Delta's end game in Seattle may be to bring Alaska Airlines to its knees, and then to force a marriage. It's a helluva dating strategy.
Delta Air Lines Chief Executive Richard Anderson has ambitious plans to build up Seattle as the airline’s West Coast international gateway and its eighth domestic hub.
Delta will not only offer more flights out of Seattle — many of them in head-to-head competition with Alaska Airlines — but will also base more jobs here and spend heavily on facility improvements at Seattle-Tacoma International Airport.
The chief of the world’s third-largest airline is not shy about pushing assertively into a market where hometown favorite Alaska Air carries more than half of all passengers.
Some analysts see Delta exerting pressure for an endgame in which the giant Atlanta-based enterprise swallows its smaller Pacific Northwest rival.
Anderson deflects talk of that possibility and insists Delta is here “to be successful unilaterally” in a rough-and-tumble industry.
“There’s no drama. It’s just business,” Anderson said. “Is Airbus tough with Boeing? Is Apple tough on Microsoft? It’s a competitive marketplace.”
On Monday, Delta, headquartered in Atlanta, Ga., inaugurates direct flights from Seattle to Hong Kong, bringing to 10 the number of its daily international nonstop routes out of the city, six to Asia and four to Europe.
Anderson said that adding such destinations from Seattle is “huge for the economic and cultural development of the community.”
Delta’s expansion requires building up its base at Sea-Tac. Anderson said the airline has about 2,800 employees based here now and will soon grow past 3,000.
“We’re in the process right now of hiring 1,400 flight attendants and 600 pilots,” he said. “A lot of those will end up based here.”
The Port of Seattle plans a new $350million international-arrivals facility — the first phase is scheduled to open in 2018 — to be paid for by the airlines that use it.
“Given the sheer number of arrivals we’ll have there, the lion’s share of that will be Delta’s,” said Anderson. “We’re fully prepared to meet that obligation. … Seattle is a strategic priority for Delta.”
More routes, more ads
Near term, Seattle travelers will certainly benefit, said Michael E. Levine, a former senior airline executive now on the faculty of New York University School of Law.
Expect more flight options, more routes and connections, more perks and special offers, and cheaper airfares. Both airlines are already bombarding the region with ads.
“You have two good airlines trying to make friends with people in Seattle,” Levine said. “What could be bad?”
Local Alaska loyalists may possibly view Delta as an invader, like some corporate Darth Vader.
But Levine said it’s by far the best managed of the three big U.S. network carriers, with qualities similar to those that distinguish Alaska, but on a vastly bigger scale.
Delta is the most profitable airline in the world. Excluding special tax gains, it made $2.7 billion last year.
It handles much of its own maintenance in-house and has high operational reliability. The company’s profit-sharing scheme paid out just over $500 million to employees last year and labor relations are better than at most airlines. That helps ensure better service for passengers.
Bob Cortelyou, Delta’s vice president of network planning, said Seattle has the potential to be a big global travel gateway and yet lags behind cities such as nearby Vancouver, B.C., in international connections.
Seattle’s relative closeness to Asia, compared to the big California cities, offers Delta flexibility in the aircraft it can fly on trans-Pacific routes.
So Cortelyou’s opening new direct routes with smaller airplanes such as the Boeing 767 or 777, or the Airbus A330, rather than four-engine jumbo jets.
“Seattle has a strong corporate base, a strong economy and a relatively affluent population. It’s also a tremendous geographic location for flights to Asia,” Cortelyou said.
“It befuddles my mind why Vancouver is so much stronger. Seattle has all these great demographics and a smattering of service.
“That’s not right, and we’re fixing that.”
Of course, if Delta was solely creating an international gateway, that would be no threat to Alaska Air.
However, it’s also been building a feeder network to bring its passengers from cities all along the West Coast and even Alaska.
This summer, it will grow to 86 departures out of Sea-Tac every day.
Delta’s Seattle routes to Los Angeles, San Francisco, San Jose, San Diego, Las Vegas, Anchorage, Juneau and Vancouver, B.C., as well as planned flights to Spokane, create head-to-head confrontations on Alaska’s bread-and-butter destinations.
