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- [00:02]
A
I'm John Ostrower, editor in chief of the Air Current.
- [00:04]
B
I'm Brian Summers. I write the Airline Observer.
- [00:07]
C
And I'm Brett Snyder, author of Cranky Flyer. You're listening to the Air show, the podcast where we talk about what goes on in the business of the sky. This week, we're going to talk about Alaska, and it's. Let's call it a quickly blooming post merger strategy. If there is one thing we can say about Alaska, it's that it is most certainly not sitting still after the Hawaiian acquisition today. Uh, let's talk about this from 30,000ft, guys, to sort of compliment the episode we did back in August. So, John, Brian, how would you describe the new Alaska in 10 words or less? Or if you prefer, I will allow a haiku.
- [00:45]
A
I wrote a haiku.
- [00:46]
C
Great.
- [00:47]
A
Let's do it. Single AOC Oops, something broke at it. Next stop, sand.
- [00:56]
B
John, how long did it take you to write that?
- [00:58]
A
Surprisingly quickly, actually. You know, sometimes it just flows.
- [01:01]
C
He's quite the poet.
- [01:02]
B
Brian, I am very impressed. When Brett told me that he was going to offer us these options here, it never occurred to me, John, that you'd actually write a haiku. I went very boring, but also, I should say, accurate. I went MBA style, boys. But I'm almost embarrassed to say it now.
- [01:18]
C
Give me money.
- [01:18]
B
Are you ready?
- [01:19]
C
No. Okay. What?
- [01:20]
B
Focused on its strengths in the western USA and Hawaii.
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C
Okay, nice.
- [01:25]
A
I like it. I like it. Any reader haikus out there, send us an email. And more importantly, send us your questions. We want to do a mailbag episode. What's on your mind?
- [01:32]
C
Yes, like John said, we are going to be doing a mailbag episode. We need your questions and comments. We love getting them. We've gotten plenty. But we want even more. We're very greedy. So please send them to us either individually or send to the airshow, podmail.com or. Brian, is it fine if I share your cell phone number here? Should I do that? No. All right, fine. Well, anyway, both of these are good guys. And that's the podcast for today, so. No, I. All right, I guess we have to descend. I guess my plan didn't work here. Let's come down to 10,000ft. How about that?
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A
Landing lights on.
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C
I think you know where I want to start, right? The network.
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B
It's always the network with you, Brett.
- [02:17]
C
I know. This time I actually think it's a good starting point before we get into some other stuff like loyalty and all that. So it sets the tone for bigger discussion. You buying it?
- [02:28]
A
Okay, so what do we want to say about the network? Aside from the two non stops to Tulsa that they just added?
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C
Oh, you stole my thunder. What else is there?
- [02:38]
A
Hey, American has a very cool maintenance base there.
- [02:42]
C
Yes, sure. Okay. Anyway, moving right along. So I was trying to think about this. I, I, the way I see it, there are five big things going on at the airline right now, which that is a lot for those counting at home. The, the first is the transition of the 787s from Honolulu to Seattle, doing the long haul shift there. Building that up in Seattle, we've talked about that before last time.
- [03:08]
I really don't think we need to dwell on it this time. The second is the buildup of San Diego, now that the new terminal there is open and capacity is available. That has become quite a fun market. The third is the restoration of Portland after what I'll call a long period of neglect. And then the flying in those two markets that's being funded by numbers four and five. Four is the drawdown in San Francisco to focus capacity on the largest markets and those in the Northwest, the strongholds and all that. And then fifth is the pull down at lax, which is being refocused into leisure flying. And now, to be fair, when I recently spoke with Kirsten Amrain, who is the VP of Revenue Management and Network for Alaska, she told me that they didn't really want to pull down LA and San Francisco. They just had better options in Portland and San Diego. They had to make some hard decisions with the fleet. But it is happening. So, you know, I think it counts and we need to talk about it.
