Alaska Airlines and American Airlines announced some big news this morning. First, they’re forming a West Coast, two-carrier alliance with more codeshares on international routes from Seattle and Los Angeles. That includes new routes from Seattle to London and Bangalore that American will launch later this year. Cue the end frequently revisions in recent years to their previous non-alliance partnership.
Second, and what I initially latched onto, is news that Alaska intends to eventually join the oneworld Alliance in 2021. That is a big shift for an airline that has long praised its independence. Alaska has finally given in.
I had the chance to speak to Brett Catlin, Alaska’s Managing Director of Network, Schedule, and Alliances, and ask him some follow up questions on what this means for the future of Alaska Airlines, and in particular how it will impact their popular Mileage Plan loyalty program. Obviously there is a lot they don’t know. Some of what they do know he can’t tell me. But I find it helpful to hear how executives respond and then I can try to infer where things might be going next. I’ll be paraphrasing Brett’s responses, and I’ll try to be clear where I’m making a guess.
Changes to Earning Rates
Alaska fully intends for Mileage Plan to remain a mileage-based loyalty program without changing to the revenue models that other U.S. carriers have adopted. That was clear from Brett. He also pointed to a year-long promotion launched last week that offers a minimum of 10,000 miles (round-trip) when you book an international trip on Alaska’s global partners.
He emphasized several times that management intends to continue offering a “generous” loyalty program to Mileage Plan members, which also applies to some of the points below.
Changes to Redemption Rates
I pointedly asked about whether these announcements and joining a formal alliance might impact their current award charts. Alaska is generous with stopovers on award travel but also makes things difficult by not allowing you to combine more than one partner on the same award. Stopovers might make Alaska look too generous (but see above). A limit of one partner per award seems to contradict the spirit of an alliance.
Brett indicated their desire to make it easy to redeem miles without confusing the customer, that they shouldn’t have to flip between multiple pages. I gathered from this statement that Alaska intends to develop a unified award chart that could apply to a mix of partners as long as you’re traveling from point A to point B. The irony is that all the other U.S. carriers have abandoned such charts just as Alaska is creating one.
However, I also think it’s possible that this unified award chart would be limited to oneworld members. We might also see different rules for awards involving oneworld from those that don’t. This is not unheard of. Many carriers adopt different charts for their alliance and non-alliance members. The difference for Alaska is that in the past all of their partners were non-alliance, so it’s kind of cool to see what they’ll come up with as they make these decisions for the first time. Again, Brett did not say anything about this being management’s plan, only that they desire to make things simpler than they are now.
Changes to Elite Status
Here again, I was concerned about Alaska being too generous relative to American Airlines when it came to awarding status. Alliance members can set their own rules, but when two are in the same geographic region that might create tensions if they have very different philosophies.
But I was told by Brett that Alaska wants to continue with its three-tier elite structure: MVP, MVP Gold, and MVP Gold 75K. There was a suggestion that these might align to oneworld’s three priority tiers: Ruby, Sapphire, and Emerald. But there is also going to be a lot of discussion in the months ahead. Things might change. Even if we aren’t so lucky to see all 75Ks matched to Emerald, being part of an alliance will at least make it easier to offer reciprocal benefits like priority boarding and free checked luggage on partners. This is an area where Alaska has faced challenges in the past: negotiating on its own with each partner has often meant these benefits are narrowly defined, vary widely, and may be unevenly enforced.
I am not too worried about seeing a big change in how status is earned. Think about it this way: MVP Gold 75K already requires 90,000 miles to earn if you include partners, which is not that far from the 100,000 miles that many carriers used to require for their top tier. Even today, under revenue-based programs, carriers give preference to flights on their own planes, which is not that different from Alaska lowering its elite qualification requirements when you earn only miles on Alaska flights.
Actually, Alaska’s lower earning thresholds are hard to hit because you can’t mix and match. It’s literally 75,000 miles all on Alaska-operated flights. You can’t fly just 30,000 miles, say that counts double, then top up the rest with partner flights. If you think status is going to be easy to earn with all these new partners, think again.
Overall Network and Business Implications
Brett was very excited to talk about the more immediate West Coast alliance with American Airlines. This is a game-changer for the airline as far as negotiations for corporate contracts and other business matters that we passengers don’t always think about. Consider that Amazon and Microsoft, two of the five biggest U.S. corporations, are both in Alaska’s backyard. There’s lots of money, lots of people, and lots of travel.
If you are negotiating a corporate travel agreement with an airline, would you choose Alaska or Delta? In the past, Delta was sort of the only option for Seattle companies who wanted access to international routes even if you had separately determined that Alaska had the better domestic network. But look more broadly.
The entire West Coast is full of businesses just like the ones in Seattle. Google, Facebook, and Alphabet round out the top five, plus you have Salesforce and countless others in San Francisco. Why should United have all the fun dominating that market if Alaska can help open it up for the rest of its oneworld partners? And why not provide American with the muscle it needs to win the three-way fight taking place at LAX?
Codeshare agreements with American are a huge deal. New, non-stop service from Seattle to Bangalore is a huge deal independent of who operates it, and now Alaska has access to it. There are lots of carriers that already provide non-stop service to London, including existing partners like British Airways. But only American provides the codeshare access that might be important for negotiating corporate travel. Once the oneworld Alliance membership comes online, Alaska’s negotiating position will be even stronger.