Alaska Airlines and Virgin America Announce $2.6 Billion Merger

An eventful week of bidding wars in the travel industry has come to an end, for now. Ending competition from JetBlue Airways Corp., Alaska Airlines and Virgin America announced their consolidation this morning amid Virgin’s accumulated debt and aircraft operating leases, valued at $4 billion. Alaska Air will acquire the airline for $2.6 billion, paying $57 per share in cash.

The merger expands Alaska Airlines’ West Coast presence for a total of 1,200 daily departures from Seattle, San Francisco, Los Angeles, Anchorage, Alaska, and Portland, Oregon. Alaska Airlines will add around 60 aircrafts from Virgin America for a combined fleet of 280 aircrafts. Virgin America’s planes boast three passenger classes, in-flight Wi-Fi, power outlets and individual touch-screen seatback entertainment.

“Our employees have worked hard to earn the deep loyalty of customers in the Pacific Northwest and Alaska, while the Virgin America team has done the same in California,” said Brad Tilden, chairman and CEO of Alaska Air Group. “With our expanded network and strong presence in California, we’ll offer customers more attractive flight options for nonstop travel. We look forward to bringing together two incredible groups of employees to build on the successes they have achieved as standalone companies to make us an even stronger competitor nationally.”

The two airlines will be based in Seattle and lead together by Tilden and David Cush, Virgin America’s president and CEO, until the acquisition receives regulatory approval by Jan. 1, 2017. While the deal is pending, both airlines’ loyalty programs, bookings and flight routes will remain separate, without any impact to members. Once complete, Alaska Airlines will integrate Virgin America’s Elevate loyalty program into its Mileage Plan.

“Our mission has always been to create an airline that people love, and we accomplished that while changing the industry for the better,” Cush said. “Joining forces with Alaska Airlines will ensure that our mission lives on, and that the stronger, combined company will continue to be a great place to work and an airline that focuses on an outstanding travel experience.”

The two airlines are among the most respected aviation brands in the United States. Alaska Airlines intends to unveil refreshed branding that will incorporate Virgin America’s award-winning customer service.  Virgin America has been rated No. 1 for the past three years in an annual study of domestic airline performance by the Airline Quality Rating report. It has also been voted “Best Domestic Airline” by Travel + Leisure’s Annual World’s Best Awards and Conde Nast Traveler’s Readers’ Choice Awards for eight consecutive years.

Alaska Airlines ranked No. 1 among the nine largest carriers in the United States by The Wall Street Journal for overall operational performance for three years in a row. The airline was rated “Highest in Customer Satisfaction Among Traditional Carriers” by J.D. Power for eight years, and ranked No. 1 for punctual performance six years in a row by FlightStats. Alaska Airlines was also been named one of the most fuel-efficient airlines by International Council on Clean Technology.

Virgin America was founded in 2007 by business mogul Richard Branson, who is founder of the Virgin Group. In a blog post on the Virgin America website, he remarked on the trend of consolidation in the airline industry. Branson started his airline with the goal of improving the passenger experience by offering superior customer service, amenities and entertainment. Because Branson is not an American citizen, the U.S. Department of Transportation stipulated that a portion of his shares would be non-voting shares, reducing his influence in a takeover.

“Our Virgin airline has much more to do, more places to go, and more friends to make along the way,” Branson wrote. “The important thing now is to ensure that once Alaska witnesses first-hand the power of the brand and the love of Virgin America customers for our product and guest experience, they too will be converts and the U.S. traveling public will continue to benefit from all that we have started.”