What Alaska Airlines' Purchase of Virgin America Means for Travelers

More Airline Consolidation

Photo by Benet J. Wilson

Just when you thought U.S. airline consolidation was over -- after US Airways and American Airlines completed their merger in 2015 -- a new deal was officially announced.  Both Seattle-based Alaska Airlines and New York-based JetBlue Airways expressed interest in buying San Francisco-based Virgin America. But Alaska Airlines won with a proposal to pay $2.6 billion for Virgin America.

In its announcement about the deal, Alaska Airlines said its acquisition of Virgin America will give it an expanded West Coast presence, a larger customer base, and an enhanced platform for growth. The merger marries Alaska Air's fortress Seattle hub and dominance in the Pacific Northwest and the state of Alaska with Virgin America's strong foundation in California. The deal will allow Alaska Airlines to get a bigger share of the more than 175,000 daily passengers flying in and out of California's airports, including San Francisco International and Los Angeles International.

Customers on Virgin America will see expanded flights to the growing and important technology markets in Silicon Valley and Seattle. Another bonus of the deal is the carrier can tap into Alaska Airlines' frequent connections to international airline partners that depart out of Seattle-Tacoma International, San Francisco and Los Angeles airports. Travelers can also take advantage of more flights to important East Coast business markets in slot-controlled airports like Ronald Reagan Washington National Airport, John F. Kennedy International Airport and LaGuardia Airport.

Virgin America originally began as the brainchild of Virgin Atlantic Founder Sir Richard Branson in 2004. He wanted to bring the Virgin brand to the United States, and proposed creating the airline Virgin U.S.A. But the proposed carrier ran into trouble after there were questions on who held the majority ownership stake. U.S. law prohibits foreign investors from owning more than 25 percent of a U.S.-based carrier. it also had trouble finding U.S. investors.

In order to get the airline up and running, executives at Virgin America restructured the carrier where  voting shares were held by a trust approved by the U.S. Department of Transportation. They also agreed that only two board members would come from the Branson-controlled Virgin Group.

Virgin America announced orders for Airbus A320 narrowbody jets for its fleet and began flying in August 2007. Once it began flying, it became very popular with travelers despite not having a large route network or daily flight frequencies.

The airline was innovative when it came to the passenger experience, becoming the first U.S. carrier to offer Wi-Fi on every flight. Other onboard services include standard and USB plugs at every seat, seat-to-seat chat and food/beverage delivery, gourmet and artisanal food and snacks, groovy mood lighting and Red, its inflight entertainment system featuring  movies, live TV, music videos, games and a music library. Passengers have access to three cabins: Main, Main Select and First Class. Main Class Select travelers get six more inches of legroom, early boarding and free select food and drinks.

 

Both airlines have been lauded for their passenger service. Virgin America has been voted "Best Domestic Airline" in both Travel + Leisure's Annual World's Best Awards and Conde Nast Traveler's Readers' Choice Awards for the past eight consecutive years.  And Alaska Airlines has been ranked "Highest in Customer Satisfaction Among Traditional Carriers" by J.D. Power for eight years running, and has been ranked number one for on-time performance six years in a row by FlightStats.

The combined airline will have 1,200 daily flights out of  hubs in Seattle, San Francisco, Los Angeles, Anchorage, Alaska, and Portland, Oregon. The fleet will be comprised of approximately 280 aircraft, include regional aircraft. 

The combined airline will remain based at Alaska Airlines' Seattle headquarters. led by CEO Bradley Tilden and his leadership team. Virgin America CEO David Cush will co-lead a transition team that will develop an integration plan. The merger, approved unanimously by both boards, will depend on receiving regulatory clearance, approval by Virgin America shareholders; the transaction is expected to be completed by no later than Jan. 1, 2017.