Alaska Airlines’ parent company announced Monday that it will pay $2.6 billion to buy the Richard Branson-inspired, California-based carrier.
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Alaska Air Group Inc’s ALK.N plan to buy Virgin America Inc VA.O makes the company a more attractive partner to Asian airlines looking for extra revenue from connecting passengers to flights within the United States, industry executives and experts say. The companies put the transaction’s value at about $4 billion, including debt and capitalized aircraft operating leases.
Burlingame, California-based Virgin America went public in the U.S. stock market in 2014 as an offshoot of billionaire Richard Branson’s London-based Virgin Group. “We would like to welcome the professional pilots of Virgin America to the Alaska family and we look forward to a common goal of building a new joint pilot group that will benefit from a stronger and more prosperous airline that we have helped build”.
Following a decade of large-scale airline mergers, this latest move would effectively make Alaska Air the fifth largest airline in the United States.
In a statement, the companies said the combined airline would have 1,200 daily departures, with hubs in Seattle, San Francisco, Los Angeles, Anchorage and Portland, Ore., Its headquarters will remain in Seattle.
He also said the merger would be a win for Alaska Air because Virgin America has routes with access into slot-controlled airports that Alaska doesn’t now have. Alaska Air has been a loyal customer of Boeing for a number of years, flying almost an entire fleet of 737s. (JBLU) has come to an end, with Alaska confirming early Monday morning that it will acquire Virgin America Inc.
“In 2007, when the airline started service, 60 per cent of the industry was consolidated”.
As a brand, Alaska Airlines will prevail, but the Alaska CEO also hinted that the Virgin image may live on in some form.
The Alaska Air buyout of Virgin America indicates that consolidation has shifted to smaller players. Alaska Air said its unions and pilot leadership were on board with the merger.
Shares of Virgin America Inc (NASDAQ:VA) are trading +42.03% at 1:25PM EDT to reach at the price of $55.24 and fluctuating within the range of $54.22 – $55.43 for the current session. The deal would generate $225 million in annual synergies once the companies merge, and Alaska Air expects a one-time integration cost in the range of $300 million-$350 million.
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.
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It is the fourth consecutive year that Virgin America earned the top spot.
