MIAMI — Alaska Airlines (AK) may be poising itself to become a major-level American carrier with the continuation of the merger with Virgin America (VA), including the recent repainting of the first Airbus A320 in the Alaskan colors.
Backed by the previous growth and strength of each airline, it appears that the new Alaska may quickly become a top-tier player in the American domestic airline industry, as well as the merger has offered AK extensive opportunities for growth in numerous fields throughout the market.
First, both Alaska Airlines and Virgin America were posting incredible profit growth in the years before the merger. Between 2013 and 2016, Alaska increased its net profit by 55% to over $800 million.
Likewise, between 2012 and 2015, Virgin America increased its net profit from less than $-145 million to over $340 million. After the merger, Alaska increased its net profit as one airline by over $200 million in 2017, pushing its profits over $1.03 billion.
Alaska’s revenue increase in 2015 was one of the highest in the industry, while other airlines’ like United Airlines and American decreased, and Delta had a minuscule growth.
AK’s revenue growth was only beaten by the low-cost-carriers Southwest, Jetblue, and Spirit. Such intense growth in a year, where the three American legacy carriers failed to post any, could be a sign of a shifting Alaska-favored market.
In addition to previous financial strength and growth, the individual high customer satisfaction reputation of both airlines could undoubtedly drive Alaska to become a major member of the market.
Per the Airline Quality Rating, an annual report on airline performance, Alaska was the best airline in the country, with Virgin America (scored separately) the third.
These statistics were pulled by an impressively high on-time rating of 82% (the third highest in the U.S.), as well as an incredibly low rate of baggage mishandling.
Virgin America’s industry-best rate of mishandled baggage and its reputation for comfortable aircraft cabins and seats, kept them as the top airline in the country for four years straight before these rankings.
While customer satisfaction alone does not inherently predict intense growth, maintaining this at a reasonable price could be beneficial as full-service airlines continue to decrease in customer satisfaction and comfort, while LCCs, even though are affordable, provide seemingly unbearable discomfort.
A high-quality moderately-priced airline could be a desired niche in the coming years, and maintaining a high reputation of comfortable service (that will likely increase as the airlines merge) could drive Alaska to become a top-tier airline.
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However, arguably the most important indication of Alaska’s growth is an increase in route numbers and cities served. With the merger, Alaska serves almost 30 destinations in the Great Plains, South, and East Coast of the United States, from towns as small as Wichita to cities as large as New York City.
The destinations that are primarily served from these cities are San Francisco and Seattle, considering expensive transcon operations or multiple-stops flights were frequently the primary options to the West Coast.
Providing an extensive profile of flights to the West Coast could be a key asset in the future by expanding Alaska’s influence in the Eastern United States.
In addition to growth driven by East-West Coast travel, market dominance along the West will likely continue to drive Alaska’s growth. Before the merger, Alaska and Virgin America were both large players in this section of the country.
VA offered countless daily flights between the Los Angeles and San Francisco areas, while Alaska served both of these areas as well as San Diego and Seattle.
Now serving seven separate airports between the Los Angeles and San Francisco areas alone, as well as its hubs in Seattle and San Diego and many cities just along the coast, Alaska dominates business travel between these large and growing commerce centers.
An intense focus on these flights as technological industry continues to increase in these cities rapidly.
Alaska also serves numerous inland areas, including many prominent ski resorts as well as remote areas of the Pacific Northwest. An enormous amount of revenue from these areas comes from the ski season, many of these areas year-round are only served by more expensive regional services contracted by legacy carriers.
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As Horizon Air does maintain Alaska’s service to many of these cities, doing so through connections to a growing Alaska market in the Eastern US while keeping lower prices and higher quality is likely to be attractive to consumers in the future, meaning that this region could help bolster Alaska’s growth.
While the future of Alaska Airlines through its merger certainly contains some doubts, many conditions appear to have set Alaska poised for rapid growth.
If Alaska can maintain the shared reputation of quality and service that both itself and Virgin America featured, it is likely that this carrier – which was, until recently, a mere thorn in the side of the dominant U.S. legacy carriers – will continue to increase its market prominence.
Alaska may just have built itself a perfect storm and if everything goes right, another major American carrier may soon join the ranks.