Alaska Air – the parent company of Alaska Airlines – has confirmed its intention to buy Virgin America.
The deal is estimated to be worth around $4 billion (including existing Virgin America indebtedness and capitalized aircraft operating leases).
The merged company will continue to be headquartered at Alaska Air’s base in Seattle.
It’s not yet clear what will happen to the Virgin America brand – in a statement Alaska Air said it would “explore with the Virgin Group how the Virgin America brand could continue to serve a role in driving customer acquisition and loyalty to get the best from both brands”.
What has been confirmed is that the loyalty programmes of the two carriers will be merged once the transaction has been completed, with Virgin America Elevate members being welcomed into Alaska Air’s Mileage Plan.
Alaska Air says that the merger – which is subject to regulatory approval – will enable it to expand its California presence, and “strengthen the company as a competitor to the four largest US airlines”.
The combined carriers will offer more frequent connections to international airline partners departing Seattle, San Francisco and Los Angeles, and will increase Alaska Air’s access to “slot-controlled airports like Ronald Reagan Washington National Airport and the two primary New York City-area airports, John F. Kennedy International Airport and LaGuardia Airport”.
In his blog on the Virgin website, Sir Richard Branson said:
“In 2007, when the airline started service, 60 per cent of the industry was consolidated. Today, the four mega airlines control more than 80 per cent of the US market. Consolidation is a trend that sadly cannot be stopped.
“Likely feeling the same competitive pressures as Virgin America, Alaska Airlines approached Virgin America with a proposal to merge. The board of Virgin America has accepted an offer from Alaska, and if the merger is approved by Virgin America shareholders and regulatory authorities, the two airlines will become one.
“I would be lying if I didn’t admit sadness that our wonderful airline is merging with another. Because I’m not American, the US Department of Transportation stipulated I take some of my shares in Virgin America as non-voting shares, reducing my influence over any takeover. So there was sadly nothing I could do to stop it.”