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 has agreed to buy Virgin America for $2.6 billion, the airlines said. The total deal value is approximately $4 billion, inclusive of debt and capitalized aircraft operating leases.
Virgin America got off the ground with support from minority owner Richard Branson and began flying in 2007. It went public during November of 2014 with a $23 a share initial public offering.
Between Virgin America’s consistent performance and Alaska Airline’s level of customer service, the merger bodes well for consumers.
There is no guarantee Alaska Air will clinch the deal, but if it does, an announcement could come Monday, the Journal quoted its sources as saying. Now, Alaska will become the fifth-biggest airline in the United States in relation to passenger traffic.
“With an expanded West Coast presence, a larger customer base, and an enhanced platform for growth, Alaska Airlines will be positioned to provide more choices for customers, increase competition and deliver attractive returns to investors”, the Seattle-based Alaska Air Group stated in the release.
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, which will be based in Seattle, will have about 280 aircraft including regional planes.
Alaska Airlines had to fight it out with Jet Blue, causing shares of Virgin America to jump by 40%.
Shares of Virgin America were up 42.1 percent at $55.27 in afternoon trading. “Likely feeling the same competitive pressures as Virgin America, Alaska Airlines approached Virgin America with a proposal to merge”, he wrote. For more than a decade consolidation swept through the major players, reducing the largest nine carriers in 2005 to four airlines by the end of 2013.
Alaska Air said in a statement that the deal would generate $225 million in annual synergies once the companies are fully merged. $300 million or $350 million.
Virgin America had the best record for baggage handling, while Envoy Air ranked last.
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Bank of America Merrill Lynch (BAC.N), UBS Investment Bank (UBSG.S) and Cowen & Co (COWN.O) were financial advisers to Alaska Air, while Evercore Group LLC advised Virgin America. Virgin flies up and down the West Coast, to Hawaii, and to vacation resorts in Mexico, as well as flying transcontinental to the East Coast.
