MIAMI – Alaska Airlines’ name and brand will live on, as the combined carrier will adopt Alaska’s name and logo sometime in 2019, according to a press release late Wednesday afternoon.
The combined carrier, formed when Alaska Airlines acquired Virgin America late in 2016, had been conducting a review of both pre-merger brands (Alaska and Virgin America). However, despite claiming to give careful consideration to the Virgin America brand, which has a strong awareness and positive customer sentiment in the pre-merger carrier’s California strongholds, Alaska appears to have chosen the path of least resistance when it comes to the brand.
The requirement to pay 0.7% of annual revenues as a licensing fee to the Virgin Group if it kept the Virgin America name also likely played a role in the selection of the Eskimo.
The combined carrier will adopt many of Virgin America’s brand elements in its product, including enhanced in-flight entertainment, mood lighting, and music. In addition to adopting specific enhancements based on pre-merger Virgin America’s brand, Alaska is also engaging in a series of product upgrades, including:
- High-speed satellite wifi on the 737 fleet beginning in fall 2018 and the Airbus fleet completed by the end of 2019.
- The new Alaska brand with blue mood lighting and new uniforms will roll out in mid-2019
- 18 Premium Economy seats will be added to the Airbus fleet’s redesigned cabin, but the First Class product will actually be worsened, with a 50% increase in capacity offset by a drop in seat pitch from 55 inches (Virgin America’s market leading product) to 41 inches (more or less the standard for US airlines).
- Alaska and Virgin will have a free catalog of more than 200 movies for passengers, joining other US carriers.
- The Seattle, Portland, and Los Angeles lounges will be expanded, and new lounges will be built at San Francisco and New York JFK.
“Our goal from the very beginning of this merger was to become the go-to airline for people on the West Coast, with low fares, convenient flights, a premium product and genuine, caring service,” said Brad Tilden, CEO of Alaska Air Group. “Three months in, we’ve dramatically grown our presence in California and are united behind a new purpose: Creating an airline people love.”
“We spent the last 10 months conducting extensive research and listening carefully to what fliers on the West Coast want most,” said Sangita Woerner, Alaska Airlines’ vice president of marketing.
“While the Virgin America name is beloved to many, we concluded that to be successful on the West Coast we had to do so under one name – for consistency and efficiency, and to allow us to continue to deliver low fares.”
— Richard Branson (@richardbranson) March 23, 2017
In an open letter entitled “Dear Virgin America” posted on his Twitter account, Virgin Group CEO and business mogul Richard Branson (one of the founding investors in Virgin America) struck a melancholy tone:
It was a long and hard journey but in the end, you are the best consumer airline in America. You invented concepts like ‘moodlighting’ and ‘on-demand food,’ you reinvented cabin amenities from seat-to-seat chat to Netflix in the sky. You chose warm and soothing pink to purple moodlighting that transitions based on outside light. You proved it is possible to run a business with a strategy that does not rely on low fares and a dominant position alone: you attracted premium flyers with a fun and beautiful guest experience. You created the world’s most loved safety video. You proved that it is possible to create a business with a terrific culture and a brand that people love.
(Read Branson’s full letter at the bottom of this piece)
In most previous US mergers, though not all, the surviving brand name has been that of the larger carrier in the merger. This was true for United-Continental, US Airways-American, Delta-Northwest, and Southwest-AirTran.
In some cases, as in United-Continental, the logo of the smaller carrier is selected as a compromise. However, in this case, it appears that Alaska’s famous Eskimo logo will live on.
Alaska Airlines waves the white flag in the Transcon Wars
One of the key network strategy questions that emerged as soon as the Alaska-Virgin merger was finalized was what exactly would happen to Virgin’s network of transcontinental flights, particularly in the highly competitive market for flights between its San Francisco and Los Angeles hubs and New York City.
The New York to San Francisco and LA markets have been roiled by some of the fiercest competitive pressures in the United States as they represent two of the most lucrative medium haul markets in the world (let alone in the United States).
With five carriers competing heartily for premium traffic on these routes and pricing set more or less by the market as a result, all five carriers in this segment (American, Delta, United, JetBlue, and Virgin America) have chosen increasingly to compete on the basis of product.
