Alaska Air Group is to buy Virgin America in a $4 billion deal that creates the fifth largest airline in the US.
An announcement today puts an end to a tight bidding war between Alaska Air and rival JetBlue Airways.
If approved by the US government and Virgin America shareholders, the deal is expected to be completed by January 1 2017.
It means Seattle-based Alaska Air will be able to expand into slot-controlled East Coast airports like Washington and New York’s JFK and LaGuardia.
"With our expanded network and strong presence in California, we’ll offer customers more attractive flight options for nonstop travel," said Brad Tilden, chairman and CEO of Alaska Air Group.
David Cush, Virgin America president and CEO, said: "Joining forces with Alaska Airlines will ensure that our mission lives on, and that the stronger, combined company will continue to be a great place to work and an airline that focuses on an outstanding travel experience."
The combined group will be based in Seattle under the leadership of Tilden and his senior leadership team.
Tilden and Cush will co-lead a transition team, which will develop a specific integration plan.
Today’s announcement said over the next few months Alaska will explore with the Virgin Group how the Virgin America brand could ‘continue to serve a role in driving customer acquisition and loyalty to get the best from both brands’.
Together, the combined airline will have 1,200 daily departures, with hubs in Seattle, San Francisco, Los Angeles, Anchorage, Alaska, and Portland, Oregon.
Joe Stelzer, managing partner Cavendish Corporate Finance, commented: "This tie-up presents significant premium to Virgin America’s market valuation, and will also strengthen Alaska Airlines’ position on the west coast where there is increasing competition, especially from JetBlue Airways.
"We’ve already seen Virgin America shares soar following the announcement. In most cases, airline assets are sold if the carrier is under financial strain, however this is an unusual case. Virgin America is widely recognized name, and the sale is indicative of the importance of a strong brand in an M&A deal. Virgin America will open an array of opportunities for Alaska Airlines to exploit the brand while equally to promote itself."
