By Rajesh Kumar Singh
CHICAGO, Oct 2 (Reuters) - Alaska Airlines is taking its decade-long Seattle battle with Delta Air Lines overseas, deploying the widebody jets it acquired with Hawaiian Airlines to go head-to-head for premium international travelers.
For much of its history, Alaska made money by operating more cheaply than the large US network carriers and cultivating loyalty in the Pacific Northwest through a largely domestic network.
The carrier, based in a region that is home to Amazon, Microsoft,
Starbucks and Costco, as well as major Boeing operations, now wants to earn more from premium cabins, international travel and its loyalty program without sacrificing its cost advantage.
Alaska aims to triple its intercontinental destinations from Seattle to at least 15 by 2030 and become the city's largest international carrier. It plans to launch flights to Paris and Athens next year.
But about 92% of Alaska's scheduled intercontinental seats from Seattle in the 12 months through August 2027 are on routes Delta also serves nonstop, a Reuters analysis of Cirium data shows, placing nearly all that capacity in direct competition with its larger rival.
Alaska's shift is a bet that premium and international revenue can close a gap with larger rivals that its cost advantage alone cannot bridge.
In the first half, the carrier spent about 17% less than the average of Delta, United Airlines and American Airlines to fly a seat one mile, excluding fuel, a Reuters analysis of company filings found. But it generated roughly a fifth less revenue per seat mile, leaving it less room to absorb the fuel-price shock tied to the Iran war.
"The airlines that actually have high cost structures are the ones making the highest margins," Alaska CEO Ben Minicucci told investors on Tuesday. "We need to pivot."
The fight at the third-busiest airport on the US West Coast reflects a broader industry battle for premium, international and loyalty revenue, an increasingly important source of profits for the largest carriers. A similar contest between American and United is playing out at Chicago O'Hare.
Delta, which calls Seattle its "premier Pacific gateway," added Rome service this summer and plans a daily flight to Tokyo Narita from March 2027, a route Alaska already serves. It has also secured preferential access to 18 airport gates and opened two additional lounges.
For Alaska, the stakes are high as the fuel-price shock has squeezed its profits this year.
The company estimates international travel accounts for roughly 30% of airline revenue in Seattle, a pool of business it historically captured only in part.
It is adding Boeing 787s, premium cabins and lounges to build Seattle into a gateway to Europe and Asia.
Alaska said on Tuesday it plans to join American's revenue-sharing ventures across the Atlantic and Pacific. If regulators grant antitrust immunity and other approvals, it could coordinate fares and schedules and share revenue with American and its overseas partners on covered routes.
HOME-TURF ADVANTAGE
The pivot centers on Alaska's home market, where Delta has built a rival hub. The carriers ended their codesharing and frequent-flier partnership in 2017 as competition intensified.
Alaska, including Hawaiian, accounts for about half of scheduled airline seats in the Seattle area, roughly twice Delta's share. Across the oceans, the balance reverses: Delta has about twice as many scheduled intercontinental seats from Seattle over the same period, Cirium data shows.
Alaska plans to use its home-market advantage to narrow the gap, funneling travelers from across the West onto its long-haul flights.
More than half of passengers on Alaska's Seoul and Reykjavik flights connect through Seattle, the company told Reuters, while London and Rome depend more heavily on local traffic. In an interview, President and Chief Financial Officer Shane Tackett said connecting traffic has run above expectations on some long-haul routes.
Delta did not respond to a request for comment.
THE COST OF GOING GLOBAL
Going global will add aircraft, crews and operating complexity while putting Alaska into more direct competition with Delta. The risk is that those costs could arrive faster than the new revenue needed to pay for them.
Melius Research analyst Conor Cunningham said Alaska is focused on the right areas but faces near-term pressure from high fuel costs and heavier competition in key markets.
Alaska has limited financial room for a strategic misstep: it expects to end 2026 with net leverage — debt relative to earnings — at three times its long-term target.
Alaska's 787 operation has higher-than-normal crew expenses as it builds pilot and flight-attendant bases in Seattle. Tackett said those costs should normalize as more aircraft arrive and the operation gains scale.
Its first European summer showed how quickly the economics can turn. Stronger-than-expected premium demand to London helped the operation turn a profit in July before higher fuel prices erased that gain, Tackett said.
Alaska expects nearly 60% of revenue to come from outside the price-sensitive main cabin by 2030, up from 53% this year, a shift it is betting will make the business more resilient.
"What we've recognized is the winning airline of the future looks different than it did 10 years ago," Tackett told Reuters.
(Reporting by Rajesh Kumar Singh; Editing by Joe Brock and Jamie Freed)