And last month, Delta announced it will open service this winter to Maui in Hawaii and to Puerto Vallarta and Los Cabos in Mexico.
Those aren’t feeder routes to an Asian gateway. Delta is going after prime winter vacation traffic out of Seattle in direct competition with Alaska.
If that seems aggressive on Delta’s part, Alaska is not sitting back.
This month, Alaska opens seven non-Seattle routes out of Salt Lake City, which is a longstanding Delta hub.
And when Delta opened its direct flights from Seattle to London in March, Alaska announced a special double-miles offer to its frequent fliers who flew on British Airways, the only other carrier going direct to London.
In terms of airline competition, all these seem like moves in an undeclared war.
In that confrontation, Alaska for the moment is in a dominant position. For the year through April, Alaska carried just over half of all passengers out of Sea-Tac. Delta carried just over 13 percent.
Levine, of NYU — who worked with Anderson at Northwest Airlines and is a longtime friend of the Delta CEO — said that to build a sustainable international hub at any airport requires a strong domestic feeder network.
“You can’t possibly build it at Seattle without Alaska,” he said.
One option for Delta is to persuade Alaska to agree to an exclusive partnership, so that Alaska essentially provides the feeder network for Delta’s international routes, Levine said.
But Alaska has denied this to previous suitors. It has a longstanding “Swiss neutrality” approach to other carriers, forging nonexclusive cooperative agreements with multiple airline partners — including Delta, for now at least — that allow travelers to book one ticket and fly different legs of a journey with Alaska and with a partner.
So in lieu of an exclusive deal, we have an airline war.
“Delta is trying to build enough pressure that Alaska will realize that it’s not in the same kind of bargaining position it’s been in historically,” said Levine. “I think Delta has decided, if you can’t join them, beat them.”
The alternative for Delta, Levine said, is to work toward a takeover of Alaska. The current competitive battle could, in time, hurt Alaska’s share price and make a transaction more manageable.
“My guess is, Delta is prepared to spend some money to do that,” Levine said.
In an interview, Alaska Air Group Chief Executive Brad Tilden conceded that Delta’s encroachment into Seattle likely means overcapacity in the year ahead.
“Seattle will have a lot more (airline) seats than it probably needs,” Tilden said, adding that Delta’s growth “will create pressure on the (financial) performance for both of us.”
He said Alaska will stick to its strategy of low costs, low fares, superior operational performance and good service to passengers.
“I have a lot confidence that over the years ahead, we’ll do these basic things well and come out of this just fine,” Tilden said.
He also adamantly reiterated his leadership team’s opposition to being acquired.
“We believe the best answer for all our constituents — our owners, our employees, our customers and our communities — is for Alaska to be a strong, vibrant, independent, Seattle-based airline,” Tilden said.
Ray Neidl, airline consultant with Nexa Capital, said a takeover of Alaska Air would cost Seattle a highly successful hometown carrier, with a regional niche and a local history and culture that have won passenger loyalty.
“If Alaska was absorbed into a bigger airline, you’d lose that unique magic it has with its customers and its employees,” Neidl said.
Levine said it’s unpredictable which airline will come out on top.
“This is a very complicated game that is going to be played out,” he said. “It’s a close call. It’s a real uphill fight for Delta.”
Dominic Gates: 206-464-2963 or email@example.com ___
Subscribe to Skift Pro
Subscribe to Skift Pro to get unlimited access to stories like these ($30/month)Subscribe Now
Photo Credit: FILE - In this Oct. 8, 2012 file photo, a Delta Air Lines airplane is parked at Seattle-Tacoma International Airport in Seattle. Ted S. Warren / Associated Press
U.S. Airlines Look to Holiday Boost as Delta Variant Delays Business Travel’s Recovery
The Delta variant has set the travel recovery back with most U.S. airlines eating humble pie after overly rosy outlooks in July. With the business travel recovery delayed at least three months, the industry hopes to counter the tide of bad news with some possible year-end, holiday cheer.
Edward Russell, Skift | 2 weeks ago
Ryanair Talks with Boeing Collapse Over 737 Max Price Tag Disagreement
Ryanair needs these aircraft to help it recover, and Boeing knows this. The standoff will be short-lived.
Conor Humphries, Reuters | 2 weeks ago