Alaska Airlines and Delta Are at War Over Seattle

It’s a sunny afternoon in the Pacific Northwest, without a hint of wind. For me, that’s wonderful news. I’m sitting in the pilot’s seat of a Boeing 767 on final approach to Seattle-Tacoma International Airport. For the next three minutes, my job is landing this 200-ton aircraft safely. Keeping the plane in good enough shape to use it again would be a nice bonus too. But even on this still autumn day, I’m fighting to keep the 767 even.

The computer calls out my quickly dropping altitude: 1,000 ft., 900, 800. For most of the approach, a digital display guides me. But at 500 ft., I have to look outside. At 100, I cut the engines and pull the nose up, losing sight of the runway. This, I know from experience flying in tiny two-seaters, is a maneuver called a flare. It’s designed to slow my descent before touchdown, but understanding that doesn’t make it less scary. Suddenly there’s a bang followed by a terrible shudder. I think we’ve crashed. But I let the nose fall, switch to reverse thrust and hit the brakes. We land in one piece, if a little off the centerline. “Nice job,” says Captain Doug Israelite, an instructor pilot at Delta Air Lines. “Want to go again?” he asks, resetting the simulator.

My landing may have gone smoothly, but in the real world–which is headed into the frantic holiday travel season–Seattle-Tacoma International (Sea-Tac for short) is experiencing plenty of turbulence. It has become the battleground for the biggest fight in the U.S. airline industry. On one side is Alaska Airlines. Though nearly invisible on the East Coast, Alaska is the nation’s No. 6 airline by market share, shuttling to more than 100 destinations throughout the U.S., Canada and Mexico, mostly from its Sea-Tac headquarters. It’s succeeded by putting an emphasis on service. On the other side is Delta, which flies everywhere from Stockholm to Shanghai and is among the world’s largest airlines by passengers flown. It’s succeeded by getting bigger.

Until recently, Alaska and Delta were partners. Now they are at war, fighting for market share–and their clash has implications for passengers far beyond Seattle. For the past decade, air travel has gotten more and more miserable. Flights cost more. Passengers are grumpier. And delays are up. A lot of this has coincided with less choice for consumers as airlines consolidate. If anything is going to improve, challengers like Alaska are going to have to find ways to compete with much larger firms like Delta. From how much you pay to what it’s like to fly once you’re actually on board, the stakes couldn’t be higher.

Alaska traces its roots to 1932, when a fur trader named Linus McGee started flying passengers alongside his wares. Today, Alaska is an oddity in the airline business. It’s not a global mega-carrier like American or United. Nor is it an ultra-low-cost carrier like Spirit, which makes money by offering only the most basic service and charging passengers for every upgrade it can put a price tag on. Think of Alaska as the largest regional carrier around, with an ever expanding list of destinations.

Another oddity: Alaska’s customers actually like flying it. It was the first major carrier to sell tickets over the Internet, it regularly wins an annual airline customer-service award coveted by competitors, and it is buying special planes with nearly 50% more overhead bag space. (Bring on those Rollaboards!) In 2014, when U.S. carriers posted their worst on-time performance in years, Alaska had the second best numbers in the industry. Only Hawaiian Airlines, which benefits from terrific weather at its prime airports, did better.

Alaska is also remarkable because its business model defies physics. A successful airline demands one of two things. There’s scale, which brings the ability to serve lots of markets of all sizes. Or there’s rock-bottom pricing, sacrificing the passenger experience in the name of lower fares. Despite its small size and focus on customer service, Alaska Airlines keeps making money. In October, the company announced a record adjusted net income of $274 million for the third quarter of 2015. It also happened to be Alaska’s 26th consecutive quarterly profit. Consistency like that just doesn’t happen in this business, notorious for its boom-and-bust cycles.

Brad Tilden, Alaska’s 54-year-old CEO, is a Seattle native who has been in the top job for three years. He was trained as an accountant and once served as CFO, but he fell in love with aviation as a boy, around the same time he was on his way to becoming an Eagle Scout. Today he holds a private pilot certificate and owns a four-seater Cessna. His flying experience, Tilden told me, helps inform how he runs the company.

