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Will Alaska Airlines Build a California Hub?

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Will Alaska Airlines Build a California Hub?

Will Alaska Airlines Build a California Hub?
February 22
02:37 2016

MIAMI — Last week, we reported that Alaska Airlines would be adding nonstop service to two new destinations from San Jose, with three daily flights apiece to Orange County and San Diego beginning June 5. The new flights will be operated by Embraer E175 regional jets (RJs) seating 78 passengers in a three-class configuration (12F / 12Y+ / 52Y).

San Jose and San Diego each over 25 peak-day departures


Outside of its four hubs at Seattle, Portland, Anchorage, and Los Angeles, San Jose and San Diego are two of Alaska’s largest stations with 28 and 31 peak day departures to 14 and 18 destinations respectively. The following table outlines the full planned operations for Alaska at each airport for Summer 2016, including peak day departures by destination:

Alaska Airlines Timetable. (Credits: Alaska Airlines)

Alaska Airlines Timetable. (Credits: Alaska Airlines)

Looking at the data, it is immediately apparent that the operations have a distinct flavor despite being similar in size. There are similar building blocks for both, including high frequency service to Seattle/Portland and the standard (for large West Coast cities) armada of Hawaiian flights. But San Diego has a bunch of service to small California cities while San Jose is more oriented towards larger point to point destinations in the Western US. San Diego also has more frequency to Mexican beach destinations (with San Jose featuring a flight to Guadalajara) and most notably, long haul flights to Boston and Orlando that were added in the last 4 years.

The broader takeaway is that both of these airports definitely qualify as “focus cities” for Alaska (both Los Angeles and Anchorage are classified as hubs with +/- 50 daily departures), and have begun to achieve critical mass for both mainline and regional service. And these levels of service are a recent development, particularly for San Diego, as both airports have seen growth of 10-15 daily flights over the last 2-3 years.

Is either Alaska’s next hub?


Alaska Airlines’ recent history is a never ending cycle of diversifying its network from an initial core. Over the past decade, the airline has in stages built a Hawaiian network from scratch, grown from its Seattle and Portland hubs to secondary and even tertiary destinations nationwide, and (re) developed its network criss-crossing the Western US. As Alaska searches for (profitable) growth, Seattle is increasingly gate constrained with heavy competition from Delta Air Lines while Portland is too small of a market to sustain much more than the ~125 daily departures already on offer.

With that in mind, both San Diego and San Jose are potential spots for Alaska’s next hub. To be clear, neither airport, if developed, is likely to become a 100 departure/day behemoth in Alaska’s network. But steady growth to 60-65 daily departures, clearly a hub by Alaska’s standards, is definitely possible. This would entail filling in the gaps with service to key Western US destinations like Las Vegas, Phoenix, and Denver, boosting frequency on existing routes, and adding targeted long hauls like Boston, Washington D.C., and Chicago to the mix.

Between the two airports, San Diego is by far the larger airport O&D market, with its overall passenger traffic (including nominal connecting activity) hitting 20.1 million in 2015. Meanwhile, San Jose proper has a smaller O&D base, with 9.8 million passengers in 2015. But San Jose serves the broader Bay Area, which had closer to 70 million total passengers, and is the most convenient airport to booming Silicon Valley. Right now, San Jose suffers significant leakage to San Francisco International Airport, but that would likely subside if service was added at the airport.

The other factor favoring San Jose is the specter of competition from rival Southwest Airlines, who has had a stranglehold on both airports for quite some while. The difference is that Southwest operates a true hub and connecting complex at San Diego, with 102 daily departures to 26 destinations. Meanwhile San Jose has 73 departures to 13 destinations, mostly high frequency flights to the LA metro area. There’s much more room for Alaska to co-exist with Southwest at San Jose. Thus we believe that San Jose is the more likely hub for Alaska, though opening neither is a definite possibility (we put the chances of Alaska opening a California hub at 40%).

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