Alaska Airlines To Buy Virgin America In $4B Deal

Virgin Alaska? Alaska American? Either of those — and other combinations — could soon be the fifth largest airline operating in the U.S. after Alaska Airlines agreed to acquire Virgin America in a deal valued at $4 billion. 

Virgin America announced Monday, just two weeks after sources said the airline was looking to sell itself, that the carrier had officially been taken off the market by Alaska Air Group.

The boards of both companies unanimously approved the definitive merger agreement, which will see Alaska paying $2.6 billion in cash and acquiring $1.4 billion debt and operating leases from Virgin America.

“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,” David Cush, Virgin America president and CEO, said in a statement.

The deal, if approved by federal regulators, would allow Alaska to jump in front of JetBlue to become the fifth largest airline by traffic in the country. Seattle-based Alaska Airlines is currently sixth largest, while Virgin America is the ninth largest airline.

Under the deal, Alaska, which already operates Horizon Air, will expand its footprint in high traffic areas such as California, where the airline expects to become the “go-to” carrier for more than 175,000 daily fliers.

Elsewhere, the airlines expect to operate 1,200 daily departures from their hubs in Seattle, San Francisco, Los Angeles, Anchorage, and Portland, OR.

“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,” Brad Tilden, chairman and CEO of Alaska Air Group, said in a statement. “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.”

Virgin America, which launched in 2007 and went public in 2014, reportedly began toying with the idea of putting itself up for sale in mid-March. Last week, sources close to the matter said the airline had received bids from Alaska Airlines and JetBlue.

It’s unclear how much JetBlue offered for the carrier or how far negotiations went.

Virgin America and Alaska Airlines will likely face close scrutiny from regulators in the U.S. who have expressed concerns that further consolidation of the airline industry would result in higher prices for travelers.

Lawmakers and consumer groups have raised issues with airline consolidation since the approval of the $17 billion U.S. Airways and American Airlines merger in 2013. While the Department of Justice sued to block the deal, it was eventually approved and the two airlines officially combined last year.

[via The New York Times]