An article from The Street suggests that Alaska Airlines won’t have to wait much longer to complete its acquisition of Virgin America, but the two carriers will need to give up some things to seal the deal. The Department of Justice is apparently concerned about the creation of another large carrier after several years of consolidation.
Remember that a key argument for buying Virgin America is to grow in the Southwest. Alaska has a presence there (it even has a hub in Los Angeles through which it routes most flights to Latin America), but it isn’t very strong. Contrast that with Virgin America, which is concentrated in San Francisco and Los Angeles. Rumor has it that the DoJ will ask the airlines to give up between two and four gates at each of these California airports.
Though it does impair a key benefit of the acquisition, the combined airline will still have a fair number at both airports. What I find interesting is that the DoJ doesn’t seem to recognize the benefit of giving Alaska Airlines some heft to compete with established players. For example, the new airline will be the second largest at SFO after United Airlines. If the government is trying to encourage competition then it shouldn’t take away Alaska’s firepower. Likewise, LAX is a major hub for nearly every airline, so I don’t view adding one more contender to the ring as a real threat.
In addition to the loss of some gates, Alaska may be asked to discontinue entirely its codeshare agreement with Delta Air Lines and limit its codeshare agreement with American Airlines to cities where it doesn’t already fly. Similar rumors were mentioned by the Puget Sound Business Journal yesterday. Note that this only affects the airlines’ ability to sell tickets on each others’ planes. It does not suggest you’ll be unable to earn and redeem miles through partnerships between their frequent flyer programs.
Ultimately I do not think this will be a big issue. The new Alaska Airlines will be one of the largest in the country and able to get you to more places with its own fleet. Besides, Delta and Alaska haven’t exactly been friendly to each other lately. I already avoid codeshare flights like the plague, regardless of carrier, so I won’t be greatly affected. (If I want to fly Delta or American, I go to their site and just enter my Alaska Mileage Plan frequent flyer number at checkout.)
None of this is confirmed yet, but I suspect the rumors mean a formal announcement is coming soon. It will be more interesting to find out more about exactly how the new airline will reorganize its network and its operations, which will probably take some time to execute.
