Alaska Sees Corporate Business Growth as Network Expands Post-Merger

Alaska Airlines SVP external relations Joseph Sprague talks:

• Bay Area network fortification
• Alliance strategy post merger
• Why Alaska isn't interested in basic economy fares

It's been six months since Alaska Airlines merged with Virgin America, and "all the big milestones are tracking the way they should be," SVP of external relations Joseph Sprague said. The carrier expects to have a single operating certificate early next year and is speeding up integration of Virgin America into Alaska's passenger services system. Sprague spoke with BTN transportation editor Michael B. Baker about how corporate business, up 12 percent year over year in the second quarter, is growing after the merger and Alaska's plans once the heavy lifting of the merger is complete.

BTN: What's the latest on route growth?

Sprague: Forty-six new markets either have been announced or started this year so far. There were a couple of Virgin markets they had previously announced, but we've announced over 30 markets since Dec. 14, when the deal closed. A lot of those are new markets coming out of the [San Francisco] Bay Area, so a lot of California growth.

BTN: What has this meant for your corporate business?

Sprague: We have a better chance of courting their business. The first thing you have to offer to corporate travelers is utility. We have 17 new markets just in the Bay Area since the start of 2017, and we're now flying to over 40 destinations out of the Bay Area. Obviously, Virgin was already flying to some of the bigger East Coast destinations like New York and Washington out of San Francisco. We've added San Jose to Newark, for instance, and now we're starting to add some of the midcontinent destinations that are popular, as well. From a corporate traveler standpoint, what we're offering out of the Bay Area is almost second to none. We know there's another airline that has a big hub at SFO, but having the balance of SFO and San Jose, especially with the very vibrant tech sector in Silicon Valley, is powerful.

BTN: How about the rollout of your premium economy cabins?

Sprague: It's not 100 percent of our fleet, but it's getting there. We're intending to take that to the Airbus fleet at Virgin America starting next year. It's doing great. It's early boarding, it's a free beverage, a little unique snack box and it's greater seat pitch. The upgrade price is pretty modest for transcontinental flights, and people are finding that attractive. Because of still having first class [and] having this greater number of seats in premium class, our elite level mileage plan members are getting upgraded to one or the other 75 percent of the time.

BTN: We've seen a lot of movement in bundling of products and services for specific fare types. Are you working on anything in that regard?

Sprague: We haven't done too much in that realm yet. We've put a lot of focus on keeping our regular, base fares low, so while some of the other airlines that have a broader range of published fares available are doing some things so they can offer discounted fares with fewer amenities, we're trying to focus on value to the customers and not excluding customers from too many of the benefits. It should just be a low fare.

BTN: How have you been adapting your alliance strategy?

Sprague: Alliances are important to us. We're largely a domestic carrier. We do fly to five countries now, thanks to our added service to Havana, Cuba, earlier this year, but even those five countries are basically North America: Mexico, Canada, Costa Rica and Cuba and the United States, of course. For us to serve the international travel needs that customers have, we know alliances need to be a part of that mix. Earlier this year, we added two new alliance partners—Condor out of Germany and Finnair—so great new access for Europe along with our existing partnerships with British Airways and Icelandair. The domestic alliances are evolving a bit right now. We're no longer affiliated with Delta, and the American relationship, which is still very important to us, is changing a little bit to reflect our growing domestic network.

BTN: How is moving toward a single brand progressing?

Sprague: Some of it will really start to trigger after we get to the combined [passenger services system, which Alaska has pushed forward from the end of 2018 to the second quarter of that year] because then we can really combine all of the flights. The single operating certificate is the first milestone, but you have to actually be able to sell combined flights. When we get to that point, we can go more fully into the integration of the actual brand and product features. Some things we're already rolling out. Mood lighting is a small thing, but in the customer research, we found out it is not so small. It won't be the purple mood lighting that's on the Virgin fleets but a vibrant shade of blue will be across the new combined fleet. We've already started rolling that out on some of the 737 aircraft. We announced in January we were going to offer free movies, and [in August], we will extend that to all of the Virgin flights, as well. Some of the more "hard product" items that have more lead time we'll start in the second half of 2018 and continue into 2019.

BTN: What else are you doing to improve the onboard experience?

Sprague: We're doing some upgrades to our onboard music. We're still the only airline out there that has not only seat power but 110-volt and USB ports at every single seat in the main cabin. The big news, and it's a significant investment on our part, is that we're going to go to satellite Wi-Fi across the entire fleet. That will start next year. It's something customers increasingly are not just demanding but expecting: that they'll have a positive Wi-Fi experience.

BTN: How has this year been operationally?

Sprague: We had challenges this past winter. We had winter weather in the Pacific Northwest we haven't seen in 20 or 30 years. We have a lot of tight processes around on-time performance, which is why we've been the most on-time airline for seven years in a row, and we're tracking better here as we're wrapping the summer months. Airport congestion and some of these challenging weather situations have stretched us, but we're working hard and the team is very focused on making the very best possible operational experience. With all the growth, not just at Alaska but a lot of other airlines, airspace congestion is getting to be a real issue. There's plenty of airspace out there. It's how we use it that needs to evolve. Our air traffic control has not modernized at all in the last 40 or 50 years. We think [the proposed nonprofit] structure would be a way to accomplish a more modernized air traffic control system with safety enhancements and big-time efficiency enhancements.