Alaska Air confirms plans to acquire Virgin America 
 
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 An image showing the tails of Alaska Airlines and Virgin America aircraft. (Photo: Alaska Airlines) 
 
 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 Airlines and San Francisco-based Virgin America, combining airlines that each enjoy strong customer service reputations into a single West Coast juggernaut. 
 
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 It also comes after four mega-mergers 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, said about the backdrop under which his company made a move for Virgin America. 
 
 Alaska Airlines, which has 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 as well as another in Los Angeles. 
 
 Virgin America began putting out feelers in March to test the waters for a potential buyer, which is when Alaska Air initiated its takeover bid. There was also a competing offer from JetBlue, but Alaska Air won out after what Tilden called a “hard-fought competition.” 
 
 “We didn’t really set out to sell the company when we were approached by Alaska,” Virgin America CEO David Cush said on a Monday morning call to discuss the merger with investors and journalists. “But we are happy with the outcome of this transaction. The price paid is a big win for our shareholders. Our employees will join a vibrant, well-run company. Being part of a bigger airline offers greater job security in a highly consolidated industry.” 
 
 The deal is valued at $57 per share in a deal worth about $2.6 billion. 
 
 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. 
 
 “It’s a great move for Virgin’s stockholders,’’ he says. “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, based on the price they paid." 
 
 Alaska Air said its acquisition of San Francisco-based Virgin America will give it a “solid foothold in California,” the USA’s most populous state. 
 
 Tilden pointed to San Francisco International, where he said Alaska Airlines currently flies on only one of the top 10 routes from the airport. “With this acquisition, we’ll fly to all 10,” Tilden said. Also underscoring the importance of California, Tilden said picking up Virgin America’s transcontinental routes affects “how much customers living in California can concentrate their travel with us.” 
 
 
 
 “Our goal is to be the premier airline for people who live on the West Coast,” Tilden said, calling Virgin America’s California holdings “really valuable real estate." 
 
 “It gives us a shot at being your go-to airline if you live anywhere up and down the West Coast.” 
 
 Combined, Alaska Airlines and Virgin America said the combined company would have 1,200 daily departures, with hubs in Seattle, San Francisco, Los Angeles, Anchorage and Portland, Ore. Its headquarters will remain in Seattle. 
 
 Virgin America’s Elevate frequent-flier members would be “welcomed” into Alaska Air’s MileagePlan program. And Alaska Airlines said it intended to acquire a single operating certificate for the two carriers. 
 
 Beyond that, however, the fate was not immediately clear for the Virgin America brand or for its fleet of Airbus aircraft. 
 
 Alaska Air currently uses only Boeing 737 jets for its “mainline” service, though regional partners Horizon and SkyWest fly Bombardier turboprops and regional jets for Alaska Air. 
 
 Alaska Air Chief Operating Officer Ben Minicucci said during the call it was too early to know whether Alaska Air would keep Virgin America’s Airbus jets or look for ways to get rid of them. 
 
 “We’re going to continue to operate the Airbus fleet in the near future. We’ll decide in time whether we go to a single fleet or if we’ll operate a dual fleet,” Minicucci said. 
 
 Similarly, the fate of the Virgin America brand also remained uncertain. Alaska Airlines pointedly said its own brand — recently refreshed with an updated logo and airplane paint scheme — would remain. 
 
 But Alaska Air officials were less committal about the Virgin America name. They acknowledged it had become a “powerful” brand with strong customer loyalty but said only that Alaska Air will consider ways to incorporate the brand "down the road." 
 
 The most pressing next step for Alaska Air officials may be winning regulatory approval for the deal. Alaska Air and Virgin America overlap only on a small number of routes, usually a key criteria looked at by regulators in airline mergers. However, the spate of mergers during the past decade may leave Alaska Air and Virgin America facing hostile attitudes from Washington regarding yet another merger. 
 
 Kyle Levine, Alaska Air Group’s vice president of legal and general counsel, said the company had not yet approached regulators about gaining approval for the deal. 
 
 “We know they’re going to take a close look at it. We think we have a good story to tell about us increasing competition and better positioning us to compete against much bigger carriers,” he said, noting there is “very little overlap” between the two airlines’ route networks. 
 
 Analyst Corridore predicted Alaska Air will also will get a green light from regulators, who have already greenlighted much bigger mergers like United-Continental, Delta-Northwest, Southwest-AirTran and American-US Airways. 
 
 “It will be shocking if the regulators chose to focus on Alaska/Virgin rather than American/US Airways,’’ Corridore says. “So I don’t think that will be a problem.’’ 
 
 But not everyone predicted smooth sailing. Jaime Baker, an airline analyst at JP Morgan, suggested regulators may take a tougher stand than with previous mergers. He noted that the Department of Justice — which had previously signed off on the past four big mergers — opened an antitrust probe last year investigating several U.S. airlines for possible collusion, 
 
 “Setting aside empirical analysis, the reality that the DOJ and DOT are investigating recently merged entities shouldn’t be ignored,” Baker warned in a research note. 
 
