Alaska, Fighting Back, Adds Three Delta Cities to Its Route System

SEATTLE (TheStreet) -- In its battle with Delta (DAL), Alaska (ALK) has stepped it up a notch, adding three Delta cities to its network.

An announcement of new routes from Seattle to Detroit, New Orleans and Tampa represents Alaska's latest response to Delta's plan to build a new Seattle hub, competing with Alaska's existing Seattle hub.

On Tuesday, Alaska said non-stop daily service from Seattle to Delta's hub in Detroit will begin Sept. 4. Service to New Orleans and Tampa will begin June 12 and June 20, respectively. Delta is the biggest carrier at Detroit Metro and second biggest, after Southwest (LUV), in Tampa and New Orleans.

Delta announced in October that it would build a domestic hub in Seattle to feed flights to the nine international destinations it will serve by mid-year. Ever since then, Delta and Alaska have taken turns announcing service additions as well as enhancements to their relationships with the Seattle Seahawks football team.

Delta announced Monday that in December it will add nine new flights to five cities, including five daily departures to Phoenix; daily seasonal service to Palm Springs; Saturday seasonal service to Tucson and Jackson Hole; and an additional daily flight to Honolulu. Also in September, Delta will add an additional daily Anchorage flight.

Alaska countered with its announcement on Tuesday.

CRT Capital analyst Mike Derchin said Delta may be surprised by the intensity of Alaska's response, but it shouldn't be.

"If you have watched the history of Alaska, they have been attacked over the years by Southwest, United (UAL) and others, and they have always been very aggressive in their response," Derchin said. "They have never backed down. They think (the Pacific Northwest) is their corner of the world and no one is going to push them out."

Derchin recently raised his 2014 earnings estimate for Alaska to $7.10 a share. He has a target stock price of $97. "Alaska is very strong financially," he said. "They have been earning their cost of capital for longer than Delta has (and) they have always treated their customers well."

It's not unreasonable to think that Alaska could strengthen its code share agreement with American (AAL)  in order to combat Delta. Both American and Delta are Alaska code share partners. "With strained relations with Delta, it does open up the chance for American to get closer," Derchin said. Alaska hinted at the possibility on its January earnings call.

Alaska may find it tough to compete in its new markets. Although its flights will be non-stop, which is a big advantage, it will operate just one flight a day in each market and the westbound flights will arrive in the evening. From Seattle, Delta flies two to three daily non-stops to Detroit and a wide variety of one-stop flights to all three cities. Also, Alaska has relatively few frequent fliers in the Southeast, while Delta has been operating in the region for about 85 years.

The airports involved welcome new competition, as airports generally do.

"Adding more air service is what our customers expect us to do," said Detroit Metro spokesman Mike Conway. "We do everything we can to provide our customers with more choices, and Alaska is an airline that our air service department has been talking to and working on for several years."

Joe Lopano, CEO of Tampa International Airport, said Tuesday that "the West Coast has been a hole in our route map, and now we've closed that," according to The Tampa Bay Times. "For us to attract the kind of high-tech companies we want to attract, we have to be competitive," Lopano said. "We have to have the air service to bring them here."

With 160 passengers each way per day, Tampa-Seattle is the third-largest U.S. market not served by a non-stop flight, the airport said. Alaska's Boeing 737-800 seats 163 passengers.

In return for Alaska's one-year contract to serve Tampa International, the airport committed to $437,000 in incentives including waived fees and $250,000 for marketing, the newspaper said.

Written by Ted Reed in Charlotte, N.C.

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