Recently, Delta Air Lines (NYSE:DAL) launched an ambitious domestic expansion in Seattle, challenging the dominance of Alaska Air (NYSE:ALK) there. In the last three months of 2013, Delta announced new or expanded service from Seattle to 10 cities: San Francisco, Los Angeles, Las Vegas, San Diego, Portland, Anchorage, San Jose, Vancouver, Fairbanks, and Juneau.
Alaska retaliated in December by announcing a series of new routes out of Salt Lake City, one of Delta's hub cities. The developing battle for market share in Seattle could put pressure on profit margins for contested routes.
However, the competition between Delta and Alaska may be moving in a more productive direction now. Both carriers announced new service out of Seattle earlier this week, but this time they seem to be focused more on broadening their networks rather than just attacking each other's top routes.
Moving toward self-reliance
Delta operates a growing international gateway in Seattle, and until recently, it relied primarily on Alaska Air for connecting traffic. However, last fall it made a radical move to become more self-reliant in Seattle. As noted above, Delta announced new or expanded service on 10 routes out of Seattle in the last three months of 2013.
For Delta, reducing its reliance on Alaska makes sense. As Delta adds international flights from Seattle, it will become more and more important to have well-timed connections. Since Delta and Alaska cannot coordinate flight schedules, it's useful to bring connecting flights "in-house" when feasible. Additionally, Delta can't control Alaska's onboard product; for example, all of Delta's mainline and large regional jet flights have an Economy Comfort section, but Alaska does not offer premium economy seats.
The next wave of new service
The biggest part of Delta's new expansion in Seattle is its plan to offer five daily nonstops to Phoenix starting in December. Delta will also add a second daily flight to Honolulu and start seasonal service from Seattle to Palm Springs, Jackson Hole, and Tucson then. Lastly, Delta now plans to maintain two daily flights to Anchorage for the month of September.
Most of the new flights Delta announced last fall targeted routes where Alaska Air had frequent service and more than 50% market share. By contrast, none of the flights announced this week will damage "core" Alaska markets. Aside from Phoenix, the flights will be once daily or even once weekly, and many of them are only seasonal flights.
As for the Phoenix-Seattle route, Delta is entering a crowded market. It will be the fourth carrier offering nonstop service between the two cities. As a result, its entry won't hurt Alaska very much. However, this route will further Delta's strategy to bring more of its connecting traffic "in-house" in Seattle.
Alaska Air also announced some new routes this week. Beginning in June, it plans to offer once-daily service to New Orleans and Tampa. In September, it will add a single daily flight to Detroit.
While Detroit is a major Delta hub city, Alaska's single daily flight doesn't represent a major challenge to Delta, which currently operates three daily nonstops on that route. Meanwhile, New Orleans and Tampa are significant leisure markets without nonstop service to Seattle today. These three flights will broaden Alaska's route network out of its top hub, providing more travel options for Seattle residents.
Alaska's Salt Lake City expansion (announced in December) seemed like a retaliatory action that did not otherwise fit into the company's strategy. By contrast, these new routes represent a welcome return to the long-term strategy of building a diversified network out of Seattle.
Foolish bottom line
Delta is mounting a serious challenge to Alaska Air's dominance in Seattle. While Alaska still has a far bigger presence in Seattle, Delta has two potential competitive advantages: a large route network and long-haul international service from Seattle.
The battle between these two airlines seemed to be turning unhealthy by mid-December. Each carrier seemed to be adding markets with a view toward disrupting the other one more than anything else. However, the most recent new service announcements suggest that the Delta-Alaska competition in Seattle is moving in a direction that will be better for both companies and for fliers.
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Adam Levine-Weinberg has no position in any stocks mentioned, and neither does The Motley Fool. 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.