American Airlines had been winding down its partnership with Alaska Airlines. American viewed Alaska Airlines as a competitor once Alaska acquired Virgin America. They emphasized the substantial route overlap rather than the unique contributions of each airline.
Now they’ve done a 180 degree turn. American sees Alaska’s strength up and down the West Coast and within the Pacific Northwest as complementing their biggest domestic route weakness. They see Alaska feeding their international flights at LAX, and partnering in Seattle opening he possibility of flying to Bangalore, India (and getting access to Alaska’s corporate clients in the Bay Area and Seattle doing computer programming business in the region).
For American customers the new partnership means:
- Earning miles and elite qualifying miles when flying Alakka
- Being able to continue redeeming miles on Alaska (which I find often has better premium cabin availability than American)
- oneworld elite recognition when flying Alaska (and possibly more to come)
- An American Airlines flight to India
For Alaska customers the new partnership means:
- Earning miles and elite qualifying miles when flying American
- Being able to continue redeeming miles on American (when there’s availability)
- Elite recognition when flying American
- A much bigger route network within and from the U.S.
Several observers have suggested the new partnership could be prelude to a merger. I do not see American able to pull that off. Their share price is too low to buy Alaska with stock, and their debt burden too high to do it with cash. And if they were going to merge they would be doing that now while they’re still certain that the current President is in office, meaning the current Departments of Transportation and Justice remain in place. A new administration is likely to take a firmer stance on anti-trust enforcement.
However the first place I’d go in predicting the future is actually devaluing of Mileage Plan the Alaska Airlines frequent flyer program. That’s the first thing many readers raised when the news came out, and they’re right to be worried.
- Alaska Airlines Mileage Plan still awards miles based on distance rather than fare paid. An Alaska Airlines analysis showed 79% of customes do better under a mileage-based program than a revenue-based one.
- Alaska charges fewer miles for the best awards Alaska already partners with many oneworld airlines that American partners with and premium cabin awards on partners are generally less expensive, often much less expensive.
- Alaska makes it easier to earn elite status with no minimum spend requirement and fewer miles flown.
A majority of non-elite frequent flyers who currently credit miles to American would clearly be better off crediting miles to Alaska – they earn more miles and it takes fewer miles to claim the best awards. Indeed, American Gold and Platinum members are often better off crediting to Alaska Airlines, too, for the more generous mileage-earning, more generous award chart, and for elite benefits.
Not only does Alaska make it easier to earn status for most customers, once they’re in oneworld that status will be recognized by American. Currently American Airlines Main Cabin Extra is available at time of booking not just to their own Platinum members but also to oneworld sapphire members (presumably the equivalent of Alaska MVP Gold). American Platinums cannot bank on upgrades. The key benefit is extra legroom coach seats. But Alaska elites will be entitled to those, too.
Alaska’s much more generous loyalty program would be a problem for American, drawing away customers, so we can assume that it was a stumbling block in the partnership. Therefore, since the partnership is moving forward they must have resolved the stumbling block.
Other concerns are that Alaska’s generous award chart (and stopovers even on one way awards) rest on the bilateral partnerships they have with each airline partner. Building a partnership through oneworld means adding a few carriers they do not currently partner with (e.g. Malaysia Airlines, S7); adding awards they do not currently support (many partner awards are limited to routes touching North America); and rationalizing their award pricing in all likelihood. Once they revisit award pricing and make it more universal it can only go up, not down.
There are also concerns whether Alaska can maintain all of its non-oneworld airline partnerships once it joins oneworld. There are plenty of oneworld airlines that navigate this, including American which partners with airlines like Etihad and Air Tahiti Nui. oneworld rules here seem more lax than Star’s, though there are some partnerships between Star and oneworld carriers such as Air Canada and Cathay Pacific (over certain routes) as well as Singapore Airlines and Malaysia Airlines (which used to be the same airline). Partnerships with carriers like Icelandair should be unaffected. If there’s a question it might be how extensive their partnership with Singapore can be.
For nearly 20 years I’ve been writing that opportunities that are significantly better than average in the industry don’t last. We don’t always know when an opportunity will end, just that it’s likely to. Alaska Airlines has a loyalty program that is more generous than peers. They say it’s a benefit to their bottom line, since they stand out from competitors and engender loyalty which is especially important fighting off Delta’s onslaught in Seattle. However oneworld will also benefit their bottom line (they believe) and their partner American will also help them ward off Delta in Seattle via access to an international and nationwide route network.