- [04:13]
B
All right, let's talk about those drawdowns first. Brett, first off, fine, I get it. Alaska may not have wanted to pull down its schedule in Los Angeles and San Francisco, but clearly they knew what was going to happen. I just don't think that those markets are going to be available to Alaska at any point in the future when they decide that they're ready to go back in. And I don't think that this surprises anybody at Alaska. Those people are smart people, we know. But already as we're speaking here today, United has made an expansion in San Francisco to go after those Alaska customers who are going to have fewer choices. I'm pretty sure that Delta, the market leader here in Los Angeles, is going to find a way to fill that vacuum. I think it's over, not over forever for Alaska in these cities, but over if it wants to be a major player.
- [05:10]
But, you know, I'm going to give Alaska a Lot of credit here. Unlike some other airlines that may go where the wind blows. I think the people at Alaska study this stuff and they tend to make pretty rational decisions. And I think the airline made the right move. The bad move here would have been for Alaska to say we have this sunk cost because nine years ago we overpaid for Virgin America and we can't cut in San Francisco and la. I think that well run companies like this, they know where the opportunity is. And I think for Alaska, that's, that's Portland and San Diego and other cities on the west coast. I presume that Brett, you also like these changes, right?
- [05:47]
C
Yeah, I do. And I think as well said there, the sunk cost thing, I hear people all the time, but why do they even bother buying Virgin America? Guys, it doesn't matter. That's done. We have to focus on what we're doing going forward here.
- [06:02]
But you know, I think we've seen it can be easy to just sit still when things are going well. And things have been going well for Alaska. So it says even more to the fact here that they are making big changes and they're not sitting still and they haven't really been sitting still for a long time. So not everything works. I just say how. I don't want to talk about Virgin America, but to be clear, that one is questionable. We could argue that. But the point is, if you just keep making enough moves that work and you're smart about it and you keep turning in solid results, then you don't really mind the missteps or the questionable moves. However you want to look at it. The bumps in the road, that's not really a problem, I guess, unless you flip the car and end up in a ditch upside down. But that's not what's happening here. I just like that they're being proactive and trying to make changes. And that's kind of the broad thought. But if we look more specifically, I actually do like the specific changes that they're making as well. Because as you said, this is an airline that's looking to play to its strengths. Nobody moved into Portland when Alaska was busy building up Seattle and not paying attention. Now it's going to step on the gas and keep building its moat in the Pacific.
- [07:17]
B
Brett, are you, are you, are you forgetting that our recent guest, Jude Bricker actually made a play at one point for seasonal traffic in Portland and failed miserably. Does his airline not really exist?
- [07:29]
C
Yes and no. Is Schrodinger's Sun Country?
- [07:34]
No, I, I did not forget that. But I actually think that was, that was a while ago now. It was a very short lived effort that also included growth in Nashville and other stuff. And then sun country ran back to Minneapolis with its tail between its legs. So I don't know that that was just a Portland issue, but fair point, somebody tried briefly. And then we have San Diego which is totally different situation. Alaska does not own this market. It's Alaska versus Southwest, which I would argue though if you're comparing that to other California cities, that's a much easier fight than having to go against the legacies and their frequent flyer plans. And in San francisco and in LA and now if you heard me say that 20 years ago, you'd have laughed in my face that Southwest was the easier competition. But this is a different world now, so I stand by it. What do you think, John?
- [08:29]
A
Well, it's interesting. So Alaska's ambition in San Diego, which by the way, they pointed out that it's a 800 million dollar annual revenue airport for them, actually their ambition there has been apparent for a while. I'm sure it predated my notice, but I started keeping notes every time San Diego popped up in an Alaska route announcement. And so like that goes as far back as like September 2023 when they announced non stop service to Atlanta. Hello Del.
- [09:00]
C
Which is going away now.
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A
Yeah, right. But at that point it was their 37th destination from San Diego. And so from where I sat, it was the first clear sign that they had a strategy at the corners.
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C
Oh, maybe you'd call it a cornerstone strategy.
