Alaska Air to Acquire Virgin America and Become 5th Largest U.S. Airline

Posted on April 4, 2016

Alaska Air Group has announced it will acquire Virgin America in a $4 billion deal. Alaska Air is the parent company of Alaska Airlines. The combined company will be the 5th largest U.S. airline. It will have an expanded West Coast presence.

The combined airlines will have 1,200 daily departures with hubs in Seattle, San Francisco, Los Angeles, Anchorage, Alaska, and Portland, Oregon. It will have a total of 280 aircraft. Alaska Air has core markets in Alaska and the Pacific Northwest. Virgin America has a core market in California. The merger expands the airlines presence along the West Coast from California northward. Alaska Air says the merger will also increase its access to East Coast airports such as Ronald Reagan Washington National Airport, John F. Kennedy International Airport and LaGuardia Airport.

Brad Tilden, chairman and CEO of Alaska Air Group, says in a statement, "Our employees have worked hard to earn the deep loyalty of customers in the Pacific Northwest and Alaska, while the Virgin America team has done the same in California. Together we will continue to deliver what customers tell us they want: low fares, unmatched reliability and outstanding customer service. With our expanded network and strong presence in California, we'll offer customers more attractive flight options for nonstop travel. We look forward to bringing together two incredible groups of employees to build on the successes they have achieved as standalone companies to make us an even stronger competitor nationally."

Virgin America founder Richard Branson says he was unable to stop the Alaska Air merger. He said in a statement, "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."

A Wall Street Journal reports described the bidding between Alaska and JetBlue for Virgin as "feverish." The report says Alaska's clean balance sheet helped it prevail in the end because it was more easily able to borrow funds for the acquisition. The deal is expected to close by the first of next year.

For loyalty customers of the airlines a FAQ says the loyalty programs will remain distinct until the merger is completed. The programs will be merged after that date. The FAQ also says fares will not rise.

Bloomberg says Alaska beat out Jet Blue in the acquisition.

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