The parent company of Alaska Airlines and Horizon Air announced strong earnings for the first quarter of the year on Friday. The airline group's CEO said he expects good results for the rest of 2014 as well, notwithstanding growing competition from Delta Air Lines on Alaska's home turf.
Delta is dramatically ramping up its Seattle operations to build a new hub city oriented toward the Pacific Rim.
Wall Street analysts peppered Alaska Air Group CEO Brad Tilden with questions about the competitive threat during a quarterly earnings call. Tilden responds that he's "confident" his airline's lower cost structure and loyal customer base will carry it through.
"If we operate well, if we operate safely, if we operate on time, if we build alignment with our leadership team and our people, and we all go out there and offer terrific service for the right fare, we think we're going to be okay," Tilden said.
Airline customers may benefit in the near term. The added competition keeps a lid on fares on contested routes. In addition, frequent fliers currently have a range of mileage promotions to compare and register for.
Starting last month and continuing through the summer, Delta Air Lines is launching new international routes out of Seattle. The airline is also adding numerous new domestic flights to funnel connecting traffic to its increased long-haul service. This includes new service into SeaTac Airport from Portland, Juneau, Las Vegas, and Vancouver, British Columbia. In the past, Alaska Airlines and its sister carrier Horizon Air would have carried the lion's share of that feeder traffic and netted the associated revenue.
During Delta's own quarterly earnings discussion on Wednesday, executive vice president Glen Hauenstein expressed excitement about the early returns from the carrier's buildup in Seattle.
"We're off to a great start and we have a lot more to go," said Hauenstein. "We do expect to become Seattle's largest carrier in terms of revenues in the third quarter of this year."
Rival executive Brad Tilden was vague about what harm this is doing to the bottom line of his profitable Seattle-based airline. "We believe our competitor's actions are creating a surplus of capacity in many of the markets we serve, which we will be dealing with until supply and demand come back into balance, which is something we do believe will happen," Tilden said.
Tilden said Alaska Airlines is redeploying some jets to seek greater profits. That includes an in-your-face expansion at Delta's Salt Lake City hub. In June, Alaska initiates new flights from Salt Lake to seven cities in the West, including Boise and Portland.
Alaska Air Group and Delta Air Lines have a standing joint marketing partnership and offer reciprocal frequent flier benefits. On social media and online bulletin boards, some of Alaska's frequent fliers have mournfully predicted the demise of this alliance. On Friday, Tilden downplayed the prospect of an imminent breakup.
"We are in the midst of a long term agreement. We have a long term contract with Delta right now," he said.
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