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Alaska Airlines Could Cash In on Amazon's HQ2 Decision

By Adam Levine-Weinberg – Nov 18, 2018 at 11:50AM

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The Seattle-based airline will probably be the top option for Amazon employees shuttling between the company's main headquarters and its new campuses in New York City, Northern Virginia, and Nashville.

Earlier this week, (AMZN -1.88%) made its long-anticipated "HQ2" decision. The e-commerce and tech powerhouse confirmed recent rumors that it will split its second headquarters between New York City and Northern Virginia. Both locations will get 25,000 new high-paying jobs. More surprisingly, Amazon announced that it will also set up a new operations center with a staff of 5,000 in Nashville.

Given the scale of Amazon's planned hiring, the HQ2 decisions will have a significant impact on the economies of these regions. Furthermore, other businesses that provide services to Amazon may benefit from its East Coast expansion. One of those winners could be Seattle's hometown airline, Alaska Air (ALK -0.96%).

Seattle's top two airlines square off again

While videoconferencing technology has lessened the importance of face-to-face meetings, the opening of two new East Coast headquarters campuses and a new operations center will undoubtedly lead to more corporate travel. There are two main options for Seattle-based corporations like Amazon: Alaska Airlines and Delta Air Lines (DAL -0.28%).

Alaska Airlines was historically the dominant airline in Seattle, providing a wide array of point-to-point services from its main base of operations. However, since 2013, Delta has become a formidable rival there, having launched a competing hub.

Both Alaska and Delta offer nonstop flights from Seattle to New York City, Washington, D.C., and Nashville, checking the most important box for Amazon. Beyond that, the two carriers have different strengths and weaknesses.

An Alaska Airlines plane flying over clouds

Amazon's big East Coast hiring spree will help Alaska Airlines. Image source: Alaska Airlines.

Alaska remains the largest carrier in Seattle by a wide margin, with about 300 daily departures to 90 destinations. Delta Air Lines' footprint in Seattle is about half that size -- but it can provide connecting service to virtually anywhere in the world. It also offers nonstop flights from Seattle to many of the top business destinations in Europe and Asia, whereas Alaska Airlines doesn't fly beyond North America. Last but not least, Delta happens to be the No. 1 carrier in New York.

D.C. is the key

Alaska Airlines' smaller route network means it will never capture 100% of Amazon's business. However, it can offer the best travel arrangements for Amazon employees shuttling between the company's Seattle headquarters and its new facilities, primarily because of its position at Washington, D.C.'s Reagan National Airport.

For the most part, airlines are limited to shorter-haul routes at Reagan Airport, but there are a limited number of slots that permit transcontinental flights. Alaska holds such "beyond-perimeter" slots for five daily round trips, including two daily flights to Seattle.

No other airline can fly nonstop to Seattle from Reagan Airport, the most convenient airport in the region. In fact, Reagan Airport will be within walking distance from Amazon's Northern Virginia offices, thanks to a new pedestrian bridge being planned. By contrast, other airlines' nonstop flights to Seattle use Washington Dulles International Airport, which is about 30 minutes away by car with no traffic, or Baltimore-Washington International Airport, which is even further away.

Travel times to Dulles and BWI during rush hour or by public transit are significantly longer. As a result, Amazon is likely to have a strong preference for the two Alaska Airlines nonstops from Reagan Airport when shuttling employees between its Seattle and D.C. offices.

Small but mighty

Alaska Airlines isn't as big as Delta Air Lines or the other legacy carriers, but it has a good amount of service where it matters most for Amazon, even beyond its monopoly on the Seattle-Reagan Airport route. For example, Alaska now operates three daily round trips between Seattle and New York's JFK Airport, up from just one earlier this year. It also flies to Newark Airport, but that airport is further from Long Island City, where Amazon's New York headquarters will be located.

Meanwhile, Alaska Airlines offers ample service from New York and Washington, D.C., to the San Francisco and Los Angeles areas, both major tech hubs. It even has coveted beyond-perimeter slots for daily round trips to San Francisco and Los Angeles from Reagan Airport.

All of these factors put Alaska Airlines in good shape to see a significant uplift in traffic and perhaps fares on some of its key transcontinental routes. That should add to the company's turnaround momentum over the next several years.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adam Levine-Weinberg owns shares of Alaska Air Group and Delta Air Lines. The Motley Fool owns shares of and recommends Amazon. The Motley Fool owns shares of Delta Air Lines. The Motley Fool recommends Alaska Air Group. The Motley Fool has a disclosure policy.

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