Alaska Air Group is acquiring Virgin America Inc for $2.6 billion (£1.8 billion) in cash as part of an effort to strengthen the airline and allow it to compete more effectively with larger rivals on the US West Coast.
Alaska Air is buying Virgin America for $57 a share – an 86 percent premium of Virgin America’s stock last month before there were reports of a sale.
The deal will give Alaska Air opportunities in important East Coast business markets by increasing the airlines access to slot-controlled airports, such as Ronald Reagan Washington National Airport and the two primary New York City-area airports, John F. Kennedy International Airport and LaGuardia Airport.
Combined, the two airlines will have approximately 280 aircraft, which include regional planes, with an average age of 8.5 years.
Brad Tilden, chairman and CEO of Alaska Air Group, commented: “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. Together we will continue to deliver what customers tell us they want: low fares, unmatched reliability and outstanding customer service.”
He added: “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.”
— Alaska Airlines (@AlaskaAir) April 4, 2016
David Cush, Virgin America president and CEO said: “Our mission has always been to create an airline that people love – and we accomplished that while changing the industry for the better. 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 companies expect to complete the transaction by 1 January 2017 – as long as it receives approval from US government regulators and Virgin America shareholders.
Sir Richard Branson said he is sad to see Virgin America merging
In a company blog, Sir Richard said: “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.”
He went on to say that consolidation in the travel industry is a trend that “cannot be stopped”.
The last US commercial airline merger was between US Airways and American Airlines in 2013.