Alaska acquired smaller rival Virgin American in 2016, and has been working to compete the final elements of integrating the two airlines. Its CEO Brad Tilden says the airline "achieved the vast majority of our integration milestones and passed through an inflection point in our financial performance" in 2018 and the group has "strong momentum and a lot of optimism heading into 2019".
In a recent interview he said he was "very happy" with progress since the merger, noting operating processes are now aligned, a substantial number of systems are merged and all but one labour group are under a single collective bargaining agreement.
CHART - San Francisco International airport is now the third largest point in the Alaska Air Group network
Source: CAPA - Centre for Aviation and OAG (data: w/c 04-Mar-2019)
Virgin America's strong presence in California had been a strong selling point for Alaska, and now San Francisco is Alaska's third largest base measured by departing frequencies behind its legacy hubs in Seattle and Portland.
The new lounge will be located on top of Terminal 2 at San Francisco International airport, and will feature made to order meals for sale focused on local cuisine. The airline says that every day roughly 150,000 of its passengers pass through San Francisco International and this new space will "serve our Bay Area guests with their every comfort in mind.
The 8,500 square foot lounge will have capacity for between 150 and 200 guests, and Alaska boasts that it will have the highest viewpoint of any domestic lounge at the airport with "an incredible rooftop location".
Alaska needs a competitive lounge at the airport as it works to ensure it maintains the loyalty of former Virgin America passengers. Virgin America was headquartered in San Francisco, and had a loyal passenger following in the market.
CHART - It may be the second largest operator at San Francisco International by ASKs, but Alaska Airlines face stiff competition in the local market
Source: CAPA - Centre for Aviation and OAG (data: w/c 04-Mar-2019)
United Airlines is the largest airline in San Francisco with a roughly 39% share of the airport's ASKs, and the airport is its fifth largest in its own network, measured by departing frequencies.
Alaska is no doubt perhaps seen a cheaper, value alternative for passengers on certain routes, and incorporating a lounge that fits that profile is way to engender positive sentiment among those customers, and ultimately enlarge rosters in Alaska's loyalty programme.