ucdtim17

Plus a winter full of delays and cancellations at SEA, LAX and particularly SFO is coming soon

sfozrhfco

Exactly--if they are having trouble in the summer, things are down hill from here.

Baze

To better understand what is happening, just go to the UA or AA forum during the times of their mergers. A LOT of the same types of posts during that timeframe. This merger is still in its infancy. And so far they are handling it better than UA is even to this day and theirs started in 2010.

This merger is part of the reason for me switching from UA to AS Oct 2016. Being SFO based AS by itself was a no brainer for not using. Adding VX made it viable. I gave UA almost 5 years before pulling the plug. I am willing to give AS the same consideration to work out their kinks and be viable. Granted AS and VX are MUCH smaller in scale and have minimal international considerations compared to AA or UA so it shouldn't be as complicated.

During the bidding process they didn't want B6 to get VX and at least saw potential with the VX routes. Now that they are doing the merger they have to get down to the nuts and bolts of what will work as a combined airline. UA and AA stock suffered in the early stages but recovered as things got better. Still don't know what UA is doing that they can't seem to fully integrate the 2 airlines. But AS seems to be at least moving forward. As they get under one operating certificate overlapping routes will start to go away and they can better utilize those planes. Just remember, they are still 2 separate airlines with one owner.

Of course there will still, and always, be the VX lovers who will still complain 5-7 years down the line. There are still a lot of CO lovers that complain about UA on the UA forum. 7 years from starting and 5 years since the merger UA and CO flyers are still blaming the other airline for all the problems. I would hope AS learns form the UA CO disaster and makes a better airline. But there will still be the haters.

As for the markets, yesterday was a big down day for all the markets so I would attribute at least have, if not more, of the 13% to this and the rest to the statements made. Just look at UA stock during and after the merger. It is doing much better today than during the merger. Merger statements will make it go up and down depending on what is said. But hopefully the stock makes a big recovery after all is said and done. If UA can do it even with the problems they are still having I would hope AS could do it too and not have as many problems 5 years down the road. I am looking closely at Alaska stock and just may buy some but haven't fully decided yet.

sfozrhfco

CO and UA merged at the bottom of the cycle. ALL airlines in the US have gone up substantially since then. AS/VX happened at the very top of the cycle. There were also not substantial wage gaps between UA/CO. This is not an issue of AS/VX employees not getting along. This is about taking over an airline that was already facing serious competitive/financial pressures in the best airline climate the US has seen financially since deregulation and not having a clue how to change that course. We all know that the best of times for airlines will not continue indefinitely. VX management were smart to get such a huge premium at the peak of the market from an eager buyer that was so blinded by the prize they didn't bother to think about what they were purchasing. Immediately seeing much higher recurring costs with no clear path to increasing profit generating revenues is not a good place to be.

dmodemd

...and I am not sure they have also factored in that Branson wants to bring Virgin America back once Alaska drops the brand .
Full circle. Alaska just ends up with some slots and Airbus narrowbodies.

So those customers disenchanted by the loss of VX will be very happy to see it come back!

tphuang

I wasn't around this forum when the other mergers happened, but I can assure you there are vast differences here.

VX had a model that was rather unprofitable in the shorter range routes, but made that back and plenty on midcon and mostly on transcon routes. They were able to charge a premium because the product was much better than rest of the market and were not capturing enough corporate contracts to attract more competition in these routes. Since mint introduction, the main area of profit for VX has been hit upside down. Routes that were the most profitable before like JFK/BOS/FLL-LAX/SFO have been savaged by a better and lower CASM product. Now if B6 was successful in purchasing VX, it would have probably updated VX aircraft and use them on most of the transcon routes while keeping its lower CASM aircraft for the leisure routes and E90s for the high frequency business routes. However, that did not happen, so B6 went on a massive mint expansion that has drew legacy carriers also into bringing premium product on line in markets that VX used to do well.

AS management solution to this problem is to put A320 on N/S routes while putting 739s on transcon routes. But the problem is A320 still don't have the CASM to compete against WN on the west coast routes, where comfort level is less of a factor. That's even after they reconfigure to have smaller FC cabin.

