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Low-fare competition is coming to the Pacific

January 26, 2017

An AirAsia X Airbus A330-300. (Image: Airbus)

With ultra-low-cost airlines like Norwegian and Iceland’s Wow wreaking havoc on transatlantic air fare competition, a similar battle could be coming to transpacific markets.

Malaysia-based AirAsia X said this week it has won a green light from the Federal Aviation Administration to fly to the U.S. – “the first Asian low-cost carrier to secure approval to operate scheduled passenger flights to the U.S.,” the company said.

However, the airline’s announcement did not include any specific destinations for the new service, nor did it suggest what kinds of fares it might charge. Like other low-cost carriers, AirAsia X offsets its bargain base fares with a variety of extra passenger fees for various amenities and services.

AirAsia X said it is “currently considering flights to several U.S. states including Hawaii as part of its route expansion plans.”

The carrier’s CEO, Datuk Kamarudin Meranun, called the decision “a major milestone” for AirAsia X. He added that the airline has also applied to U.K authorities to resume service to London.

AirAsia’s network covers 120 destinations. (Image: Air Asia)

AirAsia Group flies from its Kuala Lumpur base to more than 120 destinations in the Asia Pacific region, and it offers customers a mobile app, in-flight Wi-Fi, and an easy connecting service it calls Fly-Thru.

“Fly-Thru allows guests to seamlessly connect to anywhere within AirAsia’s wide network with just one stop at Kuala Lumpur, Malaysia – Asia’s No. 1 low-cost carrier hub – and other convenient transit hubs in Thailand and Indonesia, without having to pass through immigration, and with their baggage checked through to the final destination,” AirAsia X said.

AirAsia X uses an all-Airbus wide-body fleet of A330 -300s, configured with 12 Premium Class flat-bed seats, and 365 economy seats in a 3-3-3 layout. Seatguru.com notes that the AirAsia X A330-300s have eight economy rows right behind the Premium cabin designated as a “quiet zone,” which cost extra. Why are those rows quiet? No kids under age 12 can sit there.

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Update on Alaska-Virgin talks with regulators

October 18, 2016

Alaska Airlines & Virgin America’s merger has been slightly delayed. (Image: Alaska Airlines)

A few weeks ago, Alaska Airlines and Virgin America said they were extending their anticipated date for winning Justice Department merger approval from late September to October 17. But the latter date has come and gone with no further word. So what’s going on?

According to media reports, the airlines are still involved in discussions with the Justice Department’s antitrust specialists. No one seems to think that DOJ will try to block the merger (according to TheStreet.com), but it may seek to impose some conditions on its approval.

Reuters, citing sources close to the talks, said that DOJ might require Alaska to terminate one or more of its existing code-share partnerships with other domestic airlines in order to gain antitrust approval, or at least to reduce the scope of that code-sharing to fewer routes.

Alaska currently has domestic code-sharing partnerships with Delta and American. Given the heated ongoing competitive battle between Alaska and Delta at Seattle, it’s unlikely that Alaska would be too upset about ending those code-shares. American might be another matter; last spring, Alaska and AA implemented a substantial expansion of code-sharing on domestic routes.

According to Reuters, JP Morgan analysts estimated that the Delta and American code-sharing partnerships bring about $350 million in annual revenues to Alaska.

Sir Richard Branson wants to keep the Virgin name alive in the U.S. (Photo: Nancy Branka)

Meanwhile, Sir Richard Branson told a Dallas TV station this week that if Alaska ultimately decides to fold Virgin America into the Alaska brand, he is likely to start up another new carrier with the Virgin name.

“I hope the Virgin America brand never goes away,” Branson said in an interview Dallas’ Channel 8 WFAA. “If Alaska decides to drop the brand – because we didn’t actually want the sale to happen – we’ll start again and Virgin America will very much back here.”

How likely is it that the Virgin American brand will survive long term? We’d love to hear your thoughts.

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What’s the deal with Alaska Virgin America?

October 1, 2016

Alaska Airlines & Virgin America’s merger has been slightly delayed. (Image: Alaska Airlines)

An announcement by Alaska Airlines and Virgin America Airlines about extending the timing of their proposed merger has some observers wondering whether the deal might have run into problems with the Justice Department’s antitrust regulators.

The two airlines said this week they have “agreed with the Justice Department” that they won’t consummate their deal until after October 17, unless DOJ clears it for an earlier date. Previously, the two airlines said they wouldn’t close the deal before September 30. “The extension gives the DOJ additional time to review the proposed merger,” the airlines said.

This naturally spurred some speculation about what might be going on. The Motley Fool, for instance, ran a story this week headlined: “Is the Alaska Air-Virgin America merger on the rocks?”

Over the past decade or so, the Justice Department has given the nod to much larger airline mergers, showing little or no antitrust concern over the market concentration they would bring. After Delta-Northwest, United-Continental and Southwest-AirTran easily passed DOJ muster, there was rising criticism of the government for not doing enough to protect consumers from industry consolidation.

DOJ forced American and US Airways to give up slots at key airports to win merger approval. (Image: Jim Glab)

Thus when the American-US Airways deal came along in 2013, DOJ got a little tougher, ordering the two airlines to give up slots and gates at a number of airports to low-cost carriers, “in order to enhance system-wide competition in the airline industry resulting in more choices and more competitive air fares for consumers,” the agency said.

But Alaska and Virgin said this week that in spite of the delay, they remain “confident they will address any concerns and obtain regulatory approval” for their merger, “given the airlines’ largely complementary networks, the relative size of the merger compared to past airline combinations, and both Virgin America and Alaska’s emphasis on customer service.” They argued that a combined Alaska-Virgin America will provide “more robust competition against the Big Four airlines, which control 84 percent of the domestic market.”

The Street weighed in with this: “It’s highly unlikely that regulators would scuttle the marriage of the two carriers, especially because there’s so little overlap in their routes. Other than competing on the Los Angeles-Seattle route and a smattering of routes out of San Francisco, the two airlines don’t compete at all. But a combined entity would dominate West Coast regional air travel, proving a moneymaking boon for already strong Alaska Air.”

Even The Motley Fool, in an analysis after its scary headline, concluded that “there is little reason to worry” about DOJ impeding the merger’s outcome. “There is no good reason for federal antitrust regulators to block it,” the publication said. It noted that since the deal was announced last spring, Virgin’s financial performance has “deteriorated,” but still, “Alaska Air doesn’t seem to be having second thoughts” about the merger.

So what do you think will happen? Will the deal go through as easily as we once thought? What’s the reason for the delay? Leave your comments below.

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