In late 2014 Virgin America toyed with a mid-continent hub. The carrier acquired gates at Love Field in Dallas and slots at New York City’s LaGuardia Airport (LGA) and Washington, DC’s Reagan National (DCA). The carrier planted its flag and began operations, focusing on major markets where it could compete against Southwest Airlines‘ massive hub operation. When the Alaska Airlines merger closed the routes shifted from A320 aircraft to the smaller Embraer E175s that were now available. And now, as the merger progresses, the routes are dying. In its earnings call today Alaska Airlines indicated that it agreed to lease the slots to Southwest Airlines.
The viability of the routes came under scrutiny from their inception. The carrier has no feed at either end, virtually nil brand loyalty in Dallas or Washington, DC and only minimal love in New York City (thanks to the transcon routes from JFK). As Alaska Airlines refocuses its energy on the “Most West Coast” marketing plan the one-off routes to these east coast airports show themselves to be vanity-driven more than core to the operation. And so they will now go, converting to slot leases that will return better profits to the company.
In the 2014 slot allocation process, a result of the American Airlines/US Airways merger, Virgin America President and CEO David Cush called out the “mega-airlines” that it was now facing competition from. As a new entrant and smaller carrier it received access to a handful of the highly coveted slots at each airport. It also pushed hard against Southwest Airlines and Delta to gain access at Love Field. It is worth noting that one of the DOJ stipulations around approving the Alaska/Virgin merger requires that the combined carrier “shall not directly or indirectly sell, trade, lease, or sub-lease any of the US/AA Divestiture Assets without the prior written consent of the United States.” That approval was already granted. That is it now ceding these slots to Southwest is somewhat ironic in this context.
With these changes the LaGuardia stations will be closing; that is the only route the carrier operates from LGA; the carrier still operates one daily flight to San Francisco from DCA. At LaGuardia the move leaves JetBlue as the sole operator in the Marine Air Terminal.
Read More: Is the LaGuardia Perimeter Rule Ready to Depart??
The deal is a 10-year lease, not a sale, which is important for Alaska Airlines. The carrier can reclaim the slots at the end of the lease term if it decides further expansion on the East Coast is desired. There is also a caveat that lets Alaska Airlines reclaim some of the slots sooner than 10 years out if the perimeter rule adjusts. With the rumors every now and then about LaGuardia opening up for some longer flights given that JFK no longer needs any help forcing airlines to fly there that clause could come into play.
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So much for competition at DAL. That just leaves DL fighting it out with WN at their shared gate, and if WN ever wins that one, DAL reverts back to it’s pre-late 1990s state of being a one airline shop.
Well, AS isn’t quitting Love Field completely, just dropping those routes that it had already trimmed significantly previously. It could lead to increased flights from the west coast to Dallas, shifting the competition rather than abandoning it.
Gotcha – I didn’t catch that they still had some other routes remaining there. That’s good. Love is a great airport now that it’s been rebuilt, and as much as I know WN would love to control every single slot and gate there, the spirit of the agreement that led to the new terminal was that they would not be the only airline serving the airport.
Steven Sullivan Cutting these two routes leaves Alaska with 11 daily flights to DAL from SEA, PDX, SFO, SJC, LAX, and SAN. They haven’t said whether or not they will add more or not, but cutting that many flights puts them in the hot seat as theoretical host for Delta’s 5x daily flights to ATL.
And, much like the lease of these slots, it will be interesting to see if Alaska thinks it can profit more from leasing Delta Air Lines gate space. The part where doing so probably hurts Southwest Airlines more than it hurts Alaska is interesting.
Seth Miller This also leaves room for Delta to add flights, or for an additional carrier to enter the airport using Alaska’s excess gate capacity.
Delta originally published a 13 flight schedule for DAL including flights to DTW, MSP, and LAX. One or two daily flights to DTW and/or MSP may be back on the table.
On the other hand, jetBlue expressed interest in DAL before all the gate space was spoken for. Their 2x daily service to BOS would be pretty easy to relocate from DFW into one of the Alaska gates. And perhaps being located at DAL instead of DFW would be enough of a competitive edge to look into offering service to JFK and/or FLL that would be off the table at DFW.
I’d think AS would want the DL flights or growing its own west coast ops over B6 showing up. Even though B6 is smaller I think the perceived threat is greater.
