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TheStreet Open House

Delta and Alaska Battle for Hearts and Minds in Seattle

SEATTLE ( TheStreet) -- No doubt Delta (DAL) can build a hub in Seattle, but if it wants to win the battle for hearts and minds it will have to take on Alaska's (ALK) Eskimo.

On Alaska Airline's third-quarter earnings call last month, a reporter asked whether the carrier might get rid of its Eskimo motif as it re-examines its branding. The response was negative. "The Eskimo is a beloved part of our brand expression and something that customers and employees resonate and relate to very closely,' said Joe Sprague, vice president of air cargo and part of the management executive committee.

The question reflects the airline's periodic thoughts regarding removal of the Eskimo, a process that always seems to result in a public outcry. "Airline's Plan to Junk Eskimo Logo Stirs Up Some Alaskans," was the headline on a 1988 Associated Press story, published in The Los Angeles Times .

The point is that Alaska Airlines has a rich regional heritage, while Atlanta-based Delta is an out-of-town company trying to build an international network. Most experts feel the two can co-exist, especially since they will continue to code-share on some flights and to benefit from each other's presence, but it will be an uneasy co-existence.

Delta said last month it will add seven daily Seattle-San Francisco flights by June 2014; four daily Seattle-Las Vegas flights by April, bringing the total to five, and two daily Seattle-Los Angeles flights in June, bringing the total to seven. Regional partners will operate most of the service.

But it is not just about routes. Delta announced last week that it will establish a "Delta Zone" at Michael Buble's Nov. 15 concert in Seattle, and it will also host a VIP reception with Buble for preferred customers and partners. Buble is a famous Canadian singer. "We are always looking to provide exclusive experiences to our customers both in the air and on the ground," said Jarad Fisher, director of SkyMiles, in a prepared statement. Delta recently picked up sponsorships of the Seattle Seahawks football team and the Seattle Sounders soccer team.

"Delta is trying to do in Seattle what it's done in New York," said aviation consultant Bob Mann. "Every time you look at a billboard in New York or watch a sports team, you see Delta, which is trying to dominate awareness and be at the top of the New York consumer's mind. I presume they will try to do that in Seattle. But it's tougher in Seattle, where Alaska is such a fixture in the community."

In New York, Delta is the official airline of the Mets. It is also the official airline of the Liberty, Knicks, Rangers, Yankees and Madison Square Garden, where it maintains a club room to entertain guests.

Delta said its primary goal in Seattle is to better feed its growing international hub in Seattle, but clearly its expansion goes beyond what it takes to feed international flights. From Seattle, where Alaska offers 300 daily departures, Delta currently operates 38 peak-day departures to 17 destinations, including seven international destinations, as well as Anchorage, Honolulu, Las Vegas and Los Angeles and its hubs in Atlanta, Detroit, Minneapolis, New York Kennedy and Salt Lake City.

Delta's planned new routes target critically important routes for Alaska, which already has 12 daily Seattle-Los Angeles routes, eight daily Seattle-San Francisco routes and nine daily Seattle-Las Vegas routes.

Gauging Alaska's mood during the earnings call presented a challenge. CEO Brad Tilden, a lifelong Seattle resident with degrees from two Seattle universities, said, "What we're trying to do here is take the emotion out of this process and make the best decisions we possibly can.

"As we move forward, there are going to be places where it's going to be in our interest to work with Delta and we're going to support them, (where) they're growing internationally," Tilden said. "That should be a good thing for both of us, and so we're going to work with them to grow the connections between the two airlines.

"And then there are places where they are growing in North-South markets that have been long-term core markets for Alaska Air Group," he said. "And in those markets, we will compete and we'll defend what we've built over the next years."

Tilden noted that Alaska has successfully faced down many West Coast competitors over the years. "If you look at just the way the West Coast makeup has gone over five, 10, 15, 20 years, it's changing all of the time in terms of who's doing what flying," he said. "And I think net-net, Alaska's been a winner in all of those moves for a long, long time now." He said interline revenue accounts for about 13% of Alaska revenue, with 4% from Delta, and a bit less from American (AAMRQ).

Mann said Alaska "has kind of played the field over the years, getting code-share traffic as the cherry on top of its sundae. That's been very successful for them. But now, where Delta has strong network flows, it makes sense to put Delta metal in play because that produces stronger margins. It's better to own all the margins than to share traffic with Alaska.

"I don't think it changes the complexion of Alaska's sundae that much," Mann said. "Alaska is a resilient organization. From a cost structure perspective, it can compete with Southwest (LUV), and from a service perspective it can compete with the network carriers."

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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