Alaska Airlines To Join American Airlines Overseas Joint Ventures—Fewer Rivals May Oddly Mean More Flights

Alaska Airlines plans to join American Airlines’ transatlantic and transpacific joint ventures, sharing revenue with partners including British Airways and Japan Airlines and seeking permission to coordinate fares and schedules. Travelers could lose an independent competitor in Alaska, just like Air France, Delta and partners coordinate today along with United, Air Canada and Lufthansa among others. But this could also result in a stronger airline able to launch more flights. American was supposed to use Alaska’s domestic network to build its own long haul gateway in Seattle. That largely fell apart. Now post-merger with Hawaiian, Alaska is doing the flying itself, and American has a reason to help make it work. Alaska Will Join Two Joint Ventures Alaska Air Group has confirmed plans to join two existing joint businesses: Across the Atlantic: American Airlines, British Airways, Iberia, Finnair and Aer Lingus. Aer Lingus is part of the joint venture even though it isn’t a oneworld member. Across the Pacific: American Airlines and Japan Airlines Meanwhile, Alaska and Hawaiian are already part of the same airline group. It’ll bring a second independent U.S. airline company into these two antitrust-immunized joint ventures. This does not include joining American’s separate joint venture with Qantas. Currently, 85% of U.S. airline long haul capacity operates within immunized joint businesses. It pitches joint planning of routes, capacity and schedules; coordinated pricing, inventory and corporate sales; and access to more customers through partners’ sales networks. I covered the discussions in April, when reports of merger talks with American gave way to expanding their partnership. Later that month, American CEO Robert Isom told employees that they wanted to do more with Alaska. American Nearly Threw This Relationship Away This partnership long predates oneworld. The two airlines have partnered in some form for about 40 years. Yet after Alaska bought Virgin America, American increasingly saw them as a competitor. They cut reciprocal frequent flyer benefits in 2018. In fall 2019, they announced that reciprocal mileage redemptions would end in March 2020. As I wrote when Doug Parker explained the reversal to employees, American was looking at overlapping routes instead of where each airline had customers. Alaska had relevance in Northern California and the Pacific Northwest that American lacked. The two carriers reversed course in February 2020 following Delta taking LATAM away from American and Vasu Raja gaining responsibility for alliances and partnerships. American started treating Alaska’s customer base as something that could make its own network more valuable. Alaska would bring passengers to Seattle, and American would take them overseas. London and Bangalore were announced, and Shanghai was added to the plan. Bangalore and Shanghai never launched. London began in March 2021, last operated in October 2023, and was dropped completely. Alaska then acquired Hawaiian and gained the aircraft to pursue its own international strategy. They plan 15 long haul destinations by 2030, are already flying from Seattle to Tokyo, Seoul, Rome, London and Reykjavik and will be launching Athens and Paris in May. That’s a small Seattle long haul network, but it’s more substantial than what American delivered. What American Gets Out Of The Deal American already gets access to Alaska’s domestic network. Customers already get mileage earning and redemption, reciprocal elite benefits, and upgrades and extra legroom seating beyond what ordinary oneworld membership provides. And the West Coast International Alliance between the two carriers has capped, non-reciprocal revenue sharing, with American contributing West Coast long haul international revenue and Alaska contributing specific domestic revenue. It allows joint corporate contracting, but excluded joint capacity, schedule and network planning. American could participate economically in Alaska’s international growth. An Alaska booking currently doesn’t carry the same financial incentive as a booking within American’s immunized joint ventures. Bringing the flight into the revenue pool could make selling Alaska the right answer for American, even when American could route the passenger over Dallas or Los Angeles instead. They could build the schedule together. A codeshare puts another airline’s number on a flight while antitrust-immunized network planning can change when the flight departs, which connections it serves, how often it operates and which partner supplies the plane. The foreign partners would have more reason to sell Alaska. JAL’s strength selling to Japanese travelers and the European partners’ corporate and agency relationships can help fill Alaska’s aircraft from the other end. That strengthens the network American sells, too. A more useful West Coast network helps American compete for corporate travel accounts. A company choosing an airline agreement cares whether its employees can get where they need to go. AAdvantage and its credit card become more relevant when American can offer a credible network in places where it’s weak. There’s no public number for what this is worth. American gives Alaska a claim on the agreed pool in exchange for a share of Alaska’s contribution. The allocation formula, traffic diverted from American’s own flights, additional sales and operating commitments determine whether American comes out ahead and will be redacted in their DOT filings. American can gain some of