My thoughts on the Alaska Airlines acquisition of Virgin America

alaska-airlines-virgin-america-merger

Today, Alaska Airlines announced that it will be acquiring Virgin America for $2.6 billion. Suffice to say, that’s a lot of money for Alaska Airlines to be shelling out. Many have argued that they are vastly overpaying, but Alaska believes that it’s worth it. Alaska Airlines has put together a website with all the details, so I won’t delve too much into that here. I’ll leave that up to the financial experts. Instead, I’m going to focus on what this could mean for travelers in the San Francisco Bay Area, Virgin America’s home.

The two airlines have the reputation of having some of the best service in the United States, but this doesn’t mean that their unique cultures are going to fit. While perhaps Alaska will be incorporating some elements of Virgin’s in-flight experience, such as the entertaining safety videos, I wouldn’t expect the purple mood lighting. It would be nice if Alaska would incorporate Virgin America’s live in-flight television and ordering system via seatback monitors, but that remains to be seen. In the end, some of the biggest changes and benefits will be the combined route map, which now makes Alaska the largest airline on the West Coast based on seats sold.

alaska-virgin-america-route-map

Alaska will now have transcontinental flights from San Francisco, a competitive but lucrative market. They will become a much more dominant force on the West Coast with the addition of a San Francisco hub. There are pros-and-cons to this.

On the pro side, Alaska Airlines fans in San Francisco will have a lot of new flight options, especially to get to the East Coast. Down the line, when the frequent flier programs combine, it also opens up some different routing possibilities & additional flights to utilize with American Airlines awards.

On the other hand, when Virgin America began flying from San Francisco to Portland and Seattle, there was a positive impact on fares between the cities, as Alaska suddenly had much more competition. Same goes for Hawaii. The two airlines often battled each other with fare sales. Anecdotally, I recall rarely being able to fly from San Francisco to Portland for less than $250 or so, but once Virgin America began flying, I could usually fly for around $150. That’s a drastic difference, and I fear that once the merger/acquisition is complete, fares could return to where they once were. I hope that’s not the case, but it’s possible, and probably likely.

Finally, there’s not a ton to be happy about today if you’re a major Virgin America fan (unless you’re an investor in the airline, in which case, enjoy your windfall!). If you’ve loved the brand and in-flight experience, you can expect that to mostly fade away over time. If you frequently fly to Seattle & Portland, you’ll eventually spend more. If you have a large frequent flier balance with Virgin America, you could potentially get more value from that down the line once those miles convert to Alaska, so there’s some benefit there.

Alaska Airlines is a great airline, one that I would indeed like to fly more frequently. It looks like I’ll be getting that chance over the next couple of years, once Virgin America is fully incorporated into Alaska by 2018.

 

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