The starting point for this latest product-based battle was JetBlue’s launch of its Mint flatbed product in June of 2014, which along with American’s shift from the aged Boeing 767-200ER to the ultra-premium three-class Airbus A321 and United and Delta’s standardization on international business class offerings in the market truly supercharged the Transcon Wars.
When Virgin America had first launched it’s enhanced first class cabin into the market (one of the three or four best narrowbody First/Business Class products in the world), it was a revelation.
The combination of the hard product and Virgin America’s legendary service quality made for a product that was arguably competitive with United’s P.S. business class and American’s transcon business class on the 767-200ER, both of which only offered reclining seats in business class.
But as the cycle of product innovation on this route amped up in the middle of this decade, Virgin America steadily fell behind and its revenues in the NYC to LA/SF markets suffered, with JetBlue surging to a substantial revenue premium and capturing many previous Virgin passengers via Mint. And in addition to the hard product upgrades, the last few months have seen the competitive pressures on the soft product side start to accelerate.
Both American and Delta are now offering free meals in economy class on these routes with more product enhancements likely to come. It would appear that Alaska took one look at that situation and decided that it wasn’t worth getting caught up in an arms race with three much larger carriers and JetBlue that it had little hope of winning (without spending hundreds of millions of dollars to reconfigure a sub fleet of aircraft with flatbeds to service these routes).
Alaska has already begun to sunset the Virgin America strategy in California
So moving forward, Alaska will likely pull back on the Virgin America transcon focus at both Los Angeles and San Francisco, particularly reducing on frequencies to New York, Newark, and Boston.
Once Alaska opts out of the transcon wars in a product sense, it can easily reduce its offering in those markets to maximize origin and destination traffic with 2-3 flights per day, while growing in the areas where Alaska has unique strength.
These consist primarily of mid-sized mid-continent and trans-continental cities where Alaska has found success from Portland and Seattle, as well as smaller cities on the West Coast that can be served by Alaska Horizon.
Indeed the timing of this news comes fresh on the heels of Alaska announcing service from the San Francisco hub to Albuquerque, Baltimore, Indianapolis, Kansas City, Kona, Mexico City, Nashville, New Orleans, Raleigh-Durham, and Philadelphia primarily using Virgin America’s A320 aircraft.
With the exception of Kona and Philadelphia (which Virgin America had previously dropped), none of these are what you would call quintessential Virgin America markets. They are all smaller, and unlike a city like Austin, don’t have much of a “hip” or “cool” factor associated with them (Raleigh-Durham perhaps excepted).
This is a signal that Alaska is going to have a broader and ultimately probably more useful brand presence in LA and San Francisco post-merger. Virgin America built what was almost universally considered the best short-haul airline in the United States and it had an incredibly strong brand.
At the same time, it also had a very limited brand, as thanks to its higher cost structure and some of the tradeoffs it made in an attempt to engineer “coolness,” Virgin America also boxed itself in in the types of markets it could serve.
That largely boiled down to markets that were so large that Virgin America could skim the young and affluent segment in those markets while still filling its planes (places like Chicago or Dallas) or cities that were considered young, hip, and cool (like Portland and Austin).
Alaska’s brand is a more inclusive one that lacks the same kind of limitations, and the combined carrier’s network in San Francisco and Los Angeles will be much more diverse as a result.
With a lot of things in life, there is a point where we have to let go and appreciate the fact that we had this ride at all. Many years ago, I shed tears over selling my beloved Virgin Records for $1 billion, which we needed to fight off British Airways’ Dirty Tricks campaign to try to put Virgin Atlantic out of business. Many tears are shed today, this time over Alaska Airlines’ decision to buy and now retire Virgin America.
It has a very different business model and sadly, it could not find a way to maintain its own brand and that of Virgin America.
When a company goes public, decisions are made that benefit the shareholders. In the best of times, they also benefit consumers. It remains to be seen what will happen now – for travellers – with fewer airlines in the US than ever. Being different and on a mission to truly reinvent an experience for the customer is increasingly rare in this business.
Remember that time from 2004 to 2007 when we leased planes that were sitting on the runway while we waited for the US government to give us a license so that we could make flying good again? Remember the naysayers who said you could not create an experience-driven airline in the US and survive? Remember launch day – August 8th, 2007 – when even an epic tornado didn’t stop our brilliant team getting our first flight an on-time departure?
