Alaska Airlines is reportedly going to get Virgin America (Image: Jim Glab)
Alaska Airlines has reportedly clinched a deal to purchase Virgin America, snatching the opportunity away from JetBlue.
The Wall Street Journal reports that “people familiar with the situation” say that there’s no guarantee that Alaska will get Virgin, but if it does, Alaska Air is expected to pay around $2 billion for the Burlingame-based carrier– a price inflated by all the recent speculation that Virgin was actually up for grabs. (Prior to the kerfuffle about the sale, Virgin America was valued at around $1.5 billion.)
If Virgin and Alaska Air combined, it would create the nation’s fifth largest carrer– a title currently held by JetBlue.
I’m writing this post having just returned from the sunny slopes of Northstar at Lake Tahoe and my mind is of course bursting with speculation and possibilities…. here’s what I’m thinking. I’m curious to know what YOU are thinking, too, so read on and leave your comments below.
Related : Travel industry mergers that make sense!
-If Alaska Airlines buys Virgin America, which name would survive? If Alaska Airlines wants to be a national carrier, it will likely need to shed its regional name, right? But would Alaska be willing to pay whatever fee Richard Branson wants for it to carry the Virgin name? And speaking of regional-sounding names, Southwest Airlines sounds regional, but it has succeeded in becoming a national carrier, so who knows?
-What’s going to happen to Virgin’s hub at the fab Terminal 2 in San Francisco? It’s currently bursting at the seams so I’m not sure if Alaska’s operations are going to fit in there. But since there’s now the behind-security passageway between Terminal 1 C (Delta) and Terminal 2, Alaska could squeeze in there? Combined, the two carriers would become SFO’s second largest carrier, with 15% of all flights. (United will remain firmly in #1 position.)
-What’s going to happen with JetBlue? Will it just walk away from the deal… or will it come back with a higher bid (just like what’s been happening with Starwood/Marriott/Anbang). Who knows? But if the deal is done, the WSJ says that we could hear about it as soon as Monday. Wouldn’t it be interesting if Alaska Air bought BOTH Virgin and JetBlue? It could happen! Or…maybe Delta could swoop in at the last minute with a sweeter offer? And speaking of Delta, what’s going to happen with Delta’s relationship with Virgin Atlantic and Richard Branson if Alaska Air butts in?
“Flights with Benefits” is the racy name for one of Virgin America’s new A320 ETOPS jets (Photo: Chris McGinnis)
-Frequent Flyer programs. Alaska Airlines has resisted following the pack of major airlines down the path of devaluation. As a matter of fact, it remains the largest airline with an intact mileage-based program versus the new-fangled spend-based programs of the majors. Virgin America’s spending-based Elevate program has never been a huge draw, so maybe integration with Alaska’s more popular and lucrative Mileage Plan would be a good idea.
–Hawaii flights could become more expensive. Alaska and Virgin have been competing heavily on fares to the islands ever since Virgin launched Hawaii nonstops last December. One less carrier in the market could mean higher fares.
Related: Trip Report- Virgin America to Honolulu
-How will the two carriers integrate their fleets? Alaska Airlines is all Boeing. Virgin is all Airbus. While other airlines have both types in their fleet, it service issues could become more unwieldy/complicated.
-What’s going to happen the the hip fun culture that Virgin America has created? Will it be washed away in a take over? Alaska Airlines runs a great operation, and has similarly built up a loyal following with very good service, new planes and good on-time performance. Which culture will come out on top?
Okay. That’s it from me now. Time for some apres-ski time in sunny Truckee. Please share your speculations and comments below! We’ll regroup on Monday!
NOTE: Be sure to click here to see all recent TravelSkills posts about: Should I tip my Uber driver? + Boeing 747 nearing its end? + Bargain hunters travel guide for 2016 + World’s best airline lounge? + Fares to Europe tumble
Do you follow us on Twitter? It’s a great way to keep up with the latest news!
Please join the 125,000+ people who read TravelSkills every month! Sign up here for one email-per-day updates!
I think is great news…even though I know I might be in the minority here. This helps protect deregulation and ensures we don’t get a really nasty outcome later.
By encouraging regional monopolies, it allows better economies of scale for short hop flights that are not that profitable for airlines but are crucial to market share stastics that Wall Street devours.
Personally, Alaska duplicating their fortress hub at Seattle (or Anchorage) at other West Coast cities would be phenomenal. And in regard to Anchorage, that opens up some exciting potential with foreign carriers that I don’t think people realize. Also, Alaska’s mileage plan is definitely a great asset.
