Alaska Airlines makes $2.6B deal for Virgin America
Combining airlines could create a West Coast travel powerhouse.
One of the nation’s oldest airlines announced plans to buy one of its newest Monday, when Alaska Airlines’ parent company confirmed a $2.6 billion deal to acquire upstart Virgin America.
The move breathes life into a wave of industry consolidation that appeared to have ended after the American-US Airways merger that closed last year.
The latest deal would bring together Seattle-based Alaska Air- lines and San Francisco-based Virgin America, combining airlines that each enjoy strong customer service reputations into a single West Coast juggernaut.
It also comes after four megamergers since 2008, deals that took eight of the USA’s biggest airlines and combined them into four larger carriers that now collectively control about 80% of the U.S. market.
“For an airline like Alaska, that says scale is relevant,” Brad Tilden, CEO of the Alaska Air Group that includes Alaska Airlines. “It gives us a shot at being your go-to airline if you live anywhere up and down the West Coast.”
Alaska Airlines, with roots tracing to 1932, is the dominant carrier in the Pacific Northwest. It’s the busiest carrier at both the fast-growing Seattle-Tacoma International Airport and at Oregon’s Portland International.
Virgin America began flying only in 2007, launched with the partial backing of British tycoon Sir Richard Branson and his global Virgin brand.
The airline has become a major player in California, establishing its biggest hub in San Francisco, with another in Los Angeles.
The deal is valued at $57 per share.
Jim Corridore, an analyst with S&P Global Market Intelligence, says that the deal is great for Virgin America and would likely be a boon — eventually — for Alaska investors as well.
“Alaska is paying a very high price for these assets, but they were forced into a bidding war with JetBlue. I think it’s going to be a great deal for them but take a little bit for the payoff to come.”