DOJ Approves Alaska-Virgin America Merger

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In April, we wrote about Alaska Air Group’s purchase of Virgin America for $2.6 billion, and the Antitrust Division of the U.S. Department of Justice finally approved the merger Tuesday.

Alaska Airlines is the sixth largest U.S.-based passenger carrier currently. After merging, it will become the fifth largest airline. Still, the “big four”—American Airlines, Delta Air Lines, Southwest Airlines and United Airlines—control more than 80 percent of the U.S. market. Once merged, Alaska will operate about 1,200 departures per day with hubs in Seattle, San Francisco, Los Angeles, Portland, Ore., and Anchorage, Alaska.

“We remain confident in the merits of this transaction,” Alaska Air Group President and CEO Brad Tilden said in a press release. “The expanded West Coast presence and larger costumer base create an enhanced platform for growth, which is good for investors, employees and especially customers – who benefit from more choices, increased competition and low fares.”

As a condition of DOJ clearance, Alaska was not required to divest or sell any assets. However, the airline agreed to implement limited changes to the codeshare agreement with American Airlines. Alaska and American will no longer codeshare on flights that Virgin America and American Airlines both operate competitively. The majority of other routes will remain intact, as well as Alaska’s agreements and partnerships with other airlines, including Delta.

The deal is expected to close by Jan. 1, 2017. For the time being, Alaska will honor both programs’ loyalty points, and the programs “will remain distinct until the transaction closes,” according to both airlines. Tilden previously mentioned that he might keep the Virgin America brand and run the two airlines separately under common ownership, which could potentially keep both loyalty programs unchanged.

As we’ve seen with other airline mergers, loyalty programs have been combined into one (usually the bigger airline’s program), but it is uncertain how exactly the change would be implemented in this case, if at all. Virgin America uses a revenue-based award chart, and Alaska uses a traditional award chart. Handling point conversions between the programs might be a little tricky. Only time would tell how the acquisition would affect both frequent-flyer programs.

Although it’s too early to tell how the cookie will crumble and whether this merger would benefit flyers, I hope the change is for the best and that the airline would be able to compete effectively with the top four carriers.

 

What do you think of the Alaska Airlines-Virgin America merger?

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