Why alliance agreements helped expand Alaska’s network

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Sep. 17 2014, Updated 5:15 p.m. ET

New markets

Airlines with broader network coverage usually have a competitive advantage compared to other airlines. They’re able to provide passengers with a wider range of routes and destinations. In 2013, Alaska added 17 new markets. It started services to Salt Lake City, Omaha, Steamboat Springs, and Colorado Springs. In 2014, it launched more routes. It launched new routes from Salt Lake City, Seattle, and Portland. Alaska has added more than 200 new routes to its network since 2007.

Alliance agreements

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Airlines also get into agreements with other airlines. This allows them to expand their network. They can connect passengers from other airlines. All major U.S. airlines—including Alaska (ALK), Delta (DAL), United (UAL), American (AAL), Southwest (LUV), and JetBlue (or JBLU)—have alliances in one form or the other. It allows them to provide their customers with more services and routes. Alaska has agreements in three categories—frequent flyer agreements, codeshare agreements, and interline agreements. The table above provides details about the carriers that Alaska works with.

  • Alaska’s partnership with several domestic and international carriers allows it to run the most comprehensive frequent flyer program—Mileage Plan. It offers reciprocal mileage credits and redemption privileges.
  • Codeshare agreements allow marketing carriers to sell seats on operating carriers. They can sell them through a free-sale arrangement or block space arrangement. Under free-sale, seats are sold without any restriction. Under a block space agreement, a fixed number of seats are sold. Alaska primarily runs free-sale codeshares. For more information on the codeshare agreement refer to “Why mutually-beneficial co-operation agreements affect Airlines.”
  • Interline agreements allow airlines to provide a competitive, single-fare itinerary to customers traveling on multiple carriers to the final destination. Fares collected from the passengers are distributed to the partners according to the agreement.

As of December 2013, Alaska’s partners provided ~10% of total revenue—7.3% from codeshare agreements and 2.7% from interline agreements. Delta Airlines (DAL) and American Airlines (AAL) contributed ~3.8% and 2.6%, respectively, to the total revenue under codeshare agreements. As of the year ending September 2013, the partners contributed 16% of frequent flier award redemption—4% by Delta, 8.5% by American, and 3.5% from the rest of the partners.

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