In the past year, Seattle-based Alaska Air Group (NYSE:ALK) acquired smaller West Coast rival Virgin America and made plans to retire that brand. Over a 10-year period, Virgin America has built up a loyal customer base, particularly in the Bay Area, and many of those fans have been worried that Alaska Air would take away the amenities they've come to love.
But Alaska Air isn't following the legacy-carrier playbook and removing perks that used to be free. Instead, it's mimicking JetBlue Airways (NASDAQ:JBLU) by trying to make the in-flight experience even better.
Alaska Air wants to keep the best of Virgin America
It wasn't much of a surprise that Alaska Air decided to retire the Virgin America brand. It's far more efficient in terms of marketing and crew scheduling to operate under a single brand. But Alaska Air doesn't want to throw away the customer-pleasing aspects of the Virgin America experience. Where possible, it wants to incorporate them into its own Alaska Airlines brand.
For example, Alaska Airlines plans to play music in its gate areas and during the boarding process. It will introduce mood lighting across its entire fleet -- blue to match the Alaska Airlines color scheme, instead of pink or purple for Virgin America. It also rolled out "free chat" on Alaska Airlines flights earlier this year, giving customers free in-flight access to iMessage, Facebook Messenger, and WhatsApp on their phones.
Of course, some amenities will be changed. For example, Alaska Air will gradually replace Virgin America's luxurious first-class seats with smaller seats that are more typical for domestic first-class service. But since each Virgin America plane has just eight first-class seats, this change will affect a relatively small number of customers.
New features on the way
Contrary to some customers' expectations, Alaska Air is continuing to roll out new amenities and extending the availability of existing ones. Last Tuesday, the company announced that it will equip its full mainline fleet with satellite-based Wi-Fi by early 2020.
In recent years, JetBlue Airways customers have discovered the benefits of satellite-based Wi-Fi. JetBlue's "Fly Fi" system delivers much faster connections than other airlines' air-to-ground Wi-Fi. Furthermore, there is so much bandwidth available that JetBlue has made in-flight Wi-Fi free, whereas other carriers tend to charge high prices for Wi-Fi to ensure that most people don't use it.
Alaska Airlines' new in-flight Wi-Fi system will deliver similar benefits, with a twentyfold increase in bandwidth, gate-to-gate connectivity, and service available outside the continental United States. While Alaska Air doesn't plan to copy JetBlue by making in-flight Wi-Fi free, it did state that prices will be lower than what it charges for the older, slower system currently available.
In addition, Alaska Air announced that is has enabled free chat and free movies on Virgin America flights. Both of those amenities have been available on Alaska Airlines since earlier this year.
Gearing up for more competition
For many years, Alaska Airlines didn't face much competition. It was the dominant airline in the Pacific Northwest, with hubs in Seattle, Portland, and Anchorage. Most other airlines didn't pay much attention to the region.
However, since 2013, Alaska Air has been in a brutal competitive battle with Delta Air Lines in Seattle. More recently, the Virgin America deal gave Alaska Air a sizable footprint in San Francisco overnight, while significantly expanding its Los Angeles-area operations. In other words, the company now faces a lot more head-to-head competition than it did five years ago.
This situation is pushing Alaska Air to differentiate itself from the legacy carriers -- just as JetBlue has done. (JetBlue was launched in New York, so it has faced plenty of competition since day one.) Alaska Airlines and Virgin America customers will be the real winners. They could benefit from even more complimentary perks in the coming years as Alaska Air works to gain market share from its larger rivals.
Adam Levine-Weinberg owns shares of Alaska Air Group, Delta Air Lines, and JetBlue Airways and is long January 2019 $10 calls on JetBlue Airways. The Motley Fool owns shares of and recommends Facebook. The Motley Fool recommends JetBlue Airways. The Motley Fool has a disclosure policy.
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