“Sometimes people can overcomplicate their life, and all they care about is strategy, or they spend a lot of time on things they actually can’t control, like competition, or fuel, or the economy,” Tilden says. “Sometimes you’re better off flying the airplane,” he adds, echoing a pilot’s maxim that calls on aviators to pay attention to operating their aircraft before all other duties. “You take care and do well with the things that are directly in your control.”

Unfortunately for Tilden, the biggest threat to his airline is entirely out of his control. It’s coming from 2,200 miles away, the Atlanta headquarters of Delta. Tilden’s counterpart there is Delta CEO Richard Anderson, a 60-year-old lawyer who started out as an assistant district attorney in Harris County, Texas. “I thought that was going to be my career,” he says. “But then I got married and had big student loans to pay off.”

Anderson got a job in Continental Airlines’ legal department. Working his way up the corporate ladder, he eventually left for Northwest Airlines, where he became CEO in 2001. He arrived at Delta in 2007, leading the company through a merger with Northwest.

Delta’s headquarters are littered with portraits of founder C.E. Woolman, who in 1928 joined four other financiers to start what would become Delta Air Lines, named for the Mississippi Delta over which it first flew. The modern Delta was born in 1991, when the airline acquired prized routes from the dying Pan Am. But by 2005, high fuel prices, labor costs and other issues conspired to send the airline into Chapter 11. There it remained until 2007. Since then, Delta has emerged as a powerhouse. Anderson now runs arguably the most respected airline in the world. It just had a record quarter, posting an adjusted net income of $1.32 billion–or more than 10% of Alaska Airlines’ entire market capitalization.

These two airlines differ dramatically. There’s the sheer size of Delta’s operation. Its 15,000 daily flights serve every continent save Antarctica; Alaska flies less than a fifth of that number and mostly in North America. While Delta posts remarkable on-time ratings compared with its similarly sized peers, it was still outdone by Alaska in 2014. Then there’s the fleet strategy: Delta owns or leases 800 aircraft, a hodgepodge of Boeings, Airbuses and McDonnell Douglases with an average age of 17.1 years. Alaska’s airplanes, all Boeing 737s, tend to be newer, with an average age of 9.6 years. Delta executives say flying older airplanes helps keep costs down, but it’s not exactly something you might put in the company brochure. Finally, there’s customer service. While Delta has upped its game significantly in recent years, it’s Alaska that has won top honors eight years running in J.D. Power’s ranking of airlines for customer service.

Why compare them at all? Because three years ago, the $40 billion behemoth from Atlanta set its sights squarely on Seattle. Anderson walks me through the logic, but it boils down to one thing: Asia. (It helps to look at a map.) “When you fly from Los Angeles to Tokyo, you look down about two hours into the flight, and you’re going to be right over the top of Seattle,” Anderson says. He adds that Seattle “was served by a relatively small regional carrier that didn’t have regional jets of any size and didn’t serve much east of the Mississippi. So when you looked at that opportunity, it was a perfect business opportunity. It had just been overlooked.”

On Oct. 8, 2012, Delta announced a significant buildup of its international service via Seattle. But the long-term plan wasn’t immediately clear. Delta and Alaska were then close partners, with Alaska’s domestic traffic into Seattle feeding Delta’s flights to Asia and vice versa. In a joint press release, Anderson and Tilden both sounded upbeat. “Customers of both our airlines will benefit,” crowed Anderson. Tilden boasted about the “new flying options” the deal would mean for Alaska’s passengers.

The chummy mood didn’t last long. Delta began flying routes into Seattle that competed directly with Alaska. Alaska responded by cozying up to American Airlines and adding new destinations, including Delta stronghold Salt Lake City. The battle for Seattle was on.

