With Virgin debt added in, the total value of the takeover, already agreed by the boards of both companies, will run to about $4 billion.
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Combining Alaska Airlines’ well-established core markets in the Pacific Northwest and the state of Alaska with Virgin America’s strong foundation in California will make Alaska Airlines the go-to airline for the more than 175,000 daily fliers in and out of Golden State airports, counting San Francisco and Los Angeles.
Last year, Virgin posted a profit of $341 million, up from just $60 million in 2014 due to the plunge in the price of jet fuel.
Virgin America said Monday that it has reached a deal with Alaska Airlines to be acquired for $2.6 billion, creating the fifth-largest airline in the country.
The Justice Department is expected to review the merger, but the small size of the combined company and the fact that only six of Alaska’s and Virgins’ routes overlap should mean relatively little regulatory scrutiny.
A map released by Alaska Airlines and Virgin America shows the routes flown by the two carriers in the United States.
As a result, Virgin America’s most valuable assets are actually its terminal space at San Francisco International Airport and Los Angeles International Airport along with landing rights at Love Field in Dallas, LaGuardia in NY and Reagan National in DC, Bhaskara said.
The combined business will be based in Seattle with Tilden as its CEO. Alaska Air now flies Boeing Co 737s.
Alaska first approached Virgin about a sale in the fall and pending approval by Virgin shareholders in June and by government regulators hopes to close by the end of this year.
Those four control 83 percent of domestic seats, according to an Associated Press analysis of data from Diio, an airline-schedule tracking service.
Virgin America’s Elevate loyalty program members will become part of Alaska Air’s Mileage Plan. That’s partly a function of Virgin becoming a more mature airline and starting to take on the cost structure that comes with that.
But culturally, Virgin and Alaska seem to be an odd fit. And yes, Alaska Air also had to pay enough to outlast JetBlue in what CEO Brad Tilden called a “hard-fought” bidding battle.
Alaska Air said in a statement that the deal would generate $225 million in annual synergies once the companies are fully merged.
The companies say they expect to complete the deal no later than January 1st, 2017.
Virgin America Inc.’s stock jumped $15.15, or 39 per cent, to $54.05 in pre-market trading Monday.
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With Alaska Air’s investments, it would be able to focus on its expansion beyond its Seattle base where it is now experiencing market pressure from rival Delta Air Lines which wants to consolidate a base in the West Coast.
