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Tue June 17, 2014
Delta's New Seattle Hub Could Lead To Lower Airfares
Can two airlines be partners and rivals at the same time? Seattle-based Alaska Airlines and Delta Air Lines are long-term contractual allies. But now the relationship is being tested.
Atlanta-based Delta says Seattle-Tacoma International Airport is ideally situated to be its Pacific gateway. Mike Medeiros, Delta's vice president for Seattle, says the airline's planners determined travelers and businesses in the region were "vastly underserved." As a result, Delta is adding numerous feeder flights from other western cities to fill its international widebodies.
"With the 95 flights that we'll have by the end of this year, Seattle is now Delta's newest hub," Medeiros said. "So congratulations, Seattle."
Global Reach Vs. Hometown Airline
Delta is heavily advertising itself as "Seattle’s global airline" in tandem with increased charitable involvement in the community.
"We have been on a hiring spree to get ready for this summer. That is a tremendous story," Medeiros said. We are up to nearly 2,800 employees here in the area. That's up from just a few hundred several years ago."
But Seattle already has a hometown airline. SeaTac is the biggest hub for sibling carriers Alaska and Horizon Air. Alaska Air Group CEO Brad Tilden says Delta’s rapid buildup is adding too many seats.
"We believe our competitor's actions are creating a surplus of capacity in many of the markets we serve, which we'll be dealing with until supply and demand come back into balance," Tilden said. "Which is something that we do believe will happen."
Delta calls its expansion disciplined and says that it's filling its seats. Either way, during a recent earnings call, Tilden said Alaska Air’s lower cost structure and loyal customers will help it withstand the new competition.
"We've had a couple of big competitive onslaughts over the last 20 years that we have come through just fine," he said. "I am very confident we will come through this — and come through as a stronger company."
How Will It Affect Fares?
Passengers see potential upside from the two carriers' rivalry. There are the additional nonstop flights and both Delta and Alaska are tempting frequent fliers with mileage program bonuses. Selected customers also get electronic coupons.
Traveler Eric Parish of Seattle hopes the added competition pushes down airfares.
"Any competitor should be able to come in to take on somebody else. Allegedly we have free markets here," he said. "Some people debate how free they are, but I'm saying anybody could start an airline and compete head to head. It would be a good thing for consumers."
Increased competition should at least keep a lid on fares, says SeaTac Airport managing director Mark Reis. However, Reis does not expect a no-holds-barred airfare war.
"We're confident that the demand in Seattle is such that an increase in capacity, an increase in flights, will certainly have some downward effect on fares," Reis said. "But it is going to be able to be accomplished with both airlines being competitive and being successful."
Reis says the Port of Seattle, which runs the airport, is looking to design an expanded international arrivals area. He says the airport may also need to add gates to a separate terminal used by Alaska Airlines.
Delta and SeaTac Airport pulled out all the stops to celebrate the inaugural Delta flight from Seattle to Hong Kong.
A lion dance troupe paraded through the terminal. Caterers passed out champagne and cake at the gate. Two airport fire trucks saluted the departing flight with a water cannon arch.
The Hong Kong nonstop is just the latest in a rapid expansion this year by Delta in the Northwest. Medeiros said by year's end, Delta will nearly triple its daily departures from Seattle.
In a bit of a twist, Alaska is launching flights to seven new cities from Delta's longtime hub in Salt Lake City later this month. The move does not threaten Delta's dominance in Salt Lake City.
Conversely in the Pacific Northwest, Alaska Air Group remains the dominant carrier. At SeaTac, Alaska currently has more than 250 daily departures compared to Delta's 88 daily flights as of this August. Both figures include the airlines' regional units.