Why International Airlines Are Cheering Alaska-Virgin Deal
Because of a recent overseas expansion by U.S. legacy carriers, international airlines are looking for new code-sharing partners in the United States. Thanks, in part, to its recent merger with Virgin America, Alaska Airlines is at the top of their list. Here’s why:
International carriers often have code-sharing deals with U.S. airlines. Hainan Airlines, for example, has a deal with American Airlines. The independent Chinese carrier can sell tickets for AA flights in the United States to its customers, allowing them to reach pretty much any destination in the country with one plane change.
The three legacy carriers, all part of major airline alliances, have such code-sharing deals with other members of their alliance. Some of these deals, however, are being put under pressure. This is especially the case in Asia.
Competing against code-sharing partners
All three American legacy carriers are expanding their trans-Pacific offerings. This means that they are often flying the same or similar routes as the Asian airlines that they have code-sharing deals with. The competition among supposed friends has made code-sharing less attractive.
This is where carriers like Alaska Airlines come in. Smaller U.S. carriers do offer international service, but most of their routes are focused on a regional destinations in the Caribbean and Latin America. Alaska, JetBlue and Southwest do not fly transatlantic and transpacific routes.
No direct competition
This means that there is no danger of competition between Alaska and its international code-sharing partners. The acquisition of Virgin America has allowed Alaska to expand its presence in several key areas. The most important of these is Virgin’s hub in San Francisco, which is a major U.S. gateway for a number of carriers from Asia. This has made the Seattle-based airline an even more attractive option for code-sharing.
Because of these code-sharing deals, Alaska can offer transcontinental flights to its customers (which they earn a commission for selling), and international carriers can give their fliers easy connections to a number of U.S. destinations without worrying about giving business to potential competitors.
Alaska wants to capitalize on its unique position
Alaska is well aware of the fact that its unique status is attractive to international carriers. CEO Brad Tilden hyped the code-sharing idea to investors during a recent conference call: “We'll be a very desirable partner for these international airlines."
Joel Chusid, the senior-most executive for Hainan Airlines in the United States, was quick to point out why his airline is seeking a stronger deal with Alaska: “With Alaska, we're helping each other. There's no competition.”
Hainan already has an interlining deal with Alaska and its subsidiary, Horizon Air. Now that its other U.S.-based code sharing partner, American Airlines, is expanding its Asian routes, including offering flights from Beijing to LAX that directly compete with Hainan, the Chinese carrier will certainly be looking to make its working relationship with Alaska even closer than it already is. Other airlines are in a similar position, and Alaska is the obvious choice for a U.S. based partner.
Some of Alaska’s current code-share deals are with Emirates, Icelandair, Cathay Pacific and Korean Air Lines.
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