With a whopping $2.6 billion offer, Alaska Air outbid JetBlue for Virgin America, it was announced yesterday, leaving Virgin brand founder Richard Branson among those ruing his inability to keep the idiosyncratic carrier independent while forging the nation’s fifth largest airline if regulators approve the deal, as is expected.
“I would be lying if I didn’t admit sadness that our wonderful airline is merging with another,” Branson writes in a post on the On Virgin America blog. “Because I'm not American, the U.S. Department of Transportation stipulated I take some of my shares in Virgin America as non-voting shares, reducing my influence over any takeover. So there was sadly nothing I could do to stop it.”
Branson reminds us that Virgin America, a younger cousin to his intercontinental Virgin Atlantic, started up in 2007 “with the goal of making flying good again.” It was the first airline “to offer fleetwide WiFi, soothing mood lighting, touch-screen seatback entertainment, an on-demand food ordering platform, and power outlets at every seat on every flight.”
But “Virgin America Discovers Price Beats Mood Lighting,” a Bloomberg hed tells us, followed by, “Independence wasn’t feasible for a hip carrier trying to buck the industry's grim reality.”
Alaska is “paying through the nosecone” for Virgin, however, writes Reuters’ Breakingviews columnist Antony Currie, thanks to JetBlue’s competing interest.
The combination of the two West-coast based carriers — Alaska’s headquarters are in Seattle; Virgin’s in San Francisco — “comes after four mega-mergers since 2008, deals that took eight of the USA’s biggest airlines and combined them into four larger carriers that now collectively control about 80% of the U.S. market,” Ben Mutzabaugh reports for USA Today.
“For an airline like Alaska, that says scale is relevant,” Alaska Air Group CEO Brad Tilden says.
“The Alaska senior management team, led by Tilden, will lead the merged airline. Virgin America chief executive David Cush along with his executive team will leave the company, according to a person with knowledge of the details,” Dominic Gates writes for the Seattle Times.
“Tilden said its brand — with the stylized face of an Eskimo on aircraft tails — will live on but his team wants to learn more about the Virgin brand so they could ‘use it in some ways down the road,’” Susan Carey writes for the Wall Street Journal, pointing out that customers such as San Francisco marketing executive Maggie Lang “certainly hope Virgin’s unique vibe carries over.”
“It’s really a boutique airline experience. The flight attendants are extremely amiable. You get the sense that they really love working for Virgin. The gates don’t look like anyone else’s gates. The furniture is different,” Lang tells Carey.
But in assessing arrival time, complaints to the U.S. DOT, destinations, food, legroom and luggage handling, Alaska bested Virgin in all categories except the last and legroom, which was a tie, Evan Bush reports in the Seattle Times. (“This is 2016; you’re not getting too much legroom however you fly,” he observes.)
And Time’s Alex Fitzpatrick lays out “4 Reasons Virgin America Flyers Shouldn’t Fear the Alaska Deal” amidst images of tweets from “bummed” and “sad” devotees of the Virgin brand experience. In short, it has “adoring fans, too”; “it’s innovative”; “it’s on time”; “you’ll get to keep your miles.”
But Airbus may have more concrete cause to worry. Virgin America has an all-Airbus fleet of 63 planes, while Alaska is a Boeing customer, reports the Wall Street Journal’s Jon Ostrower. “A senior Alaska Air executive on Monday said it will decide in the next two years whether to keep a mix of Boeing and Airbus Group SE jets or drop the European plane maker.”
“We are big believers in single fleet [airlines], so much so that we bought another single fleet [airline],” says Alaska Air CFO Brandon Pedersen.
American Airlines, United Continental, Delta and Southwest are the top four airlines. JetBlue will slide to the No. 6 position if the Alaska/Virgin deal closes next January, as anticipated, assuming Virgin shareholders and the DOJ both approve the merger, as expected, ABC News’ Susanna Kim reports.
“I don’t think [the DOJ] will interfere with this merger since there’s very little route overlap and it will give the combined airline more muscle to compete with the Big Four," George Hobica, founder of Airfarewatchdog.com, tells Kim.
Whether the Big Four take note of some of what has made the two brands so beloved by their passengers is another question.