As reported last week, Virgin America put itself up for sale, and the boutique airline owned in part by Virgin Atlantic founder Richard Branson has reached a deal to be acquired by Alaska Airlines for a reported $2.6 billion in cash, per the New York Times. The San Francisco Business Times tells us that the newly combined airline will be based in Seattle, as Alaska is now, and Alaska is paying $57 per share for the purchase. Including debt and aircraft operating leases, Alaska says, the deal may be worth "as much as $4 billion."
As the Wall Street Journal reported over the weekend, the 84-year-old Alaska Airlines is one of the few independent, pre-deregulation airlines to have survived without a bankruptcy, and it beat out JetBlue in a brief bidding war over Virgin an airline founded just over a decade ago with the premise of being a more stylish and comfortable budget airline, with its base in San Francisco.
Alaska also happens to be in good financial health as compared to some rivals. Per the New York Times, the company is "one of the rare airlines to hold an investment-grade credit rating and one with more cash on its books than some others." While it currently holds the position of being the country's sixth largest airline, with JetBlue holding the number five spot, this deal vaults Alaska Airlines ahead of JetBlue into fifth place. It also boosts Alaska's presence in the two hubs of San Francisco and Los Angeles, giving it a 15-percent share of seats offered out of SFO, up from 4 percent, and an 11-percent share out of LAX, up from 5 percent.
According to an anonymous source who spoke to the Times, during the bid proceedings, "Alaska also argued that it would need to divest fewer airport slots than JetBlue would, since its network has fewer overlaps with Virgin’s." Currently, Alaska and Virgin only overlap on six routes.
Alaska Air Group chairman and CEO Brad Tilden said in a statement, "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."
The only potential losers in this deal, which was confirmed early Monday, are die-hard Virgin American fans, since Alaska's fleet of planes are older and definitely inferior to Virgin's in terms of amenities, like wi-fi and touch-screen entertainment and beverage-ordering. Virgin, in fact, was the first US carrier to offer inflight wi-fi, starting in 2009.
The possibility remains that Alaska could use Virgin's fleet of planes to create a wholly owned subsidiary with its own branding, but that hasn't been discussed.
Though obviously Alaska would acquire Virgin's fleet of 60 Airbus A319 and A320 planes with their purple-lit interiors, it's unclear what will happen with the company's signature entertainment system not to mention that fun safety video, which will probably now disappear forever.
* This post has been updated throughout.