Alaska Air Group Inc (ALK.N) has declared to buy the Virgin America Inc (VA.O) airlines company at $2.6 billion today.
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The companies put the transaction’s value at about $4 billion, since Alaska will also be taking on Virgin America’s debt and aircraft operating leases.
Though the companies” boards were reportedly “unanimous’ in their decision to back the deal, Virgin figurehead Sir Richard Branson has publicly lamented the sale.
Virgin, which in 2013 turned profitable, earned over $340.5 million in 2015, which was a company record.
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.
Many foreign airlines already market Virgin America’s or Alaska Air’s flights.
The deal will give Alaska Air opportunities in important East Coast business markets by increasing the airlines access to slot-controlled airports, such as Ronald Reagan Washington National Airport and the two primary New York City-area airports, John F. Kennedy International Airport and LaGuardia Airport. The airline now is the sixth-largest U.S.-based carrier by traffic and is serving 90 destinations in the United States, Canada as well as Mexico.
The combined airline will have its headquarters in Seattle. While Virgin America brings its Virgin partners, Virgin Atlantic and Virgin Australia, as well as Singapore Airlines, Air New Zealand, and Air China among its global partners.
There will also be a lot of discussion over the next few months about whether further consolidation in the USA airline industry comes as another blow to consumers following the mergers of American and US Airways, United and Continental, Southwest and AirTran, and Delta and Northwest in recent years. It is anticipated the deal will close by the end of 2016. $300 million or $350 million.Under terms of the agreement, Alaska will pay $57 in cash per share of Virgin America.
“Our goal is to be the premier airline for people along the West Coast”, Alaska CEO Brad Tilden told investors on a call Monday morning.
JetBlue took second place, followed by third-place finisher Delta in the list of 13 U.S. airlines based on an analysis of last year’s U.S. Department of Transportation data.
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. Alaska Air Group Inc., shares fell 4.5 percent, to $78.36.
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According to Branson, Virgin has attempted to create unique customer experience in the face of an ever-consolidating industry that he said led to the move.
