Delta Will Take Over Alaska Airlines?

[swamt]

According to this article, this guy thinks Delta will Take over Alaska if the business flyers do not support Alaska.  I thought I also recently read where Alaska was doing very well against Delta's pressures.  I just don't see this happening, but then again, what do I know?
 
Without support from Seattle businesses, Delta will take over Alaska Airlines, banker warns

 

[WorldTraveler]

he's wrong. and he clearly doesn't understand mergers and the regulation of them in the airline industry by his comments.

DL will put a good sized dent in AS' armor but DL won't finish them off.

Of course the AS PR machine is engaging anything they can... DL's growth is clearly beginning to leave a mark whether they send their employees to "everyone all smile" class or not.

 

[eolesen]

The moment I saw the article mention Ex-Im and that this guy was a mouthpiece for the DNC, I stopped reading. Unfortunately, it was at the end of the article...

He makes it sound like AS is floundering and entirely ignores the idea that someone else would be interested in merging with them.

Neither one seems to be the case with AS. If there was indeed trouble brewing, it would be a seller's market, and the ALK Board would easily be able to ignore DL's expected overtures on principle in favor of someone else less antagonistic.

 

[WorldTraveler]

except that antagonism or lack thereof isn't going to fix the DOJ's objections to mergers involving the big 4.

AS realizes that and suggested that if there were to be a merger, it would likely be with an LCC - with B6 the airline that most closely fits the type of profile that AS operates in - and there are still major differences between AS and B6.

AS chose to play the field when DL wanted large amounts of capacity to feed its growing Pacific hub, AS decided to keep its current business plan which favors multiple codeshares, and now has to live with the consequences of its decision.

AS cannot have a JV with another US airline and it is unlikely that they would seek or be approved for JVs involving just a SEA route to a potential int'l carrier's hub so the assessment that DL has the advantage in marketing and pricing is likely becoming more real on the streets in the PNW.

Given that AS' low CASM has been largely driven by aircraft and by rapid growth, there is little advantage they really have over DL who can duplicate both.

DL is clearly focused on feeding its int'l markets first, building a large enough presence in the largest major western local markets from SEA second, and then connecting domestic passengers within the west including to Alaska and Hawaii and there is little reason to believe that DL can't succeed at each of those 3 objectives without a relationship with AS - which I am guessing will end in a couple years.

And when the relationship ends, it is likely several of AS' routes to DL hubs won't work any longer.

The inverse will not be true about DL's routes from SEA which will include a significant number of int'l destinations that AS cannot duplicate either on AS service or via partnerships.

 

[swamt]

The moment I saw the article mention Ex-Im and that this guy was a mouthpiece for the DNC, I stopped reading. Unfortunately, it was at the end of the article...

He makes it sound like AS is floundering and entirely ignores the idea that someone else would be interested in merging with them.

Neither one seems to be the case with AS. If there was indeed trouble brewing, it would be a seller's market, and the ALK Board would easily be able to ignore DL's expected overtures on principle in favor of someone else less antagonistic.

Exactly.  This guy doesn't know what he is talking about.  After reading I was thinking someone from this forum was posting this article to keep cheering for Delta...

 

[WorldTraveler]

you clearly didn't read the article very carefully because his thesis is that the PNW community needs to support AS in order to keep DL from being able to buy out AS.

He doesn't understand antitrust issues regarding airlines.

His statements sound more like rooting for a Starbucks competitor where there is very little antitrust concern if Starbucks buys out a competitor or has 10 coffee houses per square mile.

there won't be a merger between AS and any of the big 4. all of the big 4 are too large on the west coast (even if it isn't SEA) to result in too large of a market presence for the combined company.

AS cannot have JVs with US airlines and JVs don't make sense just from SEA to a foreign carrier hub.

AS will have to fight on their own and the likely will result will be that both AS and DL can achieve their goals but it will come at the cost of lower margins for AS and lower fares for the PNW.

If AS decides they need to merge, the chances are much higher that it will involve B6 than one of the big 4 but I'm not sure that even a B6 merger is worth it.

 

[swamt]

Here's even more on IF Delta buys Alaska, what about, IF Alaska buys Delta, very possible...
 
If Delta buys Alaska Airlines, Seattle could lose one of its most generous corporate philanthropists

 

[WorldTraveler]

the Seattle press is going nuts over the AS-DL relationship and some of the articles are clearly paid articles by both AS and DL.

there is no merger or acquisition of AS possible by DL.

and DL isn't interested in acquiring AS at this point unless their market cap drops dramatically.