To go after Alaska’s greatest strength–fiercely loyal customers–Delta poured millions of dollars into upgrades at Sea-Tac, including a new passenger lounge. It embarked on a marketing campaign branding itself “Seattle’s global carrier.” It also signed deals to fly Seattle’s professional football and soccer teams. (Alaska fired back by naming Seattle Seahawks star Russell Wilson as “Chief Football Officer.”) Delta soon claimed a significant chunk of market share. In September, 18% of Sea-Tac passengers flew on an airplane with Delta’s red chevron on its tail, up from 11% three years ago. Alaska and its regional affiliate now claim less than half of Seattle’s traffic.

In many ways, this has been a blessing for travelers–and a textbook example of the benefits of competition. Thanks to the rivalry between Delta and Alaska, flying out of Sea-Tac costs passengers nearly 10% less than the average fare at airports handling similar amounts of traffic. “With two healthy, strong competitors, we have excellent competition on airfares,” says Steve Danishek, a Seattle-based travel analyst. There’s an upside for the region’s booming businesses too: Both airlines are adding new nonstop routes, making it easier for employees at companies like Amazon and Microsoft to move about the country.

But the more heated the battle gets, the more chaotic Sea-Tac feels. The once sleepy airport set passenger records every month this summer, reaching a high point in August when 4.5 million travelers passed through its gates. Yet Sea-Tac isn’t designed to handle those numbers. “We are bursting at the seams at every corner of the airport,” says Ted Fick, CEO of the Port of Seattle, which oversees Sea-Tac. Fick says Sea-Tac’s 40-year-old international-arrival facility was designed to handle 1,200 passengers at peak. Today it’s dealing with about 1,800. “What that means is you have the privilege, after a 14-hour flight, of having to sit on the airplane for 30 to 45 minutes because we have nowhere to put you,” says Fick. He’s asking for $2 billion in upgrades. For now, more passengers will find themselves disembarking from their aircraft down stairways and onto buses as open Jetways become increasingly rare.

You might guess that the mighty Delta is destined to crush the comparatively tiny Alaska. But so far Alaska has shown remarkable resilience. The company’s stock is up over 30% on the year, outperforming both Delta’s and the S&P 500. “As uncomfortable as it probably makes Brad Tilden,” says Fick, “if you look at the metrics and the optics of this, they’ve become a better airline.” Still, all airlines are benefiting from today’s unusually low fuel prices. It’s unclear how a spike in oil might alter the playing field.

Some industry observers believed Delta’s buildup in Seattle was a prelude to buying Alaska Airlines. Tilden has taken steps to ward off an acquisition, including a series of stock buybacks. “I bet a lot of CEOs worry about this, but you want your company to be around,” the Alaska CEO says. “You want your company to be independent.” Anderson told me flat out that Delta isn’t looking to buy. “We have no interest in acquiring Alaska,” says Anderson. “None whatsoever.”

Flying is a lot nicer for everyone when you have both a Delta, which can efficiently whisk passengers all around the world, and an Alaska, which can leverage its more nimble size to innovate. If a carrier like Alaska can survive and thrive more than three decades after the U.S. deregulated the airlines, it suggests a certain level of health, and a passenger-friendly equilibrium, for the eternally jumbled industry. That’s no small thing when the typical alternative to getting bigger, like a Delta or an American, is slashing service to keep costs low.

More than mere convenience is at stake. Consider Alaska’s work with the Federal Aviation Administration on a program meant to replace the current system for landing approaches–where planes descend in steps to lower altitudes before touching down–with a straighter path that saves time, uses less fuel and reduces carbon emissions. The system, called NextGen, is built around GPS technology. Delays have plagued NextGen’s rollout nationwide, but Alaska has been testing the concept. Not everyone is convinced–critics have argued that NextGen is unnecessary and expensive–but Alaska claims a potential savings of over 100,000 barrels of oil a year, making it more green and saving some green too. That would have huge ramifications if the entire industry adopted it.

If nothing else, the battle for Seattle is a reminder of what flying was like for many customers before airlines systematically divided up many of the nation’s biggest airports into near monopoly, one-airline hubs. That fate may await Sea-Tac in the future. But for now, the flying public of the Northwest gets the benefits of the kind of old-fashioned regional competition the airline industry has done its best to eliminate.