Alaska Airlines joining Oneworld as its Newest Partner

Merger next?

Alaska Airlines normalizes relations with American Airlines, which includes joining the Oneworld Alliance. However, is there something else that we’re not seeing? Is there an Alaska Airlines merger on the horizon perhaps?

The news came as a shock. Alaska Airlines decided to end an agreement with American in October of last year. The Oneworld alliance cancels that agreement at the end of this month.

The new partnership with American renews the Seattle-Tacoma airline (Alaska) partnership in the capacity as a Oneworld Alliance member by 2021, in which American Airlines is a founding member.

Alaska joining the Oneworld Alliance with a New Partnership inked with American Airlines. Courtesy: Alaska Airlines Blog

What has happened since the October-agreement with American?

If I had to guess, my money is with Delta Airlines and its expansion to Seattle. For Delta, Seattle is considered a hub. During 2014-2019, Delta came to Seattle and they captured the market like a boss.

Press Conference of Ben Micucci and Robert Isom. Presidents of Alaska Air Group and American Airlines Group respectively. Video: NBC Affiliate Seattle King 5/YouTube.

It comes down to Network and Independence

For Alaska Airlines, their independence was one of the few things that characterized the airline as one of the last legacy airlines to remain unaligned. Their network strength is on the West Coast of the United States.

It’s all about the Corporate Accounts

In addition, the airline’s corporate accounts need to “deliver the destination” to them. If the airline doesn’t deliver those accounts could close. Its business could go elsewhere.

That’s what happened when those corporate clients were tech and manufacturing giants such as Amazon, Microsoft, and Boeing.

Can’t Expand on their Own

The Managing Director for Wall Street’s Cowen & Co. s Helene Becke said that on-point comment in a interview.

While other airlines can expand to different markets with equipment they have or will acquire “they just can’t do it with the aircraft they (Alaska) have.”

Helene Becke. Managing Director for Wall Street’s Cowen & Co.

What does Alaska give the Oneworld Alliance (After 2021)?

Alaska Airlines did well on aligning with Oneworld and American Airlines. Here’s what Alaska can provide to the Oneworld group:

  • The ability to compete and co-locate in the future! Meaning two more airports to co-locate to in the future and the opportunity to strengthen a third.
  • Alaska Airlines can declare war on Delta and SkyTeam at Seattle Tacoma International Airport (SEA).
  • Oneworld possible (most certain) future co-location to Seattle Tacoma.
  • Alaska could move to Terminal 4 (the American-terminal) at Los Angeles International Airport (LAX).

What can American Airlines give Alaska Airlines now?

Alaska’s benefits not only stop with Oneworld. The benefits continue as American becomes its big brother in the alliance.

Alaska + American means:

  • A seamless connection for corporate accounts as well as passengers traveling internationally.
  • The opportunity to travel to more destinations within North America.
  • A passenger-option other than flying Delta out of the U.S. West Coast.
  • Alaska Airlines’ passengers can utilize the Admirals Lounge within the American Airlines network.
alaska joining oneworld alliance
An Alaska Airlines B737 wing with Mount Rainier in the background. Will the paint scheme of that wing be repainted in American colors if there is an Alaska Airlines merger? Photo: Alaska Airlines.

Seattle: Striking back at Delta with little or no money involved

As a sign of the new partnership, American Airlines has already said the airline would fly to Bangalore, India, and London Heathrow.

The India flight is on the Boeing 787-900 variant, and the London flight is on a Boeing 777 in addition to the flight already provided by British Airways.

An Example of Network and Scope

Although the first reason for the flights has been an issue fueled by corporate customers the second is because of the rivalry with Delta.

The new partnership inked Alaska’s opening of Seattle Airport to a gladiator match between American and Delta!

Interesting comments

For what Vasu Raja, American’s Senior Vice President for Network Development, commented on in an interview Alaska seems to be exploring more than a partnership.

“It makes a lot of sense for us to come together; Alaska supports American internationally, and American supports Alaska domestically.”

Vasu Raja. American Airlines Senior Vice President for Network Development.

Alaska’s New Partnership: Author’s Opinion

When an airline goes with an alliance one of two things have happened (not in order)

  • The airline will merge in the future
  • The airline coming to the alliance needs resources and a bigger network to compete with another airline. (Which goes back to the first point).

Now, according to the comments that the managing director for Wall Street’s Cowen & Co provided:

“I understand why Alaska would want more of an international presence, but any merger would be difficult to get done, due to antirust concerns.”

Helene Becker. Managing director for Wall Street’s Cowen & Co.

Helene Becker seems very nearsighted in her opinion. After what happened with the merger of T-Mobile and Sprint everything now seems possible in the merger-world.

One knows if people have done their research

While doing my own research, Alaska has always lead me to believe if they were posting a for-sale sign, American would the airline’s favorite for the buyout.

Putting on my CEO hat and my antitrust hat for a moment…

Delta Air Lines

Delta already has Seattle (SEA) as a hub, which would be considered monopolistic practices at the airport. Alaska, as of the summer of 2019, has more than 50% share of the airport. Delta’s share is close to 31.5%.

United Airlines

United, however, has a hub in San Francisco (SFO). If United wants Seattle as a hub it would have to divest its commanding 42% share in SFO as the largest of the five airlines at the airport.

American Airlines

American Airlines has no market share in San Francisco (SFO) or in Seattle (SEA). The airline dominates Los Angeles (LAX) by a hair with less than 20% of the market.

With the 7% that Alaska brings to LAX the DOJ Anti-Trust would divest the routes in which American and Alaska overlap, which aren’t that many.

Jumping into airline alliances

Continental Airlines had to jump into the Star Alliance before merging with United. U.S. Airways had to jump into Oneworld from Star Alliance before merging with American.

Alaska Airlines would enter the Oneworld Alliance from being unaligned. That means Delta is currently robbing Alaska’s customers. American’s alliance is the help Alaska needs to maintain its share of Seattle’s Airport.

Final Thoughts

I wouldn’t be surprised if Alaska Airlines put the for-sale sign up within a few years.

I mean, if the T-Mobile/Sprint sale went through, why not have a second-round of consolidation among airlines?

The process reminds me of Popeye and Bluto, trying to get Wimpy as a customer. Watch the video and replace it with an American and Alaska Airlines merger, Delta, and the Customer:

Would the Alliance of Alaska with American be enough to attract customers or would it still be difficult? YouTube.

What do you think about Alaska Airlines joining Oneworld?

  • Do you feel the new partnership with American will help Alaska against Delta?
  • Do you feel the customer favoritism with Delta has already turned the tide against Alaska?
  • Is a niche airline business like Alaska Airlines, not feasible as today’s world requires a worldwide network?
  • Is there an Alaska Airlines merger in the future?

Please mail your comments here.

Featured Image: Alaska Airlines.

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