Today the Department of Justice approved the sale of Virgin America to Alaska Airlines. This clears the way for the companies to combine operations. It’s likely that they’ll restructure their network to reduce overlap and enter new markets. There’s been talk that they might keep the Virgin America brand around for a while, but in most mergers what happens is one brand takes over and the loyalty programs are combined. The next year is probably going to be interesting.
It’s taken a lot longer than many people expected, and some people imagined that it might even get rejected as the industry is much more consolidated now than in past years.
What’s very interesting is that Alaska Airlines was not required to divest any of its assets as a condition of approval. There was speculation that it might be required to terminate codeshare agreements with Delta Air Lines or American Airlines and give up some gates at SFO and LAX. It appears they will make some changes to codeshare agreements with American, although nothing as substantial as what was rumored.
Personally, I don’t think concessions make a lot of sense from a regulatory standpoint. Alaska either needed to acquire someone or expect to be acquired itself in the near future. The big four (Delta, United, American, and Southwest) have made the competitive environment much more difficult. The combined Alaska + Virgin will be number five. If the government wants to create more competition among big carriers, why handicap Alaska? And why reject the merger altogether, which would just leave two smaller carriers? But this is pointless discussion — the decision has already been made.
Whatever you think about the wisdom of those earlier mergers, four big carriers already exist. Another big carrier is more likely to increase competition than hinder it (in my opinion). We’re likely to have more flights to more destinations. Both Virgin and Alaska have reputations for great service, and Alaska in particular has been making several improvements to its cabins, added a premium class, and issued new upgrade policies. I’m looking forward to the merger and learning more about how their plans in the near future.