 Contributing: Charisse Jones 
 
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 Alaska Air Group Inc. said Monday morning that it had reached a deal to buy Virgin America Inc., winning a frenzied bidding war with rival JetBlue Airways Corp. 
 
 The parent company of Alaska Airlines said it would pay $57 a share for Virgin, a 47% premium to Friday’s closing price, representing a total equity value of $2.6 billion. The Wall Street Journal had reported Sunday that Alaska won the bidding contest for Virgin, whose shares have risen lately on takeover speculation. 
 
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 The acquisition of Virgin America, if allowed by regulators, will make Alaska the nation’s fifth largest airline. 
 
 Alaska Air Group, parent company of Seattle-based Alaska Airlines, agreed Sunday to purchase San Francisco-based carrier Virgin America for approximately $2.6 billion. 
 
 If the deal survives regulatory scrutiny, it will make Alaska Airlines a much bigger player, adding Virgin America’s 60 Airbus A320 jets to Alaska’s mainline fleet of 147 Boeing 737s. 
 
 Alaska would leapfrog JetBlue, which it beat in the bidding for Virgin America, to become the fifth-largest U.S. airline, after American, Delta, United and Southwest. 
 
 Companies at a glance 2015 data, except where noted Alaska Air Group Employees: 15,100 full- and part-time Passengers carried: 32 million Net income: $848 million Market capitalization (April 1, 2016): $10.2 billion Virgin America: Employees: 3,000 Passengers carried: 7 million Net income: $341 million Market capitalization (April 1): $1.5 billion Source: Company reports 
 
 And San Francisco would become a second major California hub for Alaska, whichflies many routes from Los Angeles. 
 
 Alaska Air history 1930s: The merger of McGee Airways and Star Air Service in 1934 creates Alaska’s largest carrier, with 22 planes. The company is sold in 1937 to a group led by a former pilot and renamed Star Air Lines. 1940s: After buying three more small carriers, the company is renamed Alaska Airlines in 1944. It becomes the largest charter operation in the world, and carries food during the Berlin airlift. 1951: Receives Civil Aeronautics Board approval to fly from Alaska to Seattle and Portland. 1960s: Builds its fleet around the Boeing 727. 1979: U.S. civil aviation is deregulated, supported by Alaska Air. The 10-aircraft company, which serves only 10 Alaska cities and Seattle, sees opportunity to expand. 1980s: Alaska Air expands service to Alaska to Northern and Southern California, as well as Spokane, Boise, Phoenix and Tucson. Flights to Mexico are added in 1988. In 1986, the company buys Horizon Air and Jet America Airlines. 2000: All 88 passengers and crew are killed when Alaska Flight 261, an MD-83 traveling from Puerto Vallarta to San Francisco, crashes into the Pacific. The National Transportation Safety Board later concluded that Alaska’s failure to properly lubricate and check for wear the jackscrew that operates the plane’s horizontal stabilizer directly led to the plane’s crash. 2005: Alaska outsources the jobs of 472 unionized baggage handlers after failing to reach a new contract with the International Association of Machinists. The airline says it will save $13 million a year; in 2004, in a similar cost-cutting move, it laid off 900 Alaska managers, mechanics and aircraft cleaners. 2013: Alaska Air vigorously opposes Sea-Tac’s $15 minimum- wage law, which passes nonetheless. 2014: Delta Air Lines begins Seattle-Hong Kong flights as part of its Sea-Tac hub expansion, raising pressure on Alaska. 2016: After a record year, carrying almost 32 million passengers and earning net income of $848 million, Alaska Air Group says its almost 14,000 employees will receive annual performance bonuses totaling $98 million. Alaska seeks approval to begin flights from Los Angeles to Cuba. Source: Alaska Air Group, Seattle Times archives 
 
 The Alaska Airlines brand will be retained. In a presentation about the merger plan, Alaska said, “We will explore options for the Virgin America brand in future.” 
 
 Alaska will pay $57 per share in cash and will assume existing Virgin America debts and aircraft operating leases of $1.4 billion, for an aggregate transaction value of approximately $4.0 billion. 
 
 In a statement, Alaska CEO Brad Tilden said the deal brings together “two incredible groups of employees to build on the successes they have achieved as stand-alone companies to make us an even stronger competitor nationally.” 
 
 The bidding war with JetBlue forced Alaska to pay a premium well beyond Virgin America’s current market capitalization of $1.7 billion, already inflated from $1.5 billion since news of a potential sale emerged. 
 
 The Alaska senior management team, led by Tilden, will lead the merged airline. Virgin America chief executive David Cush along with his executive team will leave the company, according to a person with knowledge of the details. 
 
 In the months ahead, government regulators will have to decide whether to oppose the acquisition on antitrust grounds. 
 
 If it isn’t blocked, Alaska will likely have to stop touting itself in Seattle as “proudly all-Boeing.” 
 
