Partnerships / Acquisitions

DOJ Approves Alaska Air Acquisition Of Virgin America

It seems Alaska Air Group will be moving forward on its acquisition of Virgin America. The deal has received U.S. antitrust approval on the condition that its codesharing with American Airlines Group is scaled back.

The merged firm will become the fifth-largest U.S. air carrier, following behind American Airlines, Delta, United Airlines and Southwest Airlines. Alaska Air noted in a released statement that it is pleased with the approval and that it is looking to close the purchase in “the very near future.”

The codesharing stipulation will prevent Alaska and American from codesharing on routes where Virgin and American do not compete. Codesharing is also banned for future routes that Alaska Air might fly that would put it into direct competition with American. The settlement does not require that Alaska Airlines shut down any gates or divest itself of any assets.

“It’s not a material impact on the economics of the deal,” noted airline analyst Robert Mann of R.W. Mann & Company, Inc.

In 2016, American put its code on around 163,000 Alaska Airlines scheduled flights, more than doubling the 78,000 Delta placed, according to OAG. Alaska Airlines places its code on nearly 588,000 of those carriers’ scheduled flights as well.

Alaska paid a premium of around 86 percent for Virgin and was mainly interested in the deal for its strategic value in competing against American and Delta.

“Today’s settlement ensures that Alaska has the incentive to take the fight to American and use Virgin’s assets to grow its network in ways that benefit competition and consumers,” Renata Hesse, acting head of the Justice Department’s Antitrust Division, said in a statement.

In April, Alaska Air announced its $2.6 billion cash deal for Virgin America. The deal will make Alaska Airlines the West Coast’s largest carrier.

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