- [09:15]
A
Maybe I would. Except like this one works and it keeps growing. Look, look in, in, in April 2024 they announced Vegas. In February they announced sponsorships of the, of the city soccer teams. DCA was announced in, in March when.
- [09:32]
Approval Sun Valley in July. Now the 15 new flights we're talking about here today, for those of you counting like the airline itself, that's up to now 49 destinations to San Diego and that's a lot in just the last two years.
- [09:50]
C
Okay, so this is, you know, clearly it is not something that has been a recent trend in San Diego for them. They got the new capacity which, which does make a difference. But let me just throw this back out there since we've talked about this recently at another airline. Isn't it a bad idea for Alaska to walk away from the big cities where it can make all that sweet credit card money and go to smaller cities? You know, I, we've talked about American on this. Is Alaska different? Does the American relationship mean that Alaska can act differently because it has that network behind it. In a place like la, Alaska can be the aspirational airline with a lot of leisure, Mexico and of course, Hawaii with the merger. And then they can still attract cardholders with the broadness of the American thing.
- [10:45]
B
Yeah, Brett, good question. I mean, I think there's two reasons that an airline is strong with credit cards. One of them, as you say, is it takes people where they want to go aspirationally. So Alaska still has that on the west coast, including San Francisco, and to places like, of course, Hawaii, maybe the Cook Islands, if they can pump that enough, certainly Papeete. Places like that, they're still there. And the second reason people get the credit card is relevance in the local market. And of course, we've poked at American recently for losing that relevance in certain cities and then losing credit card business as a result. I mean, speaking specifically here about Los Angeles, Brett, where you and I live, Alaska has not had that real relevance for a long time. I think they've had more of it in San Francisco from the Virgin America customers, but they're not a strong number one or anywhere close to it in either place. I don't know that they're walking away from that big of a book of credit card business. The other thing that you talked about was the American relationship, which I think is an okay relationship. The problem is, Bret, you and I know this relationship personally. I, I, like you, have been trying to qualify for Alaska status by flying American and Alaska. And I keep flying American thinking that I'm going to get a lot of elite qualifying points or miles, and then I get like nothing. I get 50% of the miles that I think that I should be getting. And a lot of these are very expensive economy class tickets. So I know I'm just one person, but I considered getting the new Alaska credit card and I decided against it for that reason. So I do think that if Alaska wants to maintain the relevance in San Francisco and Los Angeles without actually flying more, it probably needs to bulk up that relationship with American. But there's probably reasons, business reasons between the two airlines that it doesn't. As for your questions about the network, I do respect what Alaska is doing around here, although again, as a customer who tries to use it from Los Angeles, I'm dying here. Brett, do you know how many markets Alaska flies to within California from Los Angeles?
- [13:08]
C
412.
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B
Yeah, it's two, Brett. San Francisco and Santa Rosa. That is not relevant for you. And then if you want to go to the east coast, you Better be working around their schedule, not yours. The majority of this airlines flying from Los Angeles is going to the Northwest. There's about a third of it going to Latin America and Hawaii. East coast, it's just down to two flights daily, one to Newark and one to Washington National. So not that much for Alaska here in Los Angeles, a little bit more in San Francisco, but I don't think it's very relevant there anymore either.
- [13:44]
C
I think it is a different situation in San Francisco where first of all, American doesn't really help you much at all there as a partner. I mean, maybe a little just with the broad network, but in the same way that any one world partner might help you, I guess. But Alaska is the number two airline there as opposed to la. What are they, number five, six, I don't know, somewhere down there. Right.
- [14:10]
And also the network is different in San Francisco. There's none of the Latin flying, almost none. Nearly half of their departures are intra California or to Vegas or something. So it is definitely a very different strategy up there. You know, Kirsten had mentioned when I talked to her that Alaska could always go back into these markets when it had more airplanes in the fleet.
- [14:37]
B
I don't think it works like that, Brett.
- [14:38]
C
Yeah, that I agree with this assault from United. I mean, things are going to change pretty quick here against Alaska. I don't know that it's going to make much sense to do that either. But what do you think about that, John?