I know there’s a lot of bitterness about losing Virgin’s excellent service, but it was unprofitable. Secondly, it was targeted at the “bi-coastal” demographic which is not viable either. The silver lining is Alaska wants to keep Virgin customers, so they will probably try to improve service where they can.
Overall, this is really good news for those out West. All mergers are hard, but this one makes sense not just for the Lower Manhattan crowd.
None of the airline mergers have gone smoothly and there’s no reason to believe that this one will be the exception. All of the mergers have resulted in a lower quality product and higher prices. If the merged company just provides the AS experience the VX flyers will move on.
I question also question the cultural fit of these two carriers. I still remember getting a christian prayer on my meal tray on Alaska. I was shocked at the time. I can’t imagine a different culture.
In the past, I’ve said that the ideal partner of all is in fact the other two. That remains true.
Think what an Alaska, JetBlue, and Virgin America combination would mean >
1. Strong north – south presence both coasts,
2. A huge step up on way to a powerful trans-con network,
3. Attractive domestic and international frequent flyer destinations – carrots,
4. The critical mass necessary for viable national media buys,
5. No massive anti-competitive impact that couldn’t be dealt with easily, and
6. All other good things one expects in a combination such as increased ability to negotiate with vendors.
Moreover, unlike some notable airline mergers, this one would not bring in a totally demoralized employee group with customer service issues from a carrier shaken by years of financial pressure. There are also similarities in corporate culture among these.
So, where do we plant the headquarters?
You may be right. I doubt we’ll ever find out. It’s fun to speculate on these things. I will stick with my guns on the fact that Delta is one of the Big 3 in America and will have a harder time getting government approval than one of the second tier carriers on such mergers prospects.
I guess all I’m saying is that the the boards on these corporations would take caution with such offers and the prospects of getting tied up in monopoly accusations. Especially when they have alternative offers on the table from viable 2nd tier carriers.
For example say you are on the board of Virgin and have offers of $2 billion each from Alaska and Delta. You want a quick transaction so which do you chose? This is of course slanted if you like one company over another. But in general if both offers are equal which do you pick for a fast and smooth closure?
Interesting idea on Alaska buying Virgin and Jet Blue. That would make Alaska a national player overnight. In terms of name, I’d keep Alaska. Most travelers know their reputation for great service (like Southwest).
wonder if SWA will begin service to Hawaii on the 737-800’s. They generally show up when competition on a route decreases. I’d love it.
Actually, even with VS, DL would be smaller than AA. So, DL would argue that this merger allows it to BETTER compete with the giant in the industry. DL would also argue that a 2nd large player at SFO would significantly increase competition. Frankly, I think both of those are compelling arguments that this move would actually be good for competition.
As the largest player in the game, AA would not be able to sell this merger to the government. As the largest player at SFO, UA also has no hope of approval. DL, however, has a strong case in my opinion.
I agree with you on the routes but I think that due to the size of Delta that they would run into issues on such a merger. I could be wrong, just my opinion that this would be perceived by the Virgin ownership so they would try to avoid a competing offer unless it was much, much higher. It would be like saying American or United makes an offer and wouldn’t run into issues.
DL, just like AS, has very little route overlap with VS. Either one could get anti-trust approval very easily. I don’t think DL is interested tho.
I don’t think Delta could get approval from the government for the purchase and I think everyone knows it. I with you on merging Jet Blue, Virgin and Alaska. Well except for the impact on prices. It’s fun to speculate. I would vote to keep the Alaska name or something like it. I’m not sure Virgin Alaska would work though. If all three merged we could do Blue Alaskan Virgins or Alaska Jet Virgin.
I think Alaska and Virgin employee culture will mix well. They both are very customer friendly and focused.
Money say DL throw in a (non serious) bid to jack up the price and hoping to cause Alaskan fiscal issues if they do win it.
As an Alaska mileage member who frequently flies Boston-Bay Area routes, I’m excited to see direct routes coming. Especially if they keep VA’s pricing policies.
Well I guess this is what Delta gets for hosing Alaska in Seattle! This will be fun to watch.
Well, if you didn’t object when Delta and NWA merged, when United and Continental merged, and when American and USAir merged, then this proposed hook-up is trivial.
Back in the 1970’s I flew with Southern, Eastern, Allegheny (AKA Agony), AirWest, Piedmont, Ozark, Texas International, Pan Am, TWA and Frontier (a different one). Oh, and Alaska – the only one still around.
Just be grateful the US government protects our airlines from real competition – the foreigners
Sorry but this is a deal that the U.S. government better stop, it’s of no use to the consumer and again will make traveling even more expensive and give us less choices.
These are the worst things for our country these mergers.
I wonder who items the “Northwest Airlines” trade name?