In a deal worth US$2.6 Billion, and one that is sure to shake up the US domestic travel industry, Alaska Airlines have confirmed they have won a bidding war with JetBlue Airways to purchase the much loved airline Virgin America. The merger will see Alaska Airlines become the 5th biggest in the USA, with 1,200 daily flights and US$7+ Billion in annual revenue, overtaking rival JetBlue.
Though the sale has been approved by both Airline boards, U.S. regulatory approval will likely take until the end of the year, so guests won’t notice any immediate changes. But Brandon Pedersen, CFO for Alaska Air Group, has said that while they will explore options to continue with the Virgin brand, he digresses that the airline’s iconic logos may disappear under the Alaska Airlines brand by 2020. This news has upset many Virgin customers, who on the same day rated the airline the best in quality for the fourth consecutive year, which is something Alaska Airlines surely can’t ignore:
— Jacob Teixeira (@jacobteixeira) April 5, 2016
Really hoping Alaska Airlines doesn’t change the Virgin America brand at all.
— Troy Osinoff (@yo) April 4, 2016
Meanwhile, the Virgin American loyalty program EleVate, will merge with Alaska’s Mileage Plan. This could have an impact for Australian travellers. As Virgin America holds a partnership with Virgin Australia, while Alaska sits with Qantas, it’s likely this will end up being a win for Qantas loyalty holders, and a loss for Virgin Australia’s Velocity customers. Though according to an article today from Forbes, an Alaska Airlines spokesperson has said they are “still determining how we will combine the programs” and nothing will happen there until Q1 2017.
Though the sale has proven a “big win for our shareholders” according to Virgin America President and CEO David Kush, Virgin Founder Richard Branson expressed his frustration at the sale (in spite of the parent company pocketing some US$780 million from the sale), saying in a Blog Post:
I would be lying if I didn’t admit sadness that our wonderful airline is merging with another. Because I’m not American, the US Department of Transportation stipulated I take some of my shares in Virgin America as non-voting shares, reducing my influence over any takeover. So there was sadly nothing I could do to stop it.
The reference in his shares comes from the fact his UK company could only hold a 25% stake in the airline due to US regulation. His worry is that the sale will mean that Virgin America’s notable time of “shaking up the US airline system” with a tagline of “making flying better” has come to an end, citing the changes that have been seen across the industry since they stepped into the game in 2007. but he hopes that Alaska will continue the tradition, saying:
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 US traveling public will continue to benefit from all that we have started.
This news also comes at a time where Virgin Australia is seeking new equity partners after Air New Zealand withdrew its 25% stake in the company. Though unlike the news today out of the USA, Air New Zealand have assured customers that their trans-Tasman alliance will continue as is, which Australian Business Traveller confirmed today.
You can learn more about the Alaska – Virgin merger, and what it means for you, at a website they’ve put up: http://flyingbettertogether.com/
Photo Credit: Alaska Air