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What Alaska’s CEO is saying about the Virgin America merger

by on Mon April 25, 2016 • 5 Comments
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Alaska Airlines is acquiring Virgin America, and that has a lot of loyal Virgin America fliers concerned.

Virgin America is the only airline in the U.S. with on demand video at every seat, just 8 extra roomy first class on every flight, and that special Virgin flair for service make it like no other airline.

So is Alaska going to keep those signature elements alive when it buys Virgin?

Alaska has a award winning service, but Alaska’s planes don’t have video screens….

cabin_exp1

Instead they will rent you a video player to stream movies and shows over Wifi (or you can use your own phone or tablet).

cabin_exp4

Alaska’s first class cabins have up to double the seats that Virgin America does, but they have just 36 inches of legroom and no footrests, compared to 55 inches of legroom on Virgin America.

If you’re paying for first class on Virgin, you know there’s no similar alternative unless you pick JetBlue on its long flights from New York to California.

On the plus side, Alaska lets its elite members upgrade to first class for free when space is available, while Virgin doesn’t offer free upgrades.

Here’s what Alaska’s CEO had to say on its earnings conference call with investors last week…

“The biggest challenge is going to be bringing the customers together, and that’s what we’re focused on.

And that’s why we’ve talked a lot about the brand. We’re going to go into this with a humble approach. We’re going to look at both product sets, the tangible product features. And we’re going to look at Virgin’s approach, look at Alaska’s approach in over 12 or 18 months, make a decision of what’s best for our collective customers.”

Translation: Alaska knows Virgin passengers are a different breed and nothing is going to happen quickly. They’ll at least try to consider the Virgin way.

“Virgin America and Alaska share similar philosophies about building alignment with and taking care of our people and about putting customers first. Both of us run strong operations. We’re both recognized for our terrific customer service. We both have a great onboard product, and we have two of the youngest and most fuel-efficient fleets in the industry.”

Translation: Alaska thinks its onboard product is comparable to Virgin America’s for many flights – which means streaming video to your iPad might be ‘good enough.’

“We are starting to look at the transcon service out of San Francisco and L.A. to JFK. In particular, the product offering is different than what we’ve got. But it will be complex analysis. There’s RASM implications, there’s loyalty implications, there’s countless implications. And we’re going to try to do this in a way where we are known for innovation, we’re known for great service, we’re known for low fares.”

Translation: This is where the rubber meets the road. Alaska is trying to figure out if it can move away from the Virgin seat layout without killing off the golden goose of Virgin’s best customers.

It sounds like Alaska is hoping that having Virgin’s extra large first class seats and video at every seat might not be necessary for the short flights up and down the West Coast, but for the long flights to New York it isn’t sure how much it will lose if it goes with a more standard layout. 

“And for the analyst community, we’re known for making money and making returns. So, we’ve got – we have a work cut out for us but that’s where we’re going to be thinking about.”

Translation: Virgin didn’t make the kind of profit Alaska did, so things Virgin does that are less profitable will get a lot of scrutiny, and that’s not great news for some of the softer things Virgin offered.

At the end of the day, this merger is about keeping Alaska a strong profit generator, and Alaska things giving people up and down the West Coast more flights with one airline will help that.

Richard Branson wasn’t mentioned at all on the call, but he does hope Alaska takes Virgin to heart: “The important thing now is to ensure that once Alaska witnesses first-hand the power of the brand and the love of Virgin America customers for our product and guest experience, they too will be converts and the US traveling public will continue to benefit from all that we have started.  ”

If you’re a Virgin customer, make your voice heard that it will take more than a name to keep you loyal, but be pragmatic and know Jet Blue will fight hard for your business where it can.

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5 thoughts on What Alaska’s CEO is saying about the Virgin America merger

  1. David Wright

    I like the idea of Alaska using Virgin America aircraft for cross country trips (all of them not just LAX/SFO – JFK) and it’s current fleet for 3.5 hour or less flights.

    Reply
  2. Hugh Devlin

    Alaska Airlines has shown travel safety is their top priority. This business practice improves reliability. Because of this, when I travel, Alaska Airlines is considered first.

    Reply
  3. James

    What will happen with Virgin America Visa card holders? How will our mileage points translate across to Alaska? Will our Visa cards stay in place or transfer to Alaska?????

    Reply
    1. MileCards.com

      @James – No formal word – but our guess is your miles get migrated over to Alaska accounts at some point. And as for the credit card account itself – it depends on whether Bank of America decides to buy the account portfolio – in which case you may not need to apply for a new card. If they don’t, you might need to apply for a new card at some point.

      But probably 2 years out before any of this – and your miles are safe.

      Reply
  4. bob

    The deal is Virgin America had such a limited amount of routes that you really had to like them to fly them. If you didn’t, there were plenty of other airlines flying the same routes with more convenient scheduling. So Alaska has to own up to the realization that trying to compete with the same product as offered by United or Southwest, but with much less frequency, is a loser.

    Reply

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