Delta Encroaches on Alaska Air's Turf Yet Again
In the last few months, the competitive dynamic among airlines in the Seattle market has undergone a dramatic change. Delta Air Lines has been building a major international gateway in Seattle, but up until this fall it seemed content to rely upon regional powerhouse Alaska Air for connecting traffic.
Now, Delta Air Lines is following a new playbook. The carrier is adding short-haul service in Seattle at a breakneck pace to feed its international flights. On Tuesday, Delta announced its third service expansion in as many months. Once again, Delta is targeting core markets for Alaska Air, in a bid to become more self-sufficient in Seattle.
The newest growth plan
Delta's latest expansion of service in Seattle involves two more routes for which Alaska already offers frequent service. Most importantly, in June Delta will add five daily round-trips between Seattle and Vancouver, which is a short 125-mile hop currently served by Alaska and Air Canada. Delta will also add a daily seasonal flight from Seattle to Fairbanks next summer, breaking Alaska's monopoly on that route.
These new flights come on top of recent announcements of new or expanded service from Seattle to San Francisco, Los Angeles, Las Vegas, San Diego, Portland, and Anchorage. (Delta is also adding long-haul flights to London, Seoul, and Hong Kong next year.)
All in all, by next summer, Delta Air Lines will have added 31 new daily roundtrip flights to its Seattle schedule compared to its 2013 schedule. This is pretty impressive considering Delta currently offers only 35 peak-day departures from Seattle and offered just 44 during the summer peak season.
Delta thus plans to grow its presence in Seattle by around 70% in the span of just a year. This will still leave it at just a fraction of Alaska Air's size in the Seattle area, but as a much more serious competitor.
Delta's goal seems to be to provide its own connecting traffic in Seattle whenever possible, rather than relying on Alaska Air as a code-share partner. This suggests that Delta thinks it can support the additional costs of operating new short-haul service from Seattle by capturing revenue that would otherwise go to Alaska from passengers connecting to Delta's international flights.
In the short term, Alaska's strong brand in the Pacific Northwest and large Seattle route network should help it maintain a dominant share of local traffic. However, Delta's continuing expansion will inject more price competition on routes between Seattle and other West Coast cities. Moreover, as it builds up a critical mass of flights in Seattle, it could start to break Seattle locals' loyalty to Alaska Air.
Foolish final thoughts
While Alaska is one of the best run airlines out there, Delta's never-ending expansion in Seattle is cause for concern. An increase in competition on several routes during 2013 has held back earnings growth compared to recent years. If anything, 2014 is shaping up to be even worse, as Delta will introduce competition to several markets that Alaska currently monopolizes. Until the dust settles, investors should put their money elsewhere within the airline industry.
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The article Delta Encroaches on Alaska Air's Turf Yet Again originally appeared on Fool.com.Fool contributor Adam Levine-Weinberg has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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