Why Does Alaska Air Want To Create a Focus City At LAX?

There’s two things I’m unsure of by Alaska Air’s latest moves.  First, I’m not sure why they want to establish a focus city at LAX.  Second, if those are their intentions, I’m not sure Costa Rica and Baltimore are going to accomplish it.
Alaska Air

Copyright Leonard Zhukovsky/Shutterstock

Alaska Air announced recently that they would add 4 flights a week each to San Jose, Costa Rica (SJO) and Liberia, Costa Rica(LIR).  These are routes that Delta already operates out of their LAX hub, a place that’s tough to compete in because of how many carriers already have a presence there, as well as a lack of substantial room for growth.
They also announced a new flight between LAX and Baltimore-Washington, Airport (BWI) to complement their LAX-DCA service.  The flight times actually make sense, with a red-eye to BWI and a 7:30am departure to LAX that lands before 11am.  But, this one also has a decent amount of competition.
Looking at the fares to Costa Rica, Delta doesn’t seem to command much of a premium for their non-stop options to SJO.  I see plenty of days where their fare is just over $500 round-trip, and numerous connecting options from competitors are plus or minus $50.  They do seem to command a higher fare to fly into LIR, with fares typically in the $900 range on dates I reviewed, and competitors again plus or minus $50.
If the plan is a fare war against Delta, that LAX-SJO route doesn’t leave a lot of room to cut into Delta’s profitability without affecting their own ability to make money.  LIR probably has a lot more fat on it, but you’re talking one route, 4 times a week.
LAX-BWI is already flown nonstop by United and Southwest, so that route certainly isn’t a dig against Delta.  United charges anywhere from $400 to $600 as a normal round-trip fare on this route.  Southwest’s yields on these routes must be great. While they offer some Wanna Get Away fares just under $400 round-trip, Anytime pricing on this route will set you back over $1,000 round-trip.  Looking two weeks out, the fares are still around $700 for a nonstop flight.  Though most Wanna Get Away options are gone, the nonstop is still for sale.
Alaska Air already has an existing partner in American Airlines at LAX, and they’ve done a good job of not stepping on each other’s feet.  So, I don’t see this “focus city” move as one that necessarily jeopardizes the existing relationship with AA.  I actually think that it’s possible American could provide feed for LAX-BWI given the regional jet operation they have out of LAX.  But, I don’t think the market for the Costa Rica flights is big enough for AA to be sending them business.
After spending an hour with this today, I guess I can’t fault Alaska for adding these flights.  They’re a successful airline that’s under attack by Delta, and it seems likely that they can make money operating these new flights.  They also announced new service from Seattle to Nashville, Raleigh-Durham and Charleston.  While none of those strike me as sexy destinations, I think they’re good routes to add to attract business travelers to Alaska, who does a really good job with their loyalty program.
It’s unclear to me how many spare aircraft Alaska has on hand to schedule new routes with.  They did place an order for 737 MAX airplanes from Boeing to go along with a couple dozen airplanes they’re still waiting for delivery on.  I’m interested to see where this plan goes.  I still think it might be easier to building profitable routes out of SEA than tackling LAX.  And, I imagine it won’t be easy to fill two flights to Costa Rica from LAX, even if it’s only 4 times a week.

The post Why Does Alaska Air Want To Create a Focus City At LAX? was published first on Pizza In Motion.

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16 Comments

  1. “I’m not sure why they want to establish a focus city at LAX.”

    Um, because they already have a HUB at LAX?

    http://www.alaskaair.com/content/about-us/newsroom/as-cities.aspx

    “With hubs in Anchorage, Alaska, Los Angeles and Portland, Oregon, Alaska calls Seattle home. ”

    http://en.wikipedia.org/wiki/Los_Angeles_International_Airport

    Anchorage, Baltimore, Guadalajara, Ixtapa/Zihuatanejo, Liberia (CR), Manzanillo, Mazatlán, Mexico City (ends June 3, 2015), Portland (OR), Puerto Vallarta, Salt Lake City, San José del Cabo, San José de Costa Rica , Seattle/Tacoma, Vancouver, Washington-National

  2. Alaska Airlines already has a focus city at LAX and LAX is Alaska Airline’s third largest port after Seattle and Portland with approximately 54 daily departures vs 45 for the bay area & 44 in Anchorage

    1. Booking Guru, I know they have presence at LAX, but didn’t realize they had 50 daily departures. I’ll have to look it up, but I assume most are to points North as opposed to East. Still doesn’t feel like a hub to me.

      1. the 54 daily departures are from the LA area actually, include SNA, Burbank, and Ontario. However, Alaska does have preferential gate rights at 6 of the 10 gates and then shares 4 gates with Delta. Although its not a huge hub, it’s a big focus city for Alaska. I think the issue is when you think of a hub you think of the major airlines such as Delta/United. Virgin Considers Los Angeles and San Fran hubs, and they don’t offer 40 daily flights from either location.

        1. Booking Guru, I think my lack of connection on a hub for them at LAX was that the vast majority of the traffic was heading to places like SEA. I agree with your analogy of Virgin and LAX/SFO.

  3. I have often wondered why all of Alaska’s Mexico City flights depart from LAX too. Maybe aircraft mileage issues?

    1. Asar, I would think a 737 could make it from SEA, but maybe the range on the 737-700 isn’t long enough. I need to go look that up.

      1. I presume there are more O&D passengers between Los Angeles and the Mexico markets than from Seattle/PacNW/Alaska so it probably makes sense to operate from the market with more O&D rather than overflying the LAX hub and forcing L.A. area passengers to backtrack to connect in SEA.

        1. Hua, I would imagine the same, just didn’t think they would have enough traffic just in their own to fill those routes.

    2. @Asar – Alaska Air fleet is mainly comprised of 737-800 and -900s which have the range to reach many destinations in Mexico from Seattle. Alaska has served a number of destinations in Mexico nonstop from Seattle including Mexico City, Cancun, Puerto Vallarta, Cabo, and others. However, they have dropped a number of routes to Mexico and have opted for 1 stop service via LAX/SFO/SAN as it gives them more feeder traffic and there is a larger O/D in other cities outside of Seattle

      1. Booking Guru, where are they getting the feed from? I think AA operates to all of the cities AS flies from LAX in Mexico. DL?

  4. I watched AS add SJC-BOI, SJC-RNO, SJC-all the Hawaiian islands, SLC and two mexican destinations, so was hoping that their next focus city would be there, but alas, that doesn’t seem to be the case. SJC needs some routes back East.

  5. Even though LAX may not generate a ton of O/D traffic, feeder flights from Seattle, Portland and the Bay Area just might make the difference. Currently our choices are AA, UA or DL. DL means a transcon to Atlanta with a 31″ pitch in coach. I’m also not interested in flying in 31’pitch seats through Houston or Dallas. Alaska does a great job covering the leisure market and loyalty in the Pacific NW runs deep. That extra inch of seat pitch makes a huge difference.

    1. Eric, I agree that AS does a good job keeping loyal customers. I still do question whether they can fill two Costa Rica flights, given the other options for West Coast folks.

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