Alaska Air Group has snapped up California-based Virgin America for US$4 billion. The combined company would become a major force in the US West Coast region, with hubs in San Francisco, Los Angeles, Seattle and Portland, and a combined fleet of approximately 280 aircraft providing 1,200 daily departures. It will also gain Virgin America’s east coast slots, in New York and Washington, DC, where Alaska has struggled to gain access and of course the group would also maintain a dominant position in Alaska from its Anchorage hub.
The two companies expect to complete the transaction no later than 1 January 2017 and the company’s headquarters will remain in Seattle.This will mark the latest in a series of mergers and acquisitions within the US aviation sector. Delta Air Lines acquired Northwest Airlines in 2008, and two years later United Airlines merged with Continental. Most recently, American Airlines merged with US Airways to create the world’s largest airline group.
The US Justice Department must approve the deal, which would create the fifth largest airline in the country after the big four — American, United, Delta and Southwest — which control 80 per cent of the domestic industry.The merger of Alaska and Virgin America would effectively leave the US with six major airlines, with American, Delta, United and Alaska competing with low-cost carriers Southwest Airlines and JetBlue.
Richard Branson said he was sad to see the airline bought by a competitor but that a 25 per cent limit on non-US share ownership meant his influence over the decision was limited. Virgin’s VX Holdings owns about 18 per cent of the voting shares with the rest of Branson’s stake in non-voting stock.
But Branson claimed Virgin America had pushed the rest of the US airline industry into improving service for customers, whom he said had a grim time before his company shook up the sector.
“As more airlines consolidated and grew larger and more focused on the bottom line, flying in the US became an awful experience. Despite moves to block our airline from flying, Virgin America has brought new competition, lower fares and a focus on creating an enjoyable in-flight experience to the US,” he wrote in a blog on Monday. “When Virgin America launched, fleetwide Wi-Fi was considered a radical idea, and so was touch-screen entertainment at every seat, and brand new and beautifully designed cabins. Airlines have had to invest in better products to try to compete.”
Virgin America made a pre-tax profit of US$61 million on sales of $1.4 billion in 2014, according to its annual statement.
