MONDAY: Updated news bring in latest information about an agreement laid forward by Alaska Air Group to acquire Virgin America worth US$ 4 billion -in order to become fifth largest airlines of United States. As per deal policy, Alaska would acquire Virgin America with an estimate count of $57/share.
(The first U.S. commercial airline merger since U.S Airways and American Airlines combined in year 2013)
The deal is also believed to enable Seattle-based Alaska to expand into lucrative hubs such as San Francisco and Los Angeles. Board members of both the companies solely signed on the agreement.
INSIGHT: Alaska and its partner regional airlines, which in total account for about 5% of US domestic flight capacity, serve more than 100 cities in the US, Canada, Costa Rica and Mexico. In year 2014, Virgin America was accounted for about 1.5% U.S. domestic flight range, on U.S. Stock market.
On the Virgin Group corporate website, Branson lamented selling off Virgin America, but called it inevitable:
“I would be lying if I didn’t admit sadness that our wonderful airline is merging with another. Because I’m not American, the US Department of Transportation stipulated I take some of my shares in Virgin America as non-voting shares, reducing my influence over any takeover. So there was sadly nothing I could do to stop it.” – Sir Richard Branson’s blog
The deal will bring together Virgin’s 60 Airbus A320s with Alaska’s Boeing 737s and Bombardier Q 400s, for a total fleet of about 280 operating a combined 1,200 daily departures.
“With our expanded network and strong presence in California, we’ll offer customers more attractive flight options for non-stop travel.” – Alaska Air Group’s chairman and CEO, Brad Tilden
Exclusive estimates obtained from BBC reported Virgin America shares to have surged 40% to US$ 54.52 – bearish to offered price – during early trading. Meanwhile, Alaska plunged 4.7% to $ 78.15.
