Originally Posted by
Bretmd
I’m confused. Why is it that Alaska needs to compete for customers heading from PIT-Chicago? Or from any two points in the eastern seaboard? At what point in their past do you think establishing an east coast or midwestern hub would have turned a profit for them? And did I miss the memo where Delta’s Seattle hub (which you’re right - they threw lots of money at) has suddenly become profitable? Why is Alaska supposed to organically grow a large domestic network on par with the big four when those airlines attained scale through a merger? Does Alaska need a nationwide route network to be profitable? And by “stretch of road”, did you mean interstate 5, a highway that connects the entirety of the west coast, including all of its economic influence and population?
I don't get what's so confusing.
- Great, there's a SEA>PIT route. That's great for their Seattle travelers. What does the person in Pittsburgh care about this? "Oh look Jerry, that plane has a weird Eskimo looking guy painted on it!" These people probably want their airline to get them to more places than just...Seattle. The core responsibility of any company is to grow. AS has amazing margins (I think they might even be the best domestic margins in the industry) but their capacity growth is terrible, because they're not even attempting to signal interest to any of those potential customers on the other end of their thrown ball of string. The era of large-scale independent regional/non-feeder carriers is quickly coming to a close (ironically, due in part to AS's 2.6bln buyout of VX).
- The modern traveler has more of a mesh network than a point-to-point one for their travels. And these people don't want to fly over half/all the country to get to a hub to fly half/all the way back over. I was ahead of the curve of my company in ditching AS loyalty (they were our preferred carrier, but they caused me a physical injury on a flight once, so I got an exemption to use DL when I could), but now DL is the preferred carrier for my entire (very large) organization. Why? Because people were getting stuck in DEN/BNA without an easy way to get to LAX, or they found themselves in MSP and couldn't get to BOS without traveling 4 hours the wrong direction first and kept having to fill out travel exemptions. Once every meaningful European partner other than BA dried up and the org's international travelers were on different networks because they didn't want to split programs, it was over. Again, this is going to become a bigger and bigger thing for AS as tech companies (since, let's face it, tech travelers are the airline's lifeblood at this stage) start setting up most of their outposts in the Front Range or Austin or Nashville and expect their workers to be able to get between those points without having to see Pacific Ocean first. These days, at our org, you have to fill out an explanation in Concur as to why you've even chosen AS, even if it's the lowest fare, and our two companies were pretty tightly knit at one point.
- Populations are stabilizing in the cities AS calls hub-homes, which limits growth
- Going back to VX, they threw 2.6 billion dollars into a hole to announce their presence as one of the big players of the travel industry, and ended up with nothing to show for it but a lot of confusion, mixed hardware, and angry people (and successfully stopped B6 - for the moment - from announcing THEIR presence as one of the big players).
Doesn't matter. See it or don't. The thing with companies using strategies like this (we'll just be super nimble and out maneuver everybody!) is that all it takes is a couple of misfires, and you're screwed. They're gonna make some mistakes and lose just enough market cap to find themselves getting gobbled up at some point when some other carrier decides it doesn't want to build its own west coast network or that (like DL) they want another gateway to Asia that doesn't require having a friend. Although I did find it amusing you talked about scale through merger when the company you're trying to take up for attempted just that, it just didn't work.