Alaska Airlines has been a maintstay in the Seattle area for decades and has always done well by providing above average service combined with competitive fares in the area.  They have built a lot of loyalty in this area.  Over the past two decades, Alaska has also engaged in partnerships with almost all comers.

They have been willing, for instance, to do business with both Delta Airlines and American Airlines (and many other airlines) on the premise that they were too small to ignore anyone and what they had to offer.  That worked very well for Alaska.

A few years ago, after the Delta / Northwest merger, Alaska and Delta formed a more special partnership.  The idea was that Alaska would provide feed in Seattle for a relatively small group of flights that Delta wanted to operate from Seattle.  Flights that, mostly, were to go across the Pacific but which also included flights to Europe and some of Delta’s hubs.

It seemed innocent and very beneficial to Alaska at first but over time Delta grew Seattle into a big focus city that now borders on the verge of being a hub.  Delta treats Seattle much like it treats both Los Angeles and New York:  a good place to aggregate traffic onto international flights.  Since Delta has so many international flights departing Seattle now, it needs more and more feed.

Feed that Alaska can’t provide in total.  Alaska’s feed is more expensive anyways in that it doesn’t give Delta the economies of scale that a focus city/hub require.   So Delta is adding more and more of its own flights and directly competes with Alaska out of Seattle on many routes now.

Each continues to act as if the other is still a great friend.  Neither is really kidding anyone at this point.

At some point, Alaska will have to withdraw and do better at aligning itself with a variety of players again.  Alaska is useful to Delta only to the point that Delta is unable to do for itself in that market.  Delta is doing for itself just fine.

Alaska won’t pick a fight with Delta and probably won’t appear to do much at all until it finds a way out of this relationship that preserves all relationships.  In the meantime, Delta will encroach more.

Competition is alive and well in the United States airline industry and this is a perfect example of the market power a behemoth such as Delta has vs the market power the LCC airlines have.  Delta created a major focus city and did so in a few short years quite successfully.

Filed under: Airlines Alliances by ajax