kevincrumbs

I feel like I sound like a broken record but as a PDX flier, even I can't stick to AS since the lack of a true AA partnership means that I can't get to a lot mid-sized cities that I need to go to for work, such as PIT & TUL. Even for places that AS serves, such as IND & MKE, other airlines have more advantageous schedules. This, combined with the QX debacle (co-workers are now forced into DL PDX-SLC-RNO as the morning PDX-RNO n/s has vanished), means that AS is a non-starter for 2018.

I'm actually a little short of requalifying for MVP but an AA transcon over Christmas should get me there. I status challenged to DL earlier in the year and am considering just flying DL again as I don't see a ton of value in having MVP status in 2018.

ucdtim17

I wonder if we'll see WN jump on this route (and also SEA-RNO) soon. AS is earning the competition, flying (or cancelling) Q400s on long flights to SEA/PDX.

sfozrhfco

We hear you. I think PDX is really the one that is getting scr+wed over the most from all of this. The California market will be just fine even if AS decided to just not fly to California at all. PDX is really get hit by QX and by having resources moved to California that may well be less profitable than keeping them in PDX.

milypan

Yeah, I'll bet it was a huge setback for WN when they pulled out of that super-important Spokane route.

The lesson I'd draw from that anecdote is that it's very hard to go into someone else's backyard and compete effectively. You know, like AS is trying to do in CA (though in this case it's like three or four other people's backyards, simultaneously).

sltlyamusd

I'm actually not trying to defend AS, but instead arguing that there were some issues with the VX business model that were going to need to be addressed near-term, either by VX management or by whoever became the acquiring company. I agree with you that it makes no sense for AS to pay top dollar for VX, disregard their brand equity and dismantle their product. I also agree that the only reason VX got as far as it did was because of its unique product and customer-focused business model.

The issue with VX moving forward was its "one-size fits all" business model. They had an F product that was excessive for a 1 hr flight, but no longer competitive on a 5 hr transcon. Given that AS paid so much for VX, I think they should be doing more to retain the VX flying experience and retain high yield customers on routes where it makes sense financially. What I would have done is to pull VX fleet off of the intra-CA routes (it makes no sense to have 55" F seats on a 1 hr flight) and replace those with higher frequency service on QX/OO E175s. Gradually prune back the A320 fleet as leases expire, and renovate the remaining A320s with lie-flat seats in F. Then assign those remaining VX aircraft to high yield transcon markets. The higher density 737s should instead be used for the West Coast trunk routes and leisure-oriented long haul destinations. The new AS 41" pitch F seats are great for 2-3 hour flights but not competitive with the major carriers in premium markets. And then use the E175s for shuttle routes and low density point-to-point service as AS is currently doing. As an airline expands, its all about having the right product for the right market.

jrl767

the problem with this, as I see it, is that an 8F configuration (A319/A320) isn't going to be compatible with "high-yield TCON markets" ... the 12F A321s are marginal
again, one longtime DL guy's opinion: the new AS F is actually fine for mid-cons and those TCON routes where DL/AA/UA/B6 don't offer their higher-end products (SEA<--> WAS/PHL/MCO/TPA, LAX/SAN<-->BWI, to name a few)

sfozrhfco

[QUOTE=sltlyamusd;28995362

The issue with VX moving forward was its "one-size fits all" business model. [/QUOTE]

Well, being honest, AS is not following any of your suggestions and instead of having a better product than competitors in most markets, they will have a totally forgettable product in all markets. AS F is fine if you pay a low fare and get a free upgrade but in reality, it is usually a very poor value if you have to pay for it. Even from PDX to SFO, it was not a product I would ever pay full price to fly. Using an award in coach and getting upgraded to first, it was not a bad value. Even $25 over coach--not so much. I would never pay to fly it cross country. Whoo hoo..now you can order your $1.50 bowl of granola and yogurt in advance

All of VX's routes compete will every major airline. Lacking a fan base or a product to get excited about, AS is pushing blackberries when the rest of the world has moved beyond just getting e-mails from a smart phone.

UAPremierExec

Alaska has already came out and made it clear that they plan on being the "in between" airline.

they want to be the guy between the ULCC/LCCs and the mainline carriers.

And, not coming out as an Alaska fanboy, but they seem to be headed that way. They are making an F product, for a 737, that is nicer than "the other guys" and an acceptable service matrix in the premium cabin.

Virgin's product slipped in the past few years while everyone else caught up. VX was losing marketshare as the others got better. It also lacked a strong corporate sales force.

People seem to forget that Seattle is home to some VERY large companies, and companies with significant operations in LA & SF. Companies that have corporate contracts with Alaska. Those contracts hold a lot of value to the "new" AS as now AS will have more leverage.

