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Alaska faces an existential threat from Delta in Seattle even as the two have a long-term contract on reciprocal benefits and codeshares.
Only a day after Delta revealed it plans by the third quarter of 2014 on being the largest airline in terms of revenue in Seattle — both Alaska Airlines’ headquarters and its largest hub — Alasksa Airlines CEO Brad Tilden conceded there is a competitive threat, but expressed confidence “we’ll come through this as a stronger company.”
Delta, seeking to expand its service from Seattle-Tacoma International Airport to destinations such as Hong Kong, Seoul, and London, increased its capacity in Seattle 17% in the first quarter.
Tilden said Alaska and Delta have lots of overlapping routes, and there will be much “jostling” in the next few months. “I think there is going to be more capacity in these markets than the markets need,” he said during the Alaska’s first quarter earnings call.
Of the competition, Tilden said: “This is how capitalism in this country works.”
Tiden said Alaska is focusing on the things it can control, and if it operates well, and delivers safe flights that are on time with terrific service and at the right fares, then “we think we are going to be OK.”
In response to the Delta moves, Alaska has reallocated capacity from Seattle to cities such as Detroit, Tampa, Albuquerque and Cancun, and into new markets outside Seattle, including from Salt Lake City to seven cities in the Western U.S., Tilden said.
Tilden argued that Alaska has a cost-structure advantage in this fight, enabling it to offer low fares, and that its loyalty program now enables members to earn elite-qualifying miles on flights with all international partners as flyers can qualify for elite status faster than with any other airline loyalty program.
Delta has been eliminating some of its codeshares with Alaska, but Alaska has recouped that lost revenue through codeshares with other carriers such as American Airlines, officials said.
Delta’s push into Seattle doesn’t bode well for Alaska, which is adamant that it can counter the threat, although officials acknowledge they can’t predict the precise outcome of the battle.
Says Tilden: “We are looking forward to the next little bit.”