- [14:52]
A
I preface this by saying this is largely conjecture on my part and probably.
- [14:58]
You know, ask the fleet guy what he thinks he's going to talk about. Fleet. So I, I introduced with that, that preface. But look, SFO is probably going to be a really good place to put the max 10 when it's finally ready. Look, this is an airplane that's going to have 11 or 12 more seats than the max nine. And by the way, that's the same number as the departed Virgin A321s. They can run them up and down the west coast in transcon. Nat Pieper, of course, now of American Airlines fame, told me back in mid 23 that he expected the Max 10s to actually end up making a majority of Alaska's fleet when it was all said and done. But that was particularly designed for tightly constrained airports. I think that it's going to be interesting to see how it fits within a market where they are constrained on departures, particularly San Francisco, Seattle on both ends and also San Francisco, Louisiana. So maybe it's an aircraft issue. Maybe that's a way, way back in. But I think ultimately United absolutely has the advantage in San Francisco. Look, there's a massive local market and a lot of money to spend. United has scale and I think they do have a better product for what they're trying to do there. My point about the max tens and the added space was if Alaska wants to get serious about a transcontinental competition with United and Delt, there's a Lopa potentially with lie flat seats that may very well check that box. But again, that's a lot of speculation on my end.
- [16:32]
C
I don't know. I. I don't think San Francisco is really all that constrained because they just keep pulling it down. I mean, maybe United keeps taking their place. So there's some. Seattle probably has bigger constraints than San Francisco at this point is my guess. But I don't know that more seats is going to be the answer for some of these routes that they've walked away from. Anyway.
- [16:55]
It. Yeah, I, I guess we'll see where they end up. I don't know if they're done with their San Francisco play here, but it, it seems entirely possible to me that there's more to come here. Now let's talk about Portland, the other place that's growing at the expense of San Francisco and LA. Alaska had been around 45% of the seats in the market, but in 2023, by then it was down to around 40%. And now though, looking at 2026 or the early part since not all airlines have their schedules out yet, but it actually has more than 50% of the seats filed right now. That's not final, but whatever, it is a big leap and they're trying to really bulk this up. I think there is a good local market here. They've always kind of served that, but this is really more about connecting traffic through Portland, easing the pressure off of Seattle. Seems like a win. Win, right? Yeah.
- [17:51]
B
I'm not sure if you had your pick of any domestic hub in the United States that you would choose Portland just based on geography. But you know, as the, the great Donald Rumsfeld once said, you go to war with the army that you've got, and an airline of that size, a big network airline, needs a true domestic connecting hub. And I think Portland was the best opportunity that they had.
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C
I hear they call Portland the St. Louis of the Pacific Northwest.
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A
Portland is weird, but it's our weird.
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C
Okay.
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A
The big rationale for hubbing Portland actually was laid out in our interview with CEO Ben Minicucci last year. Let's Go ahead and play the clip.
- [18:32]
C
Portland's an important part of our strategy going forward. So we see Portland becoming a huge connecting complex for us in the next few years. And so a lot of flow instead coming over Seattle is going to come over Portland over the next few years. And that's part of our strategy going to go forward. So that's going to create some capacity for us to grow other parts of the business in Seattle. So that's one way that we're thinking about it.
- [18:57]
A
Okay, so now we have is a schedule that's distributed across five distinct banks. They can flow a lot of that Hawaii traffic through Portland and free up space in Seattle for more local traffic.
- [19:09]
B
I guess the nice thing about this guys is if it doesn't work as a, as a true banked connecting hub, they'll just start over over and turn it back into what it was. It's a pretty low stakes move.
- [19:20]
C
All right, guys, I want to get beyond the network here, talk about loyalty, among other things. Let's do that after the break.
- [19:28]
A
You know that moment when you walk past business class and think next time?
