There is no contractual mechanism to end the relationship without financial risk to either side.
DL is AS' largest interline partner making about 4% of AS' revenue.
There is no desire on AS' part to pursue a merger.
AS' cost advantage will be harder to maintain as it slows it growth in part due to the necessity to improve its RASM performance.
AS will look at contractually permitted means to protect its own interests while also fulfilling its contractual requirements under the AS-DL agreement.
AS recognizes that there are other carriers making capacity adjustments in AS' core markets, including by VX. Other carriers' actions are helping reduce the impact to AS while others are hurting.
Here are some excerpts from the ALK earnings conference call. The entire transcript can be found at Seeking ALpha
http://seekingalpha.com/article/1770792-alaska-air-group-management-discusses-q3-2013-results-earnings-call-transcript?part=single
This is Brad. I might chat about the Delta relationship for a bit. First of all, the new flights that Delta's putting in into some of our North-Southwest markets are markets that we will not be code sharing on. And a lot of folks have asked question about Delta and I guess one of the things that I want folks to know that we're trying to do here is take the emotion out of this process and make the best decisions that we possibly can. I would think that as we move forward, there are going to be places where it's going to be in our interest to work with Delta and we're going to support them, they're growing internationally by itself, that should be a good thing for both of us, and so we're going to work with them to grow the connections between the 2 airlines. And then there are places where they are growing in North-South markets that have been long-term core markets for Alaska Air Group. And in those markets, we will compete and we'll defend what we've built over the next years. But we got a long-standing relationship with these folks. We had a lot of competition North-South and the West Coast over the years. It will be a little complicated, but that's the world we're moving into and I think it's going to be okay.
We know that many of you are wondering about Delta's capacity additions in several of our markets, including Seattle-Los Angeles, Seattle-Las Vegas and Seattle-San Francisco. United has also added capacity to the Seattle-San Francisco market by adding frequency and up-gauging their service to mainline jets. There's really not a lot we can say about this, except that we're focused on the situation and we're confident in our ability to deal with it as we dealt with new competition in the past. Alliances can be complicated. It's likely that in the future, there will be markets where it's in our interest to work together with Delta and there will be markets where we will compete because it's in the best interest of Alaska Air Group to do so. We have a long-standing alliance with Delta, but many of their recent domestic additions are in core Air Group markets, and we intend to compete aggressively and defend them vigorously