And on transcon routes that have mint, they are going to have an even harder time to sell FC, since they have to price it about the same level (around $600) but the product is no where as good. So routes that used to get a lot of paid FC will now consist mostly of upgrades. And even in Seattle area, they will loose some exclusive corporate contracts since DL and B6 offer clearly better J product to NYC. Y prices will be low since carriers with flat bed will use margins for J product to undercut Y prices.

AS management is complaining about $100 O/W transcon tickets. Guess what, B6 is still making money on those routes, so those low fares are not going away. They fundamentally don't realize the game has been changed.

And it will get worse next year once WN adds more to their Cali network and start flying to Hawaii.

jinglish

Even if a "new VX" does come to fruition, I doubt there'll be much of an impact. Where is Branson going to set up shop, SFO again, to become the third airline hubbed there? LAX, with an incredibly crowded market? SEA, which is running out of room, and where AS has fended off DL fairly well because of hometown loyalty?

Maybe he'd have slightly better chances from PDX, and he could have some decent success out of a dehubbed airport like PIT, but I don't see him directly taking on AS out of spite. He'd be throwing money away--and, thanks to the 25% ownership rule, largely others' money.

eponymous_coward

Independence Air or Skybus all over again: trying out of second-tier or third-tier cities that probably can't support a reasonably sized operation out of that city as a hub...

sfozrhfco

There is zero chance that Branson will start another airline in the US unless some major carrier somehow disappeared. VX investors made out like bandits and the chance of that repeating is also close to zero.

BenA

I tend to agree with this. AS is like a vacationer who got suckered into an impulse buy of a timeshare, and now a year later the reality of maintenance dues is starting to set in

The really gnarly problem from my perspective is the lack of integration early on in the merger. As an AS elite, I refuse to book VX flights right now because I get minimal (until recently, no) benefits onboard. That's keeping their customer base much more segregated than it should be, and is preventing them from realizing most network efficiencies from the transaction yet.

Hopefully when they get it all integrated, things will get better. The problem is that they aren't doing this in a vacuum, and the competition (especially DL and B6) is getting better really fast - they're getting squeezed on both ends and in both hubs by a competent network airline and a competent low cost airline.

If high-value passengers desert Alaska for DL/B6 out of frustration at the merger problems, and discover the grass is greener on the other side, it's going to be really hard to win them back once the operation is actually running smoothly.

WebTraveler

Continuing to add additional flights and not being able to find pilots on existing flights (Horizon) is only serving to make the problems worse. Lots of last minute cancellations, pissed off travelers, and now some flights completely pulled from the schedule.

The merger for existing customers has been awful so far. We lost our ability to book flights across the USA from American, Delta, and so forth.

Investors see the issues going on. Brad Tilden is an awful CEO and has allowed this to happen.

The merger has been hard, and always will be for anyone, but to make it worse with how Tilden has managed it?

notquiteaff

So Alaska elites are thus booking competing carriers out of spite on VX routes? Where they neither earn AS miles nor getting benefits (unless they happen to have status on those alternative carriers)? If I personally had the need to fly a VX route and cared about AS miles, I would probably still book VX vs. another carrier where I get no benefits and less valuable-to-me miles.

Sure, it would have been nice to have had a seamless benefits merge on day one or maybe after a month. Some of that simply comes at a cost of developing, testing and deploying "throwaway code" to integrate the systems. I don't know how much it would cost and how much the lack of such integration costs them in revenue/profit from you and other elites that refuse to book VX flights. I think they are probably in a better position to estimate that than most of us.

jsguyrus

Have you given any thought to what Alaska would have done had Jet blue bought Virgin? It seems to me that if B6 got a large west coast foot hold then Alaska would have been slowly crushed. AS overpaid for VX not because they wanted to but I think because they didn't have a lot of choice. I don't think that Alaska staying that cute little northwest airline with lots of partners was sustainable going forward. Had they kept that model they would have been bought out in the foreseeable future.