Remember that time in 2014 when Dallas residents signed a petition to make sure city council members did the right thing and gave us two gates at Dallas Love Field? And the party we threw to thank Dallas for letting us fly? The legacy airlines kept trying to stop us flying. But we won over people in Newark, Chicago and Boston in similar fashion. We grew to more than 25 cities, swept every single major consumer travel award and became profitable.
Even if the industry ‘experts’ did not, you and your guests always believed that an airline can stay in business by delivering a better flying experience.
We went through a lot together. And you were worth every minute, every penny (there were many!), every battle. We earned every loyal guest and fan. Every market was hard-won. The launch parties, the networking, the productivity on flights, the live concerts at 35,000 feet, the marriage proposals, the first in-flight wedding, the Oprah Skype to the plane! And who could forget that time in 2008 when I nearly ripped my arse jumping off the side of The Palms in Vegas?
It was a long and hard journey but in the end you are the best consumer airline in America. You invented concepts like ‘moodlighting’ and ‘on-demand food,’ you reinvented cabin amenities from seat-to-seat chat to Netflix in the sky.
You chose warm and soothing pink to purple moodlighting that transitions based on outside light. You proved it is possible to run a business with a strategy that does not rely on low fares and a dominant position alone: you attracted premium flyers with a fun and beautiful guest experience. You created the world’s most loved safety video. You proved that it is possible to create a business with a terrific culture and a brand that people love.
You let Teammates think differently, and invested a lot of time and money into lifting your Teammates up with extraordinary training. You also gave back at every turn, even when you weren’t yet profitable. Investing in and operating one of the youngest and most fuel and carbon efficient fleets in the US. Starting mentoring conversations among seasoned and aspiring entrepreneurs.
Putting the spotlight on adopting animals that need homes on the adorable annual Chihuahua airlift day. One of my favourite moments was joining KIPP students on a flight to watch Virgin Galactic’s WhiteKnightTwo fly alongside us; the flight inspired a new generation of engineers and pilots and ensured that an exciting future of transportation belonged to everyone. Throughout it all, you aimed to make flying good again – and you did.
To each of your brilliant Teammates, I know that you will continue to do great things, whether you stay on with Alaska or pursue a different path. Build a business that puts its people first. Work with partners who share your same progressive and inclusive values. Focus on delivering a great customer experience, and success will come. Make business a force for good. Stay positive; attitude is everything.
To our wonderful guests, I speak for everyone at Virgin America when I say we are eternally thankful. For believing in the little airline that could. For giving up your miles on “Blah airlines” – so you could fly us for the experience. For supporting us in every tussle we got in with the big guys. For believing that all airlines don’t have to be the same – and that experience matters.
You would not believe the number of people who tell me how much they love flying Virgin America. Keep expecting – and demanding – more from your airlines! If you miss flying Virgin America, you still have your beautiful sisters; Virgin Atlantic is starting service from London to Seattle next week, and Virgin Australia is starting direct service from Melbourne to Los Angeles the week after that. Virgin flies on.
Businesses come and go but beloved brands make lasting impressions and remain in your heart. Virgin’s purpose is to change business for good. We give humans permission to be and do the best they can. With that simple approach, Virgin builds companies around the world that get into your heart. We earn lasting loyalty and love that you don’t normally see for a bank or a health club or a small satellite launcher. We have all those and more.
We have been busy building a number of new and exciting Virgin businesses in the US, and they are gathering pace. Later this year in San Francisco, we will open a Virgin Hotel and put on our first Virgin Sport US festival. We have just launched the Virgin Pulse Global Challenge, Virgin Voyages has started building the first of its three ships, and we continue to expand our space tourism and small satellite launch businesses in southern California. As an entrepreneur’s brand, Virgin is always starting new businesses. And we will not stop.
George Harrison once said, “All Things Must Pass.” This was the ride and love of a lifetime. I feel very lucky to have been on it with all of you. I’m told some people at Virgin America are calling today “the day the music died”. It is a sad (and some would say baffling) day. But I’d like to assure them that the music never dies.