I'm glad that the VX acquisition is forcing Alaska to upgrade its product. But I understand, as someone who has been flying VX almost monthly on long hauls, the little things on VX that have made it worthwhile. I wish Alaska would hold on to a few more of those items.

eponymous_coward

I don’t think VX was generating much F revenue premium outside of transcons, not enough to balance out selling more Y in a denser cabin. Witness that AA/DL/UA don’t fly lie-flats on most domestic routes, B6 isn’t going Mint-everywhere, AS got perfectly fine numbers out of SEA/PDX/ANC despite the polenta everyone grouses about, WN does fine without F, and so on.

The assumption that AS is making based on their market research is that there is a middle space for a “F but not quite as good as transcon F” product. This product doesn’t actually exist yet given that AS and VX haven’t unified their offerings yet. Right now, AS enjoys the downside of losing the VX cachet, QX operational issues, and integration hiccups, plus pricing/marketing pressure. Plus their assumption may not hold true in the California transcon market.

I hope they aren’t fooling themselves into avoiding the expenditure and complications of a subfleet/refreshed VX-style longhaul product by cherry picked market research, because if they did, reality is likely to be painful. But let’s not fool ourselves in thinking VX was selling all those F seats for short trips. My anecdata are that upgrades were easy pickings for the short routes...

sfozrhfco

It is pretty obvious that the only "market research" AS's management did was to consult other people in the AS management team and ask if it would be easier to keep the same configuration for the entire mainline fleet or to have a different configuration on some.

Let's be honest. It was a whole lot easier to just give everybody the AS product rather than use even the slightest bit of creativity to make themselves competitive in California.

Market research by asking 10 random people at SFO could have given them more information about the competitive environment than they seem to have a grasp on--even two years after making contact with VX about a sale.

formeraa

Of course, it is easy to criticize market research when the conclusion is not to our liking. The problem is that airline market research does not provide good answers on what people will actually do (just what they SAY they will do). Everyone wants something that is not feasible (i.e. premium service for $50 each way). The key defining principle is that everyone wants the lowest fare possible.

bkojote

They should've phased out the Alaska Airlines name and focused on a refresh of the Virgin America product to bring it up to 2017. They paid a ton of money for an extremely valuable brand and differentiated product and they're squandering both (or worse, actively alienating the customer base as the revenue numbers seem to indicate.)

Outside of the PNW, Alaska Airlines doesn't mean anything to anyone, and the Virgin America audience is a lot savvier than the phony "chicken and waffles was weird too" marketing. They're going to notice the crappy DigEPlayers and awful device streaming app, the inedible food up front, the uncomfortable seats, and the lack of any sort of imagination in the food/drink/service offerings. If they're going to fly just another airline, might as well be Delta or Southwest.

As the industry moves more to a-la carte purchases and revenue models, Alaska's also missing an opportunity to capitalize by removing the onboard ordering system.

sfozrhfco

Which is actually not true. Mint proved that the opposite is true. People want the best VALUE and will pay far more for a product they actually value. Remember that it was not that long ago that jetBlue actually capped all their fares at $299 each way. They realized that improving the product in all classes would lead to increased profits---most especially on transcons where they had lots of trouble over the years. When you lose transcon travelers, you also tend to lose loyalty for other routes.

If all the product options are equal then of course there is also no reason to pay anything more. This is the dilemma AS faces. They have never offered anything to the industry that is game changing. They are not distruptors. They strive to be slightly better than average which works fine in a non/low-competitive region like the PNW. Does not work well in a hyper competitive market.

MIDWESTERNFLYER

FWIW, according to an AS pilot on the SEA-IND flight last week, AS is heavily considering adding an IND-PDX (Portland) route that would be added sometime in 2018. This route would not be flown with an Alaska mainline jet but rather by Skywest or Horizon on an E-175... (didn't think it had the range but I guess I am wrong).

He also said IND-SAN is being "lightly discussed" but most likely will "not be really considered until the Alaska/Virgin America" merger is all complete."

So it looks like not all hope is lost

eponymous_coward

Did you pay attention to ALK’s previous investor presentations? They showed off research. The SEC takes a dim view of lying that way- that materially affects the stock. I’m pretty sure nobody in Alaska management thinks orange jumpsuits or GPS bracelets are an attractive look, or wants massive shareholder lawsuits for lying to investor about research they actually never did. Or are you in the business of making inflammatory accusations of crimes because they killed off your favorite airline?

That being said, marketing research can be wrong for any number of reasons. Pretty sure New Coke had some market research done for it...

You mean like Jet Blue reducing pitch from 34” to 32” in the non-EML seats and getting rid of free bags? That is a curious definition of “improvement in all classes”.