Thunderroad

I really can't argue with all of the good points being made here regarding how AS overpaid for VX out of desperation and/or how it is mismanaging the merger. All I'd add as a partial counterpoint as someone who used to fly both UA and AA a lot is that both are on downhill slides of their own in terms of service and their FF programs. It's not as though AS's struggles are occurring in a vacuum, then, in which all competitors are improving or at least not regressing.

Now, are competitors' own problems enough to counterbalance those of AS? I don't know - and again, some of the criticisms here of AS are pretty persuasive. But it's at least possible that it's getting enough defectors and other benefits from competitors' problems that it could weather its current storm.

UAPremierExec

Few notes:

-> The Virgin America product needed updating. It was an *amazing* product 5 or 6 years ago. However, the Big 3 have all been able to take parts of the VX product differential and integrate them into their services. The VX needle moved, just not in VX's favor. And VX didn't upgrade or enhance any of their services, except for the Toddrick Hall safety video.

-> Alaska is living in a time zone 5+ years ago. I used to be greeted by name, and thanked for my loyalty. I used to recognize FAs, and they me. Gate agents & staff used to bend over backwards for MVPG+. Now, that airline is gone. We are thanked for our loyalty by hearing "would you like a drink on us?" so that the FAs don't alienate other passengers -- err egalitarian. We've been left behind at the gate when a plane pushes 15 minutes early, despite being on full F/Y tickets. Mushroom & asparagus quiche.

We've all been living in a bubble, and you know what, it was a great past 10 years or so. Heck, lets talk about flying pre 9/11 when we had actual GLASSWARE on airplanes, or when food was edible.

As the industry moves into its next cycle, its apparent that Spirit has won the war. Basic Economy is becoming the norm, as society is demanding cheaper & cheaper products; the Walmartization of the skies. History: Did you know that Sam Walton, the founder of Walmart, demanded that 75% of all products in Walmart were Made in America? He used to know EVERY store maanger's name, birthday, and anniversary. He would walk around stores in Kansas/Missouri/Oklahoma/Arkansas and he'd even know the stock clerk's names. Walmart USED to be an amazing company, now look at it. It had to change with the times because SOCIETY wanted cheap, cheap cheap. Now look at Walmart, they are the poster child of any socialist/communist/ultra liberal.

Our beloved Alaska is heading down the same path. They are trying their best to make a mediocre product that isn't "WOW", but isn't Spirit cringeworthy. They're trying. But also failing on a few fronts.

I've become a fan of Virgin America. Its really a nice product and good airline. BUT, its a relic of when Delta/American/United sucked. All of these little things on Virgin add up. The food in F is a culinary treat, however portions aren't the best. The FAs are mostly in great spirits. The IFE, although Alaska-ized, has been great this month (Halloween themed movies across both AS/VX, I will always pick Rocky Horror over some lame Catherine Heigel chick flick). The seats are actually comfortable. I just discovered that the F tray tables can flip around and hold your ipad/iphone/tablet at an angle. Wifi has been same as Alaska - hit or miss. Great recline on the F seats, super plus pillows and blankets (which, have now been downgraded to 1/2 size they were before). The red rope keeping steerage at bay. And of course the cute little autopilot amenity kits with eye shades & a pen/stylus.

Virgin America had the chance to be SUPER AWESOME, but they ran out of money, and time. Kush put in some super crappy policies for staff & passengers, and now we have Alaska coming in to "fix" things.

Problem is, we need a better blended product to keep us happy. We now have lost our Delta & American links, which kept our FQTV accounts and wallets intact. Delta is sitting back and making upgrades left & right, yet Alaska is downgrading VX instead of pulling over some of the higher-end perks to make AS stand out against the likes of DL, AA, and even B6.

I'm not on any of the AS boards. I unfortunately am a consultant to the airline business in the IT world, so Alaska doesn't want to hear my input. Which is odd, airline CEOs always pull me aside and retain me for my insight as a frequent flyer. But every Alaska survey boots me. And I guess we don't have MVP Gold luncheons anymore.

I want to see Alaska stand out, but unfortunately its not. They're going to make Alaska a "good" product that keeps us pleased, but not happy.