What Will Happen to America in 2020

What's going on with the Alaska Air-Virgin America deal? The proposed merger of these two wildly different companies attracted an inordinate amount of public attention when it was announced back in April—and for good reason. After the carriers initially said they expected to close the sale, valued at some $4 billion, in less than six months, the original target date of September 30 came and went, as did the second date, October 17. Now, delays in closing the deal are attracting a fair amount of attention, too, with some questioning whether the engagement could be called off entirely.

The combined company will become the fifth-largest airline in the U.S., which is a concern in an industry dominated by four behemoths—American, Delta, Southwest, and United—that together carry more than 80 percent of airline travelers in the U.S.

Still, one source, a former Virgin America official who asked not to be named, said that everyone close to the situation still expects it to go through; Brad Tilden, Alaska's CEO, said as much during his recent quarterly conference call with financial analysts. "We were hoping to get this done a couple of weeks ago and we're obviously not there quite yet," he said, while adding that he was "confident" the deal is on track. And indeed, some longtime Virgin America employees see it as inevitable, too, and are reportedly already preparing to depart in the first part of 2017. "Everyone's assuming it's [the merger] going to happen," the source added. "We're making good progress with the Department of Justice and we continue to be optimistic the deal will close in the fourth quarter of this year." (It should be noted that hiccups in a merger process are nothing new—and the American-US Airways merger ultimately got approved, even after the DOJ sued to block it.)

However, it may not go through without some significant changes. After the airlines met with the DOJ in mid-September, reports circulated that Alaska might have to divest some assets, such as gates or landing slots at airports where the combined airline might lead to reduced competition. After all, the combined company will become the fifth-largest airline in the U.S., which is a concern in an industry dominated by four behemoths—American, Delta, Southwest, and United—that together carry more than 80 percent of airline travelers in the U.S. Alaska will have 1,200 daily flights and a route network that extends from New York to Hawaii, and from Mexico to the continental U.S. It won't be huge by industry standards, but what the DOJ looks at most closely is the impact on competition in specific markets.

Despite questions on how much Alaska is willing to compromise before the purchase price becomes, well, not such a good bargain, Tilden insists that the merger is good for travelers. "This is a pro-consumer merger of two smaller airlines," he said. But for Virgin America loyalists, a big question is whether the Virgin brand and amenities will continue after the merger (and they are loyal, as evidenced by the carrier's No.1 ranking in our Readers' Choice awards). Alaska has thus far declined to spell out in detail what it plans to do with the moniker, although it has signaled it wants to preserve many of the airline's trademark touches and, of course, hold onto that coveted customer base. That's not to suggest Alaska doesn't have a fan base of its own—it ranks high with consumers as well, coming in at No. 4 in our most recent survey.

Virgin Group founder Richard Branson has threatened to start up a new airline bearing the Virgin America name if Alaska doesn't use it. But Alaska would have to pay millions each year in fees to the Virgin Group if it holds on to that brand, an expense it might be reluctant to incur, especially if it needs to make concessions to win approval that might lessen the value of the acquisition. How will the deal shake out? Only time will tell.

What Will Happen to America in 2020

Source: https://www.cntraveler.com/story/will-the-virgin-america-alaska-airlines-merger-still-happen

Share this post