- [19:32]
B
No, I don't because I never miss an opportunity to sit up front. Okay, but let's pretend it's hard, but I get it. If I walked past those big seats, I would immediately regret it.
- [19:44]
A
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- [19:52]
C
And what's doing the heavy lifting to make that offer is smart automation.
- [19:56]
A
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- [20:06]
C
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- [20:16]
A
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- [20:20]
B
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- [20:49]
C
So let's talk about loyalty because when we last talked about Alaska in August, it was right before the airline announced its new Atmos rewards program for the combined Alaska and Hawaiian airline here. Brian, this is your jam, man. So is this the right direction strategically?
- [21:07]
B
Yeah, Brett, I think that it is there really was nothing wrong with the old program's mileage plan. And Hawaiian miles were perfectly fine for a lot of the markets in which Hawaiian and Alaska were number one. So if you lived or you still live in Boise, San Diego, Portland, or Seattle, mileage plan would have been your program. Now they call it Atmos. Same thing if you were in Hawaii. And it would not have been insane for the airline to keep two frequent flyer programs, each with the same terms. We've seen things like this before. So the question is, why did they go with Atmos? So the old version of loyalty, it's this idea that you own these customers in your hub markets or places where you're the most relevant, and then those customers should be loyal to you and should be part of your ecosystem. That was the case before. That is also the case today. The name of the program just changed. But what Atmos is trying to do with this new program is help Alaska Air Group punch above its weight and then earn customers who might not necessarily fly it or might not fly it all the time. So we talked about Alaska wanting credit card holders in places beyond its sphere of influence, not just places where it's shrinking, like a San Francisco, but even in maybe New York or Chicago or Philadelphia or even in Europe, for that matter. So the idea is that people will get the credit card and they might earn the points and they might fly in Alaska, but they might never fly on Alaska. And perhaps in the future. This is kind of crazy. You know, this is the way people, Loyalty people talk. They might not fly at all. Perhaps they'll redeem points on a lifestyle partner or something like that. So this is Alaska's play for that big money in the credit card and loyalty business. And I think that Alaska needed to rename and rebrand its program to get there. I talked with Brett Catlin, vice president of Alaska for Loyalty, who runs the program, and he called this a third front door to the company. So you've got your Hawaiian customers, you've got your Alaska customers. They were always interested in these programs. But then you have just your pure Atmos customers. And, you know, we look at this Atmos promotion that the company announced just this week. So for one week only, Alaska's cutting prices on award tickets to a bunch of international destinations. And usually when we see something like this, guys, it's structured around the airline's crappy routes. So where the airline has to fill seats very quickly. So that's. That's part of it. There's promos to the Cook Islands and Sydney and Auckland, but there's also promos to Manila and Hong Kong and Bangkok. And that's for people who may not be necessarily Alaska customers, but they live in New York or somewhere else and they just want to get jazzed about their credit card. So like, it's, it's like the next Avios guys. And you know how much I love collecting Avios points. Plus Avios is a stupider name.
- [24:26]
C
You heard it here first, people. I understand what you're saying, but it's also kind of hard to reconcile this with the network changes. Right. If you're really trying to appeal to where there are the most people, you know, pulling down LA and San Francisco, you would think that that would go against this strategy. But on the other hand, I guess they were thinking of those before as people who were entry level.
- [24:51]
Via Alaska or Hawaiian front doors, and now they are going to get them through the Atmos front door instead.
- [24:58]
B
Sure. But if you live in San Francisco, they want you to know that they can get you to Dublin on Aer Lingus, they can get you to Germany or broader Europe on, on Condor, they can get to Tokyo, they can get you to all these places, even if you're not flying Alaska metal most of the time.
- [25:14]
C
Yeah, fair enough. You know, with me, my problem is that I just think they've given people too much choice here. This pending decision starting next year that you have to decide how you want to earn by points, revenue, segments, it just bugs me. It makes it too complicated. And you know, they, they love to talk about how this is a flexibility thing and people love that. But I don't want the pressure of having to choose and then, you know, regretting it when I choose wrong, inevitably.
