Alaska Airlines plans to close its New York base in September to reinforce its West Coast fleet, asking more than 100 pilots to relocate to California in a matter of months.
The airline acquired Virgin America in April 2016 for a reported $4 billion which grew Alaska into the fifth largest airline in the U.S., serving over 44 million passengers in 2017.
Both aircraft and pilots, which flew routes from JFK, Newark EWR and La Guardia, will relocate and deploy from West Coast hubs this fall. Prior to the merger, Virgin America competed with established airlines on this trans-continental route for over a decade, by advertising as the cool, alternative airline of Silicon Valley.
“This was a difficult decision — but a necessary one — based on the need to match our pilot staffing with the geographic areas on the West Coast where we deploy our aircraft every day. All of our JFK-based pilots are being offered the opportunity to transfer to either Los Angeles or San Francisco,” a spokesperson for the airline told CNBC via email.
Alaska currently operates five flights a day from JFK to both LAX and SFO, with lower service offerings from EWR. With all Alaskan aircraft diverting to the West Coast in September, flights could be decreased to one or two per day departing from San Francisco and Los Angeles and arriving at JFK and EWR.
Mid-continental and East Coast routes accounted for 4 percent of the Alaska’s flight composition back in 2013, which climbed to 10 percent after the merger. In that same timeframe, Alaska’s California presence has climbed from 15 percent to 25 percent in network composition, which could increase after the transition. Pulling pilots and aircraft from New York could potentially lower volume and weaken the company’s leverage in any future merger deals while lowering expectations of international growth into Europe and Asia.
Alaska now serves 115-plus destinations from seven hubs along the West Coast. The airline leads domestic seat share in Seattle, Portland and Anchorage. It ranks second in San Francisco and fifth at LAX. However, transferring its New York workforce westward might not lead to sustained growth in the region. United Airlines still accounts for more than 40,000 seats per day at SFO, nearly four times more than Alaska. At Seattle-Tacoma International Airport, Delta has increased its stake by offering 50-plus destinations including eight foreign countries. Alaska will also face tough competition down the road in Hawaii, as Southwest Airlines is launching a low-cost service from four California cities, including inter-island routes.
Many destinations in Mexico and Alaska that are already served by Alaskan Airlines from West Coast hubs are not oversaturated with direct flights from New York area airports. Popular Mexican vacations spots such as Puerto Vallarta and Los Cabos, have little or no direct flights from New York. There are also no domestic airlines offering direct service to Anchorage, Alaska from JFK or Newark. Only a seven-and-half-hour flight, a summer seasonal direct option to Alaska’s largest city could tap into the multi-billion dollar tourism sector which continues to grow in the Frontier State.
Alaska Airlines says its growth model consists of three parts, flying customers to desired locations for affordable fares, building loyalty through benefit programs and adding network depth and frequency. Alaska has promised the integration of Virgin America is ahead of industry standards and would be 85 percent complete by June of this year. However, pilots who are now Alaskan employees are still wearing Virgin uniforms, wings and flying Virgin branded aircraft.