 Antitrust scrutiny 
 
 U.S. airline consolidation has already reduced the legacy carriers to just three giants, so antitrust officials at the Justice Department are likely to take a close look at how this merger could affect the West Coast flying public. 
 
 From its main hub in San Francisco and a secondary hub in Los Angeles, Virgin America flies up and down the West Coast, to Hawaii, and to vacation resorts in Mexico, as well as flying transcontinental to Chicago, Boston, New York, Washington, D.C., and Florida. 
 
 Since 2014, it has also had flights out of Love Field in Dallas. 
 
 It certainly has routes that overlap with Alaska’s. 
 
 Residents of Seattle or Portland can choose between the two when traveling to San Francisco or L.A., as can passengers traveling from the Bay Area to Hawaii. 
 
 Cutting that head-to-head competition will be good for Alaska, but not so much for travelers. 
 
 Yet acquiring Virgin America also offers Alaska lots of additional routes out of San Francisco, vastly strengthening its status as a West Coast power. 
 
 Widening its network in the Golden State will also help Alaska in its intense competitive battle with Delta by offering more connections to California from Seattle. 
 
 One slide in an Alaska presentation about the merger states that the merger will create “a bigger stronger national competitor to the big four airlines.” 
 
 As for adding the Airbus jets, Alaska could choose to abandon its policy of flying only one aircraft type, though that has been a fundamental strategy of low-cost carriers. 
 
 Introducing another aircraft type adds a great deal of expense in terms of training pilots and maintenance crews on two different machines. In 2008, Alaska finally retired the last of its MD-80s to focus solely on the Boeing 737. 
 
 But Alaska could choose to operate the two aircraft types separately with minimal integration of the flight crews and could conceivably even retain the Virgin America brand. 
 
 Since all but five of the A320s are leased, not owned, by Virgin America, Alaska could theoretically let those aircraft go as they come off lease between 2019 and 2025. 
 
 Yet this doesn’t seem to be the plan, with Alaska taking on the additional commitments Virgin America has made to Airbus. 
 
 Virgin America has already agreed to lease 10 new Airbus A321neo aircraft in 2017 and 2018, and also has firm orders for three more A320s and 30 A320neos. However, the airline has the right to cancel those 30 orders with just a $26 million cancellation fee. 
 
 “Virgin America’s fleet provides us ample flexibility” is the heading of one slide in the Alaska presentation. 
 
 Fun in flying 
 
 Virgin America launched in August 2007, declaring itself “on a mission to make flying fun again.” 
 
 British entrepreneur Richard Branson’s trademark branding promotes the airline as offering low-fare but high-quality service with a dash of glamour. 
 
 When the airline debuted, the San Francisco Chronicle reported that boarding a Virgin America jet “is not unlike rolling into a late-night club, cocktail in hand.” 
 
 The carrier’s fleet of new planes features mood lighting, leather seats with Wi-Fi, power outlets and seat-back video touch screens. 
 
 Virgin America CEO Cush said in a statement: “Our mission has always been to create an airline that people love … Joining forces with Alaska Airlines will ensure that our mission lives on.” 
 
 Last year, the airline had a profit of $341 million, up from just $60 million in 2014 thanks to the plunge in the price of jet fuel. 
 
 With foreign ownership of U.S. airlines limited to 25 percent, Branson owns 24.9 percent of the airline through his Virgin Group. New York hedge fund Cyrus Capital Partners owns 28 percent. 
 
 The airline went public in November 2014. 
 
 Joined with Alaska, the combined airline will have approximately 18,300 employees. Its fleet will consist of 280 aircraft, including regional planes, with an average age of 8.5 years. 
 
 The merged airlines will have some 1,200 daily departures, with hubs in Seattle, San Francisco, Los Angeles, Anchorage, Alaska and Portland. 
 
 Alaska outlined a merger schedule that anticipates Virgin America shareholder approval in June, with regulatory approval coming in late fall and the deal closing by year end. 
 
 The two airlines will continue to operate as separate entities for about a year after that until they get a combined operating certificate from the Federal Aviation Administration. 
 
 After that, a person with knowledge of the plan said, the intention is to integrate the airlines as completely as possible.
– Alaska Air will leapfrog JetBlue to become the nation's fifth-largest airline after striking a deal to buy Virgin America, reports the Seattle Times. Alaska Air announced the deal Monday morning after what the Wall Street Journal reports was a "frenzied" bidding war with JetBlue, one that resulted in a higher-than-expected $2.6 billion price tag. The deal still must be approved by regulators. Alaska Air would add 60 Airbus jets to its fleet of 147 Boeings—the airline is based in Seattle—and solidify its status as a "West Coast power," notes the Times. As USA Today reports, the new airline would have 1,200 departures daily and hubs in Seattle, San Francisco, Los Angeles, Anchorage, and Portland. It's not clear whether the Virgin brand would disappear entirely.