Alaska Airlines Targets Smartphone Users, Cuts Out OTAs with Mobile App

by Trefis Team
Alaska Air Group
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Alaska Airlines (NYSE:ALK), the seventh-largest US airline in terms of passenger traffic, recently launched a new mobile app that helps its customers to access the most important travel information quickly and conveniently on their mobile. The new app is a part of Alaska Airlines’ strategy to expand its presence in the mobile channel and leverage high smartphone penetration in the US to enhance the customer experience. It also aims to help circumvent the online travel agencies (OTAs) by attractive travelers to directly book through Alaska Airlines rather than on OTA websites. We take a closer look at the advantages and the key elements of the Alaska’s mobile strategy below. Alaska Airlines competes with major US passenger airlines including Delta Air Lines (NYSE:DAL), Southwest Airlines (NYSE:LUV), American Airlines (NYSE:AMR) and US Airways (NYSE:LCC ).

We have a $68 price estimate for Alaska Airlines, which is about 24% ahead of the current market price.

Alaska’s latest mobile app is designed for the iPhone and iPod Touch and is a complete redesign of the airline’s first mobile app launched in March 2010. The company says that the app is akin to a personal concierge service which enables the traveler to check in and access his or her mobile boarding pass within the app and presents an array of other features including the ability to track flight status and boarding information, create text or email flight alerts, select and change seats, create a parking reminder, add notes for hotel and car reservations, access “My Trips” to view multiple flight itineraries and track Alaska Airlines Mileage Plan account information.

Here, we look at some of the ways in which Alaska can derive benefits from the mobile channel.

Mobile Service Adds Convenience and Helps Bottom Line

Such mobile apps can make life a lot easier for airline travelers who can avoid the hassles of standing in long queues to check in and get boarding passes. The app is especially attractive to the corporate travelers who generally have last minute flying needs and want to to access flight information while on the go.

Superior customer service and convenient travel options achieved through mobile applications can serve as key differentiators for Alaska in the fiercely competitive airline industry. Companies such as Continental Airlines, Alaska Airlines and American Airlines have lately been turning out their own services to expand on the mobile platform.

Longer term, mobile development is cost efficient for both the airline and airline customers as it saves time and reduces the amount of paper used to print boarding passes. Besides, mobile boarding passes also help prevent manipulation or duplication of tickets. While this might not offer significant savings, it helps by making customer’s travel experience easier which goes a long way in building loyalty.

With a significant 45% adoption rate for smartphones in US, mobile represents a powerful channel to eventually push other ancillary products of the airlines.

Elimination of Commissions Paid to OTAs

Alaska is also planning to launch an Android version of the app and a refreshed mobile- optimized website to make access to more convenient for other mobile devices and tablet users, later this year. This would not only generate additional traffic through increased share in online bookings with the launch of an additional platform but also help the company compete against online travel agencies who are actively proliferating in the mobile travel space (See related article: Expedia Adds Mobile Horsepower to Amp up Growth).

In such a scenario, airlines need to make themselves accessible to travelers via all popular media to ensure that they do not have to make commission cuts from their already strained margins by letting OTAs increase their commissions on back of any value add that airlines are unable to provide.

See our completed analysis for Alaska Airlines’ stock

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