Alaska Airlines SVP Joseph Sprague on Virgin America Acquisition

Alaska Airlines' Joseph Sprague talks:

• Corporate business growth post-Virgin America merger
• Service to Cuba
• Deepening codeshares and partnerships
• New premium-economy cabins

Virgin America shareholders late last month approved their acquisition by Alaska Airlines, leaving U.S. Department of Justice approval as the only remaining major step in the $2.6 billion deal, which the carriers expect to close in early October. Alaska Airlines senior vice president of communications and external affairs Joseph Sprague spoke recently to Business Travel News transportation editor Michael B. Baker about what the merger will mean for corporate clients, Alaska's intent with the Virgin brand and the carrier's plans for network growth and on-board product improvement.

BTN: How will the Virgin America acquisition affect your corporate travel relationships?

Sprague: We could not be more excited about what the future holds for our company from a corporate business travel standpoint. There's a lot we can't know yet, because we're still separate companies. Once we start working together on some things, we'll understand the full potential. This is a pro-competitive combination. With all the other consolidations taking place in the industry over the last seven or eight years, the fact that another consolidation would be something that enhances competition feels a little counter-intuitive, but that's really the situation. The Big Three and Southwest are so big. The four of them control more than 80 percent of the U.S. domestic market. For all the smaller airlines, it's tougher to go against that scale of competition. The combination of Virgin America will boost us to being the fifth-largest U.S. airline and will establish our footprint on all of the West Coast in a much more profound way than what we have today. We have had a lot of scheduled utility out of Seattle, and Seattle has a disproportionate share of large companies headquartered there, and so there is a lot of corporate travel. Although we have a great sales team in California and other parts of the country as well, we haven't had the network offerings for those customers. This notion of combining with Virgin America, having the network strength they have with what we have in the Pacific Northwest, it will be a powerful combination for corporate travelers.

BTN: Have you started working with the Virgin sales team?

Sprague: We're getting acquainted. We have a lot of respect for them. We have a number of large companies' corporate accounts that overlap with them, and we hear corporate travel managers, what they think of the Virgin sales team, and it's very positive. Our sense is they're punching above their weight class when it comes to penetrating the corporate travel space. 

BTN: Will you keep the Virgin brand?

Sprague: We want to create a platform for growth for Alaska Airlines. It's a little different than previous mergers, where one or both of the merging airlines might have been struggling or bankrupt. These are two strong airlines that are doing really well for their customers. We want to make sure all the Virgin customers today feel good about the direction of the combined airline. We have some things we're doing well at Alaska Airlines, but we know there are things about the Virgin experience we can learn from, so we're not in any big rush to do away with the Virgin brand. 

BTN: What about combining reservations systems and other platforms?

Sprague: Aside from the customer-facing elements of the brand, other aspects of the combined airline we intend to streamline and make as efficient as possible. We will move toward a single operating certificate, so all the elements—IT, seniority lists for employee groups—that can be brought into a single entity, we will do.

BTN: What's new in terms of route growth?
Sprague: The big news is that the Department of Transportation has tentatively selected us to serve LAX-Havana. That service will start probably late this year [and will be] the only West Coast city to Havana. One challenge for Alaska Airlines is access to the larger, slot-controlled airports, particularly on the East Coast. It was one of things that made the Virgin America combination appealing to us. They had some additional slot access at JFK and Reagan NationalAlaska Airlines has gotten the barest of crumbs that have fallen off the table in terms of access to those airports over the years, even though we wanted to have more. Newark is an airport we're particularly interested in. The slot restrictions have been relaxed somewhat at Newark, and you should look for Newark-related news in the very near future.

BTN: How do codeshares and partnerships fit into your strategy?
Sprague: As the Big Three and their global alliances flex their muscles, we want to be relevant in terms of global travel for our customers. The big way we do that is through the Alaska Airlines Mileage Plan. Today, American Airlines is our most prominent U.S.-based partner…but beyond that we have British Airways and Icelandair for access to Europe. We have Hainan for access to China. Earlier this year, we announced a relationship with Japan Airlines for Japan. We have Korean Airlines for further access and a great partnership with Emirates in terms of India and the Middle East. We're promoting those more than we ever have before. We're starting to work on other elements, like reciprocal elite benefits on some of those partners and reciprocal lounge access, which we now have in place with Emirates. Most of those airlines have relationship with corporate entities in Seattle, so we can create a situation where a Microsoft employee can fly to India and earn Alaska Airlines miles in the process and then, when they want to take their family on vacation to Europe, they can use their miles to fly British Airways or Icelandair. It is somewhat Seattle centric today, but with the Virgin combination, almost all of our international partners also serve San Francisco and LAX, so we'll be able to extend that effect down the coast.

BTN: Is Delta Air Lines still a partner as well?

Sprague: They are technically a partner at this point.

BTN: Alaska Airlines usually posts one of the top operations performances each month. Why is that?

Sprague: All the employees of Alaska Airlines are very proud of the success. We haven't always been that way. If you go back eight or nine years, we were closer to the bottom than the top. One thing that has been significant over the last several years has been an orientation towards controlling what we can control, really using data to the greatest extent possible. In the daily operation around the airport, we audit hundreds of different data points to understand a flight, when it pulled up to the gate, how fast did the ground crew plug in the power and chock the tires. How much time did it take to bring the jetway over to the airplane? What time did the door open once all those other tasks were completed? We audit that over the course of hundreds of flights each day so we can have an accurate picture of how we're doing. If we're not doing well, we can pinpoint the driver. We didn't have that level of visibility and focus; now we do, and it helps us to stay on top of things. 

BTN: How are your new premium-economy cabins coming along?

Sprague: Early 2017 we'll be launching premium economy. It's going to be a nice new feature on our airplanes. We'll be continuing with the first class product, so we'll be able to offer a segmental product that will fit whatever our customers' needs might be. We'll make use of our Recaro [leather] seat. We'll add some pitch and service amenities, and we're excited about that.

BTN: Do you expect those to do big corporate business?

Sprague: We're looking at corporate travel policies, whether they allow first class and, if they don’t, what other options are available. Right now, elite status customers in our frequent flyer program can use their status for upgrades, but this will create an additional set of options for differentiated on-board experience. We expect this will be very popular for corporate customers.

BTN: What else have you been doing to improve on-board experience?

Sprague: We're still the only airline that has 110-volt and USB at every single seat on our airplanes. For corporate travelers in particular, that ability to get off the flight and have your devices full charged, it's a hugely popular feature. We've done a lot of things over the last couple of years to enhance our on-board experience: the Recaro seat, and we were the launch customer for the Boeing Space Bins, which are much larger and allow about everybody to bring aboard a roller-board bag. We now offer the Gogo Vision product for in-flight entertainment, and on longer flights, we offer a Windows-powered in-flight entertainment device. Food and beverage, we've done a number of upgrades.

BTN: Have you also been working to boost PreCheck enrollment among your customers?

Sprague: We've done a lot of things over the last few years on our website to promote PreCheck, and earlier this year, we created an option for Alaska Airlines Mileage Plan members to use their miles to defer the enrollment cost. The other thing is to create in partnership with TSA essentially PreCheck on-site signups at their offices, so they don't have to go to a special TSA office or the airport. They just come to work and can peel off for however long it takes during a coffee break to sign up for PreCheck. We've signed up hundreds corporate travelers in Seattle and Portland who weren't previously part of PreCheck to take advantage of the program.