Seth Miller I’m not so sure about that. Flights to ATL are pretty innocuous from Alaska’s perspective, so I rather expect them to lease space to Delta for the sake of their existing flight schedule. But if Delta added north or westbound flights, those could be used to compete with Alaska, and after what’s played out in Seattle I’m not sure how willing they would be to entertain that possibility.
On the other hand, Alaska and jetBlue barely compete—only on transcon markets and a select few markets jetBlue serves from Long Beach. Adding flights to the northeast and possibly Florida wouldn’t capture any passengers being served by Alaska now that they’re exiting the DAL-DCA/LGA market. By leasing the space to jetBlue first, even if there is room for Delta’s current flight schedule in addition, Alaska would effectivy limit Delta’s ability to expand service in a way that could be competitive. It seems like the smart move to me. Alaska would hold half of both gates since they’re the only one with multiple flights on the ground at the same time, and then the other two each take the remaining half of one gate or the other.
I feel like the transcon market is something that B6/AS will compete sufficiently on that it matters more. Though I also agree that if DL wants to expand westward that would be enough for Alaska to balk.
Also, there’s the part where Alaska and Delta hate each other because of DL going after Seattle and that shouldn’t be discounted to deliver cooperation elsewhere. So who the hell knows.
And leases east coast gates to WN
I guess the one good thing at DCA is that it will help a little with the overcrowding in the DL/UA/AS concourse, since AS had moved the VX flights over there a month or two ago. AS is sharing two gates, one each with DL and UA. WN is over in the Terminal A, so those additional WN flights will pull some passengers out of the B concourse, and free up some gate time at the shared gates.
I flew the DCA-DAL segment a couple of times in 2016, and it was far from full. It was also a great bargain at the time for both paid F and award seats.
The irony of WN being the lessee is hard to not laugh at. So much going on there with VX getting the slots as a new entrant and now seeing them operate by one of the biggest. I do wonder if JetBlue would (or could) appeal the DOJ approval of it given the original intent of the divestiture and how recently it was.
Alaska also flies LAX/SEA/PDX-DCA, with multiple daily frequencies out of SEA, not just SFO-DCA.
Fair point. I was thinking of the legacy VX routes and ignored the others.
Hemal Gosai cause it was always empty
Haha yep. 8 passengers the last flight I was on
About time. Sad to see it go, LGA-DAL and vice versa were basically guaranteed upgrades for me on a $150 RT fare
Wil DL five in to DAL now?
DL still has its handful of ATL flights. It is unclear what Alaska is doing with the slots/gate access on the DAL end with this shift.
I live a few hundred yards from one of the DAL corridors and just over 3 miles from the airfield. Even as a LUV shareholder this seems to thwart the philosophy for at least token competition at DAL. I wish there were more competitive forces at play in the Metroplex.
This isn’t changing the AS usage at DAL, at least not yet.
It will be interesting to see how DAL evolves…I appreciated the competitive pressure to the East Coast and sad to lose that option for sure.
This makes no sense for competition in LGA. The slots should go to a new carrier, not WN (or any of the legacy carriers). This just keeps pricing high, and adds no new destinations for NY.
Agreed that there’s something questionable about “new entrant” slots won by Virgin America to add competition going to one of the Big 4. But the Feds approved it. I suppose JetBlue could protest the decision but who knows if that would be successful, much less even possible.
Competition, in theory should help drive costs down per passenger along with adding aminities for both the passenger and the airlines. Look at what the port authority has done on the other hand, LaGuardia is old and desperately needs a referb, and it”s connection to public transit is shoddy. JFK is maxed out and obviously can”t deal with poor weather. Newark is expensive as all get out when you are a passenger. The port authority has no reason nor desire to fix any of the major issues plaguing these airports as they are the only game in town, and the amount of money they would need to pump in won”t increase their revenues enough to justify it.
Competition among airlines at a terminal has roughly nil effect on the concessions in the building.
Does anyone know how this will effect AS @ EWR? I really hope they don’t pull out of servicing those routes, I just can’t go back to UA.
Nothing currently expected to change at Newark and Alaska even added a couple routes/flights recently so that seems relatively stable. At least for now. If fuel prices continue to tick higher that will make the transcend harder to support financially. And United has solid feed to help fight off the challenge.
Apparently, in a confidential agrement” the slots were exchanged for WN giving up PNE.
That has been rumored pretty much since the day AS announced the new routes from PAE and WN indicated it was no longer pursuing service at Everett. I believe it, though cannot prove it.