the commercial benefits of a larger airline without paying to buy Alaska or integrating another workforce and operation. The Deal Makes Long Haul Expansion Less Risky For Alaska Alaska has customers in Seattle but has much less ability to fill a plane with customers who start their trip in Japan or Europe. Joining these deals gives the airlines that know those customers a stronger financial reason to put them on Alaska. It also reduces the risk that Alaska adds a flight only to have its existing partners aggressively compete away the revenue it needs. And partners share the risk. If a route loses money that’s not all on Alaska and can be offset by other carrier profits elsewhere across the Atlantic and Pacific. DOT Can Grant This Permission On Its Own—And It’s Been Granted To U.S. AirlinesBefore Even though antitrust is involved, this falls on the Department of Transportation rather than the Department of Justice, as an artifact of the Airline Deregulation Act and the agency’s historic authority to approve international airline agreements and exempt cooperation from antitrust law. An international approval also wouldn’t be blanket license for American and Alaska to coordinate purely domestic fares. While U.S. and foreign airlines are granted these approvals regularly, dating back to Northwest and KLM. KLM had purchased a stake in Northwest but couldn’t coordinate. Had foreign ownership restrictions not been in place, KLM could have acquired Northwest and antitrust would not have been an issue at all. The DOT had authority dating to when international fares were set collusively. They used it, in concert with achieving Open Skies treaties as part of U.S. foreign policy ends. Allowing U.S. airlines to have this antitrust immunity is unusual, but it’s been done with Hawaiian and Aloha Airlines in the past (under sepaarate authority) and: United and Continental. In 2009, before their merger, Continental received immunity with Star Alliance partners, including United. Air Canada, Continental, Lufthansa and United received approval for their four-way transatlantic venture. Delta and Northwest. DOT granted common immunity in May 2008 with Air France, KLM, Alitalia and Czech Airlines, before the Delta–Northwest merger closed. American’s JetBlue partnership (‘Northeast Alliance’) was different. Trump’s first DOT reached a settlement allowing American and JetBlue’s arrangement to proceed. It did not grant that domestic alliance antitrust immunity. Once the Biden administration came into power, its DOJ sued and won. Foreign competition reviews will also have to happen. And there are pilot contract scope issues on closer cooperation between the two airlines for long haul flying. There Are Potential Competition Problems With This Deal American Airlines is weak across the Pacific, and Alaska’s Atlantic flying is largely a rounding error. On some level is shouldn’t be objectionable when these joint ventures are so common. However, during the first Trump administration the Department of Transportation actually denied Hawaiian and Japan Airlines antitrust immunity. This is a broader proposal, and competition between Hawaii and Japan should still be factored so should Seattle – Tokyo where Alaska and JAL both operate independently today. Currently Alaska competes with British Airways on Seattle – London, and that would no longer be the case. What Do Customers Actually Gain? Passengers already get reciprocal mileage-earning and redemption between American Airlines and Alaska (and between American, Alaska, Iberia, etc). So a joint venture and even a codeshare have limited benefit to consumers on their own. This really only benefits consumers to the extent that it grows the total amount of flying done by the joint venture, which in turn is limited by things like gates, slots, and pilots as well as commercial opportunities. A joint venture can more efficiently allocate planes and crews to routes, and can be used as a vehicle for sharing slots as well. And that can mean more routes and flights, and a joint venture can also help with better-timed connections, sales support that puts enough passengers onto planes to keep a route operating, and deeper integration that helps with rebooking during irregular operations. A more robust Alaska international network could make Delta work harder in Seattle and give West Coast travelers a stronger alternative to United. Alaska is launching long haul service and planned growth even before discussions about joint venture membership were revealed in the spring. An antitrust exemption is what’s behind Alaska’s long haul strategy, but it could help make it successful enough to endure (and to grow further). So this could increase competition by bolstering the scale of this joint venture as it compete’s with United and with Delta’s, rather than just taking a competitor off the board and that has a consumer benefit – but it’s narrower than if Alaska wasn’t already in oneworld and a close partner of American. This Gives American Something To Ask Sean Duffy For Two days ago I asked what American wanted from all its praise of President Trump. I specifically pointed to expanding the Alaska relationship and DOT’s power to grant antitrust immunity to joint ventures. This – and this alone – may not be the reason why American has leaned hard into praising the President and Transportation Secretary even more than airlines usually praise their regulator and even more than companies in regulated industries praise this President. But the proposed joint venture addition is certainly consonant with such a strategy of effusiveness. Topics on this page