Alaska Air Group Inc’s (ALK.N) plan to buy Virgin America Inc (VA.O) makes the company a more attractive partner to Asian airlines looking for extra revenue from connecting passengers to flights within the United States, industry executives and experts say.
Foreign airlines could market Alaska Air’s U.S. flights to their customers in Asia and take a commission for those sales – a common airline practice called code-sharing. Travelers from Asia would earn frequent flyer miles under their preferred airline’s loyalty program even while traveling on Alaska Air.
Seattle-based Alaska Air said its $2.6 billion purchase of Virgin America, based in California, gives it 22 percent of seats on North America flights from the U.S. West Coast, more than any other airline. California was the No.1 U.S. destination for visitors from Asia in 2014, according to U.S. Commerce Department data.
“We’ll be a very desirable partner for these international airlines,” Alaska Air’s Chief Executive Officer Brad Tilden said on an investor call Monday.
The company’s effort to woo Asian airline code-sharing partners comes as Delta Air Lines Inc (DAL.N), United Continental Holdings Inc (UAL.N) and American Airlines Group Inc (AAL.O) are competing more aggressively with Asian airlines for trans-Pacific passengers. Each of the three carriers said in the past month that it intends to add a route to China.
The Alaska-Virgin deal is “definitely a positive” for independent carriers abroad – those who are not in marketing alliances with the three big U.S. carriers, said Joel Chusid, the U.S. executive director for China’s Hainan Airlines Co Ltd (600221.SS).
“With Alaska, we’re helping each other. There’s no competition,” Chusid said in an interview. When Hainan’s other U.S. partner American started flying to China, he said managing the relationship “became a lot trickier” even though their code-share remains in place.
American, Delta and United declined to comment.
Many foreign airlines already market Virgin America’s or Alaska Air’s flights.
But the merger opens up new opportunities, said John E. Jackson, vice president of passenger marketing and sales for the Americas at Korean Air Lines Co Ltd (003490.KS), which shares codes with Alaska Air and has a more modest arrangement with Virgin America.
Industry executives said foreign airlines will likely wait to see how the merger is executed before undertaking what could be long processes of structuring new code-sharing deals and getting regulatory approval for those agreements.
Source: Reuters
