Green Banana

Delta, Alaska Air to expand marketing alliance

Delta, Alaska Air to expand alliance; speculation Delta could seek to acquire Alaska Air

November 14, 2008: 01:31 PM EST
NEW YORK (Associated Press) - Delta Air Lines Inc., which broadened its global reach with its purchase of Northwest Airlines, plans to expand a marketing alliance with Alaska Air Group Inc., a carrier that some industry observers have speculated Delta may have an interest in acquiring one day.
The marketing alliance expansion was scheduled to be announced Monday at a news conference at Seattle-Tacoma International Airport, where the chief executives of Atlanta-based Delta and Seattle-based Alaska Air will speak, according to an event advisory issued by the carriers.
Delta is the world's biggest carrier. Alaska Air operates Alaska Airlines and Horizon Air, which together serve more than 90 cities through their network in Alaska, Hawaii, the continental U.S., Canada and Mexico.
Delta's existing alliance with Alaska Air was launched in 2004, and there has been a relationship of more than 20 years between Alaska, Horizon and Northwest. Currently, code-sharing by Delta, including Northwest, extends to more than 100 markets served by Alaska Air, including Horizon, and code-sharing by Alaska Air extends to more than 30 markets served by Delta. Currently, Delta frequent fliers can book award tickets on Alaska Air flights that carry the Delta code.
On Monday, Delta will announce enhancements to those agreements, including plans for new service that would be supported by their code-sharing partnership, Delta spokeswoman Betsy Talton said.
Under code-sharing arrangements, one airline puts its name or code on a flight operated by the other, allowing it to sell tickets on the other's flights. The carriers, in turn, generally share that revenue. Code-sharing is considered a low-risk way for airlines to expand their networks without the added cost of more planes and employees.
Credit Suisse analyst Daniel McKenzie said in a research note in October that his firm has not ruled out the possibility of further merger and acquisition activity for Delta in the future. He said then that Alaska Air Group or New York-based JetBlue Airways Corp. "remain appealing targets, both with attractive assets and strategic positioning that would enable DAL/NWA to better compete with what we consider is an inevitable CAL/UAUA combination sometime down the road." Delta has not commented on the speculation.
Houston-based Continental Airlines Inc. and Chicago-based UAL Corp., parent of United Airlines, were said to have had discussions earlier this year, but they never announced a combination. Continental later said it would join a marketing alliance made up of several carriers, including United.
Both Delta and Alaska Air are coming off losses in the third quarter. For the three months ended Sept. 30, Delta reported a net loss of $50 million, or 13 cents a share, compared to profit of $220 million, or 56 cents a share, a year earlier. For the July-September period, Alaska Air Group reported a net loss of $86.5 million, or $2.40 per share, compared with profit of $81.8 million, or $2.01 per share, during the same period last year.
In afternoon trading Friday, Delta shares fell 25 cents, or 3.1 percent, to $7.92, while Alaska Air Group shares fell 30 cents, or 1.2 percent, to $24.99.

Tinpusher007

Purchasing Alaska in order to bolster DL in SEA and LAX could be a good thing. The there is B6. But I think somehow they would have to give up too much in NYC to make that happen. I also don't see the DOJ letting the world's biggest carrier aquire an LCC...though it would do everyone a favor to elimiate the duplication of routes out JFK even if it eliminated competition on said routes. Time will tell.

iahflyr

This would be a great thing for the new Delta. The Alaska pilots would also get a lot out of a merger or acquisition. Hope it happens.

Thrill

We would, would we?

The idea does not exactly excite me....

CVG767A

I'd rather see us start feeding SEA ourselves. We have over 800 airplanes in our fleet, and a bunch of additional DC9s in the desert. Isn't that enough to feed a hub?

Green Banana

You have to look at the money that will be lost competing with Alaska out of SEA. We have shown we will match or beat any set price out of our hubs, so it would be bloody. It may be cheaper to use that money to eliminate the competition by buying them and then have a monopoly. I am not saying I want this, just pointing out economics of it.

Flyformoney

That's funny Alaska is probably worth more than what Delta paid for Northwest all though that is not saying much. Last quarter Alaska had 1.2 Billion in cash and short term investments. I wouldn't read to much into this announcement. American tried to buy alaska back in the 90's.

CVG767A

If the premise is that we're feeding our international service, then we're not really competing. A ticket from GEG to SEA might be less expensive on Alaska, but we'd be selling a ticket from GEG to PVG or NRT.

Ferd149

Don't know how it's been looked at since 9/11, but the NWA CEO (pre RA) supposedly said we had a standing offer to buy Alaska and had so for years. However, no price had ever been agreed to. Code share is perfect! Let's leave it at that, I'll bet no one on "our side" wants to do this again any time soon.

Ferd

Tinpusher007

Point taken. However DL has already failed a number of times with "organic" growth/feed at LAX. Not that LAX and SEA are totally the same, but you get the point. Having the local market at SEA through a purchase of AS with their infrastructure and knowledge of the market already in place makes int'l expansion as well as feeding the int'l flights easier. AS also has a decent share of the LA-Mexico market which Im sure DL would love to get their hands on as well.