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Alaska Air formally announces purchase of Virgin America

Photo credit: Alaska Air Group, Inc.

Editor’s note:
So many readers of this Blog use Seattle’s hometown airline for travel to Mexico, Hawai’i and the East Coast, that this merger announcement is important locally. Alaska Airlines is making a huge decision in becoming the 5th largest U. S. airline, which WILL affect the culture of our local treasure. For example, for Alaska Air to appeal to a national clientele in NYC, Washington, D. C., L. A. and the Bay Area to compete in the Trans-Con markets, will they keep the Alaska Airlines name, which is a regional brand? The Alaska Eskimo so highly valued as a marketing icon may be in jeopardy with this merger.

– “Alaska Airlines is acquiring Virgin America
“Alaska Air Group, Inc. (NYSE: ALK), parent company of Alaska Airlines, and Virgin America, Inc. (NASDAQ: VA) today announced that their boards of directors have unanimously approved a definitive merger agreement, under which Alaska Air Group will acquire Virgin America for $57.00 per share in cash. Including existing Virgin America indebtedness and capitalized aircraft operating leases, the aggregate transaction value is approximately $4.0 billion. With an expanded West Coast presence, a larger customer base, and an enhanced platform for growth, Alaska Airlines will be positioned to provide more choices for customers, increase competition and deliver attractive returns to investors,” quoting the Press Release.
Read more

– Bottom line from this Blogger:
Alaska is the premier Seattle airline and their focus must now shift to SFO, LAX and the East Coast (Boston, NYC, Washington, D. C. and Ft. Lauderdale).
San Francisco is continually ranked as the worst on-time hub in the U. S. due to the close proximity of runways, which will certainly affect the merged Alaska Air’s on-time performance, which usually is in the top 2-3 spots annually.
Alaska Air heavily invested in a move to T-6 at LAX. There just are not enough gates over there to handle this merged operation, so I foresee Alaska Air to return to T-3, from where Virgin took over Alaska’s former gates and there is room for the merged carrier.
Delta has made Seattle their West Coast International Gateway and heavily invested in the fabric of the Puget Sound region. I look for Delta to make further inroads to dominate at Sea-Tac.
“And even if its planes don’t have mood lighting and order-at-your-seat screens like Virgin’s, Alaska runs a solid airline,” say the AP’s David Koenig & Scott Mayerowitz.

Alaska got their costs down with a single aircraft type, derivatives of their all-Boeing 737 fleet, and will now have a mixed fleet of Airbus 319 & 320 equipment.
Alaska has zero experience in the highly competitive Trans-con market from SFO & LAX to New York & Washington, D. C., except for one daily LAX to Washington-National flight (and one flight daily from San Diego to Boston).
Virgin is the ONLY airline flying LAX & SFO Trans-con routes with no flat-bed seats and ridiculously high fares for what they comparatively offer in these markets.
Alaska will have alot of catch-up to do in the premium Trans-con market. They now move to the 5th largest airline in America, ahead of JetBlue.
JetBlue dropped out of the bidding for Virgin America when the price to acquire them got too high, hmmmm. THAT is telling. JetBlue will stay competitive – look for more fare wars, for awhile.

This from KING-5 TV News:
“Alaska Air’s [Alaska Air CEO Brad] Tilden hinted that the Virgin America brand could survive a merger, though he added the ‘Alaska Air brand will definitely stay.’

But he conceded in his interview with CNBC that ‘Virgin’s brand is powerful. We’re going to look at ways we might use it well into the future.'”

Puget Sound travelers will need to stay tuned for developments. Sea-Tac airline loyalties will now be in-play!

Posted by Steve on April 4, 2016 at 6:52 am | Permalink

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