MIAMI — Of course the question that most people want answered about the battle in Seattle is… who’s going to win? In the short run, the answer may very well be the airport. Traffic growth at Sea-Tac is sizzling, with April 2015 (the most recent available data) showing a 13.2% increase in passenger traffic YOY. Seattle is on pace to service more than 43 million passengers this year, a marked rise from 34 million just two years prior. These additional passenger boost concession volume and revenues (through a myriad of mechanism), and the contest between Delta and Alaska has expanded the number of nonstop destinations available from the airport to unprecedented levels.

(Credits: Jeremy Dwyer-Lindgren )

Gate space the primary concern

But despite these positive figures, the gate situation remains a massive drag on growth. Delta only has access to 11 gates at present in Seattle, but CEO Richard Anderson has indicated that the airline would prefer to have access to 30. In practice, this would largely result from increased utilization of so-called common use (CUTE) gates. Alaska has already had to resort to using CUTE gates after it boosted capacity by 11% at Seattle this spring. And there are no easy solutions on the horizon. The airport is embarking on a $512 million project to add eight gates to its North Satelite, but those gates are several years away. In the meantime, the airport might have to resort to using hardstands to board and deplane passengers. Regardless of its prevalence at European hubs such as Frankfurt and Paris, that is not a viable or acceptable solution for US travelers. But until Seattle figures out a gate space solution, there might be a natural cap to Delta and Alaska’s ability to pour capacity into the market.


Who has the edge?

As I mentioned in Part 1, the current DOT revenue data is mostly useless because it still predates a lot of Delta’s domestic buildup. But on a capacity and frequency basis, it is still possible to assess the relative strength of the two carriers’ networks at the airport. On a capacity basis, Alaska still controls 49.9% of seat capacity and 33.6% of ASMs at the airport versus 20.2% and 27.2% respectively for Delta. Delta holds the edge in international seats and ASMs at 38.6% and 45.5% versus 19.2% and 9.8% for Alaska, but Alaska still dwarfs Delta in the overall market. This conclusion is reinforced by a cursory analysis of frequency and network. Picking a random weekday in January 2016 (after most announced routes have begun), Delta will offer roughly 110 daily departures from Seattle versus just under 300 for Alaska. And on the Saturday of the same week (artificially boosting Delta who operates a lot of Saturday-only service), Alaska offers nonstop service to 84 destinations against just 41 for Delta. All capacity figures courtesy of CAPA via OAG

Despite Delta’s massive buildup, it still is in Alaska’s shadow when it comes to presence in the Seattle market. And that raises the question of what Delta has left to add from Seattle. On the long haul front, there are no European destinations that really make sense, and Asia is largely settled for the time being (Taipei has an outside shot of happening) until the secondary China market matures or Osaka recovers its viability. So most of the expansion will be in North America. Edmonton and Winnipeg (the latter of which Alaska doesn’t serve) make a lot of sense. Albuquerque is a relatively major hole in the Western US, and the four Texas cities plus Chicago and St. Louis are good feeders for Asia. And there are probably several transcon markets that have some viability and reasonable demand The nice thing for Delta in these types of markets beyond the West Coast is that despite Alaska’s first mover advantage, they have intrinsic point of sale strength there due to their nationwide network.

Then again, Delta could instead decided to continue to deploy an army of regional jets to Walla Walla, Yakima, Wenatchee, and the like. Only time will tell. Regardless of how Delta expands its network, it is almost certain to do so. And that raises the question of how sustainable the current situation in Seattle is. The last major market to see this type of sustained competition between two major network airlines was Denver where United and Southwest eventually settled into an uneasy co-existence after Frontier exited the market. In Seattle, the legacy carrier is the aggressor, but that experience is probably instructive. Under present economic conditions and at the current price of fuel, this situation is probably sustainable. But when the next recession hits, all bets are off. In the meantime, Seattle residents can expect an ever-expanding windfall of additional service and sharply lower airfares.