Alaska Airlines Confirms Deal to Acquire Virgin America

Apr 4, 2016

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Alaska Airlines just confirmed its plans to acquire Virgin America in a post on… Instagram.

According to a CNBC report, Alaska will purchase Virgin for $57 per share in a deal that’s valued at roughly $4 billion in total, including debt, beating the top offer of bidding war partner JetBlue. That’s a HUGE jump over Virgin America’s public valuation of $1.48 billion as of Friday, based on its share price of $38.90. Shares are Virgin are up nearly 35% in pre-market trading, to $52.25 per share. That’s still shy of Alaska’s purchase price, so the stock may continue to climb throughout the morning.

The all-cash deal, which was apparently signed Friday night following a bidding war that may have put Marriott/Anbang/Starwood to shame, was expected to be announced today. According to a WSJ article, JetBlue backed off once the bidding jumped too high.

Alaska operates exclusively Boeing aircraft, while Virgin America has a fleet or Airbus A320s.
Alaska operates exclusively Boeing aircraft, while Virgin America has a fleet of Airbus A320s.

Once combined, Alaska and Virgin will make up the country’s fifth most popular airline by traffic, unseating JetBlue, which currently ranks #5. Alaska would also get hubs at two key West Coast airports — Los Angeles (LAX) and San Francisco (SFO) — and a fleet of Airbus A320s (which may ultimately present a challenge for Alaska, which currently operates only Boeing 737 aircraft).

As for consumers, passengers will have fewer airline options following the merger, of course, but there’s no question that Virgin’s fleet represents an upgrade for Alaska flyers, with its high-tech cabins, comfier seats and superior catering options. Alaska, meanwhile, offers an arguably more comprehensive frequent-flyer program, giving current Virgin elites an opportunity to earn and redeem miles on a variety of US-based and international carriers.

What do you think of an Alaska/Virgin America merger?

H/T: CNBC

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