DL could buy a whole fleet of more than 100 737-900ERs for less than AS' market cap.

and let's remember that Boeing moved its headquarters from Seattle to Chicago; if the largest employer in the PNW is not even based there, it's not terribly meaningful to think that an airline with HDQs elsewhere can't be a strong part of the community.

 

[Kellerguy]

I don't think I'd worry about DL buying AS.

 

[Kev3188]

I still don't think people outside the PacNW get just how deep the brand affinity for the Eskimo runs up there...

 

[WorldTraveler]

Kev,
people are ALWAYS loyal to their hometown brand, regardless of who it is, if they are a least bit decent in quality.

But DL is clearly doing the right thing or they couldn't be adding as much capacity as they have and have it as well received.

Clearly, PNW passengers are not as loyal as some would like to believe.

and, btw, you do realize that the SEA market, just like every other has two ends, only one of which is at SEA?

and DL along with every other airline that serves SEA has stronger sales OUTSIDE Of the PNW than AS does.

In fact in a market like LAX-SEA, DL gets almost identically half and half of its revenue from SEA and LAX origins. AS is 60% + SEA originating.

the same is true in MOST markets. obviously the seasonality favors AS in the winter when SEA passengers leave the PNW but favor DL and other carriers in the summer when PNW is the DESTINATION for people from other parts of the country. From DL hubs, the difference in DL's average fares and the size of the DL market vs. the size of the AS market is decidedly in DL's favor. Even in non-DL hub markets, though, DL has a strong showing in selling both from the PNW and in other parts of the country.

and the same phenomenon exists with JetBlue which gets a disproportionate share of its bookings in NYC but it does poorly in other parts of the country.

That is part of the reason why DL has done so well in NYC because DL has built its brand in NYC as a global carrier with a strong local presence but also does far better in selling on the other end of the NYC routes.. something B6 does not do well.

and to extend the concept one step further, UA is much stronger from its hubs than in the other direction... CO was the most directional of the big US carriers; UA had that some in its own network per-merger but it is more pronounced now. AA and DL have a much more balanced network with demand on both ends of their routes.

btw, Alaska is a SEATTLE based airline. The Eskimo is a great marketing tool to identify with the 49th state but it also is a hindrance in helping AS achieve brand identity outside of the PNW where people know that AS is really a Seattle based airline.

finally, DL has beat AS in DOT performance statistics in various recent months and tied them in a quality report that the Dallas Morning News featured. (you read the blog so you should be able to find it).

the notion that DL doesn't have the service quality to compete with AS is simply not accurate, esp. since DL is matching AS performance and also offers a broader array of passenger amenities including IFE than AS does.

 

[FrugalFlyerv2.0]

You write so much that often you seem to contradict yourself.
Have you ever considered quality over quantity?
 

people are ALWAYS loyal to their hometown brand, regardless of who it is, if they are a least bit decent in quality.

Clearly, PNW passengers are not as loyal as some would like to believe.

So which is it? Are the PNW people loyal or are they not? Make up your mind.
 

btw, Alaska is a SEATTLE based airline. The Eskimo is a great marketing tool to identify with the 49th state but it also is a hindrance in helping AS achieve brand identity outside of the PNW where people know that AS is really a Seattle based airline.

 
So which is it?  Is the Eskimo logo a great marketing gimmick or a hindrance?
 

 

[WorldTraveler]

there is no contradiction in nothing that people are loyal to AS but not so much so that another airline can't have an effect in the marketplace.

As I have noted, AS gets a disproportionate share of its traffic between SEA and the rest of the US from SEA but that hasn't stopped DL from successfully adding 1/4 of the domestic seats that AS had as of last summer and that number is dramatically increasing this summer.

 

[jimntx]

Yeah, DL can add seats to the market.  I haven't noticed anyone saying that people are sitting in those seats on DL.   For instance, as mentioned earlier, the "seasonal" Haneda flights on which DL  can't even fill even a 767.  I suppose there will be a strategic downgrade to 737 with a courtesy call at Kamchatka on the way to HND.

 

[Kev3188]

Or they can go to Khaborovsk or Magadan, and just borrow AS' old approach plates. Maybe bring back "Golden Samovar service?"