- [25:43]
I like the way that it works today. It's a combo package. Higher fares get rewarded more. But, but just, I, I think that's something that's harder. If you're talking about this, this casual Atmos customer that you're hoping to bring into the program, if you make it that hard, doesn't that just sort of defeat the purpose? We, We've talked about this a lot, Brian.
- [26:04]
B
Yeah, we have. And, and you need to stop texting me your complaints. You gotta, you gotta find something else to do. No, I'm not sure that we've talked about it here on the podcast.
- [26:13]
C
Who am I supposed to text?
- [26:14]
B
Let me just remind you, okay, that not every, everyone has a Stanford MBA and a spreadsheet that they build that tells them how they can earn the most miles. Believe it or not, some people just like the feeling that they're in control. They like to think that they have choice, even if they make irrational choices, because they don't even know that they're irrational. Some people are going to make bad choices here, but if they don't know it and they feel better about it, that's what matters.
- [26:46]
C
This has nothing to do with having a Stanford mba. I'm talking about regular people that.
- [26:50]
B
Regular people don't build spreadsheets, Brett. And I know you build a spreadsheet.
- [26:55]
C
I suggest I built one before, I have not built one since, and I will not be trying to renew my elite status with anyone ever again. But that is neither here nor there.
- [27:08]
I just think the whole process. You talk about earning 50% of miles. All of this to me is, is like so challenging to figure out Now, I guess if you're, if you're coming in through the Atmos front door, you don't care because you're just going to buy things and make your money and use the credit card and whatever. And maybe that's the case. But you know, if you are the people that are actually flying. This is where I think it is just so wildly complex. I spent way too much time asking a friend who's a titanium, emailing people, texting when we were preparing for this. Like, I just, it just pushes me away. But yeah, fine, maybe, maybe I stand alone here, John. How about you? You're the actual Alaska road warrior. So what do you think?
- [27:52]
A
And as the only non MBA in the group.
- [27:54]
C
Oh, this doesn't matter. Come on.
- [27:56]
B
It's an overrated degree, John.
- [27:59]
A
I'm the guy without student debt.
- [28:02]
Yes, I, I am on the verge of requalifying for Titanium right now. I have got one more trip that should push me over the top here in sitting in early November. Okay. But honestly, there aren't a ton of visible changes yet. As someone who spends a lot of time within the mileage plan, May she rest in peace. Atmos loyalty program, though. Look, I think the it side of things has been extremely rickety. And I think that's actually the most visible trait of this new system. Fun aside, on my flight back from New York from the Wings Club Gala a few weeks ago, Ben Minicucci was actually on our flight home. And as he boarded, yes, it was very full flight and he was in economy. A first class passenger actually stopped him in the aisle. Yes, he noted that he buys a lot of first class tickets. And his main complaint to Ben was that the customer facing it had become really messy. From a loyalty perspective. I think the big test is going to be 2026 when all the earning levels formally change to the new tiers and the international routes hit the schedule.
- [29:10]
B
Look there.
- [29:11]
A
There is also a big renovation at SeaTac wrapping up in the Sea concourse. That expansion is almost certainly going to include a big new Alaska Lounge there for, for the international operations. It'll be the first full year for the integration and all these international ops. And look, including the new branding and so we'll have to see how that plays out. And look, I think contextually within this, let's see what happens as American tries to get its groove back.
- [29:38]
C
Okay, so we have a bit of a wait and see here still. There are still a lot of moving parts, which is probably the right thing to do. But we're not at the end game yet and so we will see where this turns up. But. But sounds like Alaska's penchant for change is likely to continue for some time.
- [30:00]
B
You've been listening to the Air Show. If you have suggestions or questions for us, or if you're interested in sponsoring the podcast, go to our website, theairshowpodcast.com to get in touch.
- [30:10]
A
The Air Show Podcast is produced and edited by Sarah Fay. Our theme music is by Joshua Mosher. Thanks for listening and we'll be back soon.