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Shrewd business behind Virgin America's Alaska move

Scott McMurren
A new airline's in town with an eye on opening Alaska up -- and bringing prices down -- for Lower 48 flights. A question-and-answer session with Virgin America CEO David Cush. Courtesy: Virgin America

There's a new airline in town: Virgin America now offers nonstop service between Anchorage and San Francisco six days a week. The flights leave Ted Stevens Anchorage International Airport at 12:50 a.m. (every day but Wednesday), returning at 11:55 p.m. (every day but Tuesday).

The airline carries the signature brand of Sir Richard Branson but is independently owned. Branson's group, Virgin Group, owns 25 percent of the airline, in accordance with U.S. laws regarding foreign ownership of U.S. airlines.

Virgin America cooperates with both Virgin Australia and Virgin Atlantic Airlines as part of the licensing agreement with Sir Richard's group. But for Alaska travelers, the most important development is the single flight between Anchorage and San Francisco, which will operate between now Monday, Sept. 9, 2013.

Virgin's entry into the market has shaken things up, particularly with the incumbent nonstop competitor, United. Fares have dipped below $250 roundtrip. Currently, United is offering the lowest fare, at $298 roundtrip. In fact, United currently is offering $99 southbound rates with no advance purchase. The return flight northbound on United's nonstop is $199 (thus the $298 roundtrip total). Fares change all the time--Virgin America and United have been hiking and dropping fares on a daily basis.

David Cush is Virgin America's CEO and is based at the airline's headquarters in Burlingame, Calif., near San Francisco International Airport. We caught up with him just after the first Virgin America flight departed Anchorage last week.

Q: Why did Virgin America start this new service to Anchorage?

Cush: We noticed the strong seasonal demand for flights into Alaska during the summer. In fact, last summer we saw there simply were not enough seats to accommodate travelers. As a business, it's great if we can take advantage of this spike in demand.

The other reason we chose Anchorage is that we were able to use an aircraft (Airbus 320) that otherwise would be on the ground overnight. Our scheduled departure from San Francisco International Airport is at 8:00 p.m., arriving at 11:55pm. The return flight, departing 12:55am, arrives back in San Francisco around 6:30am. It's a very efficient way of using our aircraft.

Q: What are some of the features that set Virgin America apart from the competition?

Cush: The RED in-flight entertainment system is the most advanced in the sky. The seatback system offers TV, movies and music. But I like the food and drink on demand. I think that's really important on an overnight flight for Alaskans. Instead of ringing the call button, you simply place your order on the seatback screen. Then, our team delivers it to your seat.

Another important component for Alaska travelers is the availability of in-flight wi-fi. Alaska Airlines offers the service as well (with Gogo Inflight) but United does not. And we compete with United Airlines on the nonstop service between Anchorage and San Francisco.

I think a key component also is the quality of service from our team. When you fly with Virgin America, we hope that you'll notice our "cool factor" with the staff.

Q: Virgin America offers service to other destinations beyond San Francisco. As part of your rollout this summer, you've offered some great fares to Austin, TX, Las Vegas, Los Angeles and Las Vegas. Are you making a concerted push for travelers to these onward destinations?

Cush: We really are focused on the point-to-point traffic between Anchorage and San Francisco. However, we estimate that between 20 and 30 percent of our travelers will fly beyond San Francisco to our other destinations.

Q: You've been the CEO at Virgin America for more than four years. But prior to that, you spent 20 years at American Airlines. What changes have you seen in the airline industry--and what do you expect in the future?

Cush: The airline industry has essentially been turned on its head over the past five to seven years. Before, the industry was highly fragmented with low barriers to entry.

Today, the industry is highly concentrated. The top three carriers (American, Delta and United) carry 75-80 percent of the traffic. There are no new airlines on the drawing board. The good news is that airlines will remain more stable and companies will invest in their products. The bad news is that travelers will have fewer options and fares will be higher.

Q: It appears Virgin America is pushing uphill to carve out a place in each market they serve. Each of your routes already is served by other carriers. What is your "strong suit" in serving today's demanding airline customer?

Cush: Our strong suit is the long haul. We don't have any monopoly routes--but our airline consistently ranks at the top in customer service surveys. (NOTE: Virgin America is the highest-quality major airline in the U.S., according to the 2013 Airline Quality Rating).

For example, we do very well in top markets like LAX-JFK. We're watching our competitors come in with features like lie-flat beds on the trans-con flight. That's nice, but it's not the overwhelming benefit that it is on longer international flights.

Q: Most airlines, including your competitors United and Alaska, have formed deep alliances with other carriers. Alaska works closely with Delta and American, while United is an international network carrier and member of the Star Alliance. Does Virgin America have any plans to affiliate with other airlines, especially in light of the proposed purchase by Delta of a 49 percent share of Virgin Atlantic?

A: The Virgin Atlantic alliance with Delta really doesn't affect us, since we're separate companies. But when the time comes, we'll probably tie up with another carrier. We're not against doing it.

Scott McMurren is an Anchorage-based travel marketing consultant who has lived in Alaska for three decades, spending much of that time traveling the far-flung corners of the state. Visit his website at www.alaskatravelgram.com or follow him on Twitter for breaking travel news.