Two U.S. companies have finally sealed the deal — Alaska Airlines and Virgin America will celebrate a merger months in the making.
In a blog post Wednesday, Alaska Air Group Inc. announced it has closed its acquisition of Virgin America, the crescendo of a multibillion-dollar agreement that was announced in April 2016.
“Alaska Airlines and Virgin America are different airlines, but we believe different works — and we’re confident fliers will agree,” said Brad Tilden, CEO of Alaska Air Group. “Together, we’ll offer more flights, with low fares, more rewards and more for customers to love, as we continue to offer a distinctive travel experience. The two airlines may look different, but our core customer and employee focus is very much the same.”
The company stated it and Virgin America will spend the next year working to secure Federal Aviation Administration certification to allow the two airlines to operate as a single carrier.
Coming together: How the deal was struck
Alaska Air Group, Inc., the parent company of Alaska Airlines, and Virgin America, Inc. announced in April that both of their boards of directors unanimously approved the merger agreement. Alaska Air Group would acquire Virgin America for $57 per share in cash; a deal the company stated was worth approximately $4 billion.
Virgin America lauded the merger on its company website, stating that Alaska Airlines plans to expand its presence in California. The post projected increases in annual revenue of 27 percent to more than $7 billion.
In Wednesday’s release on Alaska’s website, California’s Lt. Gov. Gavin Newsom said the partnership is a good thing for the state.
“Both airlines boast a strong history, and we look forward to seeing their innovative spirit magnified with their global international network of partner airlines,” he said.
But not everyone was as thrilled with the idea and the lead up to the merger was fraught with drama. A lawsuit, brought by consumers and travel agents, stalled progress, trying to stop the acquisition altogether. They claimed that a larger airline would reduce competition and air service, as reported by CNN in November.
On Dec. 6, the airline came to a settlement and secured government approval to finalize the purchase of Virgin America.
Conditions of the settlement included Alaska Airlines and American Airlines scaling back their ticket-selling agreements on each other’s flights where Virgin America and the No. 1 U.S. airline compete.
That stipulation also applies to any future routes Alaska creates where American is already flying, according to the New York Times.
More than 80 percent of air travel within the U.S. is handled by the top four airlines – American Airlines, Delta Airlines, United Airlines and Southwest Airlines – a share that has stayed high since numerous news outlets reported the merger of American Airlines and U.S. Airways in 2013.
In a Dec. 6 press release, the Justice Department said the goal of ruling in Alaska’s favor was to give the Seattle-based company a leg up to compete – as it will now hold the spot as the fifth-largest airline nationwide.
“Today’s settlement ensures that Alaska has the incentive to take the fight to American and use Virgin’s assets to grow its network in ways that benefit competition and consumers,” the statement reads.
Cheaper flights and mood lighting: What to expect from the merger
The announcement Wednesday laid out plans for how the two will merge their customer benefits. On Dec. 19, members of Alaska’s mileage plan will be able to earn miles on Virgin America flights. Members of Virgin America’s Elevate plan will also be able to earn points on Alaska Airlines flights. Elite members of both will receive priority check-in and priority boarding on each other’s flights.
Customers will be able to purchase Virgin America tickets at alaskaair.com on Dec. 19, though tickets will continue to be available for sale at virginamerica.com for the immediate future, according to Wednesday’s release.
Beginning Jan. 9, Alaska Airlines will begin asking Elevate members to activate Alaska mileage plan accounts.
“We plan to make this the most customer-friendly merger ever, and we will have much more to announce over the coming weeks,” Tilden said.
Many Alaskans are well versed in the amenities of the Alaska. Self-described Alaska travel authority Scott McMurren said in April that the merger both strengthens and stabilizes Alaska Airlines.
It also opens up more flights and more routes by securing routes into “slot-controlled” airports in Washington, D.C., Chicago and New York City, McMurren said at the time.
Further, he voiced concern that any other merger would take away from the company’s “Alaska-ness” and that service in rural parts of the state would fall by the wayside.
While Alaska Airlines is quintessentially Alaskan, Virgin America seems to be very Californian – catering to a younger, hipper crowd. The airline is known for mood-lit flights, WiFi on every flight, a series of #travelhacks on social media and marketing that includes words like “hella.”
It’s also known for bold stances taken by billionaire backer Richard Branson, who named a plane “Lady Boss” in November 2016 in response to the comments of President-elect Donald Trump. Branson wrote on his blog on the Virgin website that Virgin America would partner with LeanIn.org and LinkedIn to provide free professional development sessions for women onboard Virgin America flights. The fate of those programs is unknown.
But it’s also a well-decorated company, being named 2016’s top domestic airline for the ninth time in a row by Travel + Leisure.
Alaska Airlines was fourth.
Virgin America won another accolade late in November, when it was ranked first for healthiest airline food by the NYC Food Policy Center at Hunter College.
Again, Alaska trailed in fourth.
Fans of Virgin America worried that it, too, would lose its personality in the merger. No decisions about the Virgin America brand have been made, Wednesday’s release stated, and Alaska plans to fly the Virgin America fleet under its current brand with no immediate changes to the onboard product or experience.
“We appreciate that there is great interest in the future of the Virgin America brand among customers and employees alike,” said Tilden. “This is a big decision and one that deserves months of thoughtful and thorough analysis. We plan to make a decision about the Virgin America brand early next year.”
Favorites include its three-tiered cabin arrangement: first class, main cabin select and main cabin. A more affordable option, main cabin select offers six extra inches of legroom and priority boarding.
But coming Jan. 5, Alaska Airlines will debut premium class, which comes with four more inches of legroom and early boarding. Sound familiar? The new booking option will also come with complimentary snacks and drinks.
On the surface at least, it seems the merger is truly going to deliver on the promise of a premier West Coast airline.
Though the reality is, as it were, up in the air.