Does Virgin America Sale Help Or Hinder Discount US Airfare?

It's not often that a merger between two companies engenders such strong reactions from the buying public, but if investors thought the Alaska Airlines purchase of Virgin America was big news, the airborne adherents of Virgin are wringing their hands in anxiety over what might happen to the carrier that offered a distinctly different way to fly than most of its American competitors.

As one 29-year-old Silicon Valley marketing manager and former frequent Virgin flyer told The New York Times: “I think of [Virgin] as a young, hip airline. Alaska is more of a friendly aunt.”

Virgin loyalists are unlikely to get any help from regulators in saving their grounded carrier. Seeking Alpha explained that while any mention of airline mergers might justifiably conjure up images of antitrust suits and price collusions, the Alaska-Virgin consolidation doesn't smack of anything illegal. In fact, the addition of Virgin's routes to Alaska will boost the latter's share of the nationwide air travel market by a mere 1.5 percent. While this is enough to push Alaska, now at a total of 6.5 percent market share, over JetBlue (6 percent), the larger carriers of American, Delta, Southwest and United all boast figures in the high teens to the low twenties. Moreover, every former Virgin route now flown by Alaska has at least one other airline servicing the included airports.

So, with Virgin locked up in Alaska's clutches so tightly that even Richard Branson had to post a breakup letter on the Virgin Group blog, should the airline's old supporters — as well as everyone else in the friendly skies — lament the loss of the British-based airline in American airspace?

It really depends on how passengers view the entire experience of "discount airlines." First off, it pays to note that, despite the national pastime that is complaining about airports and air travel, average domestic fares are lower today than they have been in more than half a decade. According to the Bureau of Transportation Statistics, Q3 2015 saw the average air fare — admittedly a wide-ranging figure — fall to $372, a 3.5 percent dip from the previous quarter and a 6.2 percent slide compared to Q3 2014. The number represents the lowest average domestic fare since 2010, adjusted for inflation.

But low prices don't automatically mean customers are delighted to pay them for whatever experience they get. Virgin America was far from offering the lowest domestic fares on the continent. That "honor" may go to Spirit Airlines and its average fare of about $67 as of Nov. 2015, but for the value offered, none bested Virgin. Wichita State University's Airline Quality Rating report found that the airline outperformed all its domestic competitors in minimizing lost luggage and avoiding delays, cancellations, oversold flights and customer-provided complaints.

What airline was ranked the worst? Spirit, the one that offers customers the lowest average rate they could possibly find and ostensibly want.

Dean E. Headley, associate professor of marketing at Wichita State and co-author of the report, told The Boston Globe that Spirit's low score might point to a major misconception about discount air travel in the U.S. While Europe is nearly choked with carriers that go from port to port without offering as much as a salty snack or a bottle of water to consumers as a way to eliminate free services and keep costs down, American passengers may not be ready for the lack of amenities and downright predatory fees that come with so-called discount airfare.

“Spirit takes a hit in the complaint category because people don’t really know much about them,” Headley told The Boston Globe. “Consumers shop on price, but then, they’re nickeled and dimed when they get to the airport so they complain in record numbers. Spirit doesn’t make it particularly clear you’re going to pay for everything.”

Frequent Virgin flyers have plenty to fear if they're worried first and foremost about the look and feel of their favorite carrier rising above the clouds, never to be seen again. But if their anxiety causes Alaska to take some heat for eliminating Virgin America's low-cost, long-haul flights, it's not exactly clear that they'd be happier paying for dirt-cheap fares and paying more out of pocket for the type of customer service that Alaska Airline's newest subsidiary made its name off of.



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