April 13, 2016

Say goodbye to Virgin America airline

Alaska Airlines makes moves to acquire Virgin America in a deal valued at $2.6 billion.

There have been dozens of major airline industry mergers throughout the years. Just since 2001, there have been several notable mergers and acquisitions that resulted in the top three name brands for air travel throughout the country – American Airlines, Delta and United.

Some of these M&As include the 2008-2009 Delta Air Lines-Northwest Airline acquisition and the 2010 United Airline-Continental Airlines deal, according to Airlines for America. While there was significant M&A activity between these three major industry players, it was the 2010-2011 Southwest Airline-AirTran Airways merger that solidified Southwest as No. 4 on the list.

While these companies handle around 80 percent of the air traffic in the country, according to Airway News, a new deal proposed by Alaska Airlines's parent company, Alaska Air Group, may push this Seattle-based company to become the fifth-largest American airline in the nation.

What are the terms of the Alaskan Airlines-Virgin America deal?
Alaska Air Group recently announced its intentions to buy Virgin America, a San Francisco-based, low-price, high-quality airline created in 2007 for an estimated $2.6 billion. This deal will combine two of the country's air travel companies both known for their affordability and thorough commitment to excellent customer service.

Expected to be finalized by January 2017, this merger will expand Alaska Airlines current presence in California, along with allowing for further growth, competition and greater network benefits for its customers. Until the two companies receive official regulatory approval, they will continue to operate as separate entities, meaning that no scheduled flights will be interrupted or changed.

"With our expanded network and strong presence in California, we'll offer customers more attractive flight options for nonstop travel," Brad Tilden, chairman and CEO of Alaska Air Group, said. "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."

Why are customers concerned and federal regulators aren't?
Virgin America is known for its excellent customer service and in-flight offerings. With a dedicated fan base, Time reported that independent researchers named it the highest quality airline in the country four years in a row. These fans have been vocal on social media, expressing their dissatisfaction and mournful platitudes about their favorite airline. Meanwhile, the company's creator, British entrepreneur Sir Richard Branson wrote a personal letter, expressing his own mixed feelings about the deal.

Despite public opinion regarding the merger, Air Transport World reported that the Department of Justice is expected to accept the terms of the deal. This is likely, most notably, because of its prior approval for the vast majority of airline M&As throughout the past few years.

Many of these others M&As were far more expansive than this current proposed deal, solidifying the industry stronghold leaders such as American Airlines and Delta. Though the deal itself hasn't yet raised antitrust concerns, some wonder if it could create a continual "domino effect" for the rest of the airline business sector.