Alaska Air Group has closed its acquisition of former competitor Virgin America, a move that comes one week after regulators approved the deal and continues a multi-year process of consolidation of US airlines.
Seattle-based Alaska, which has recently returned some of the industry's strongest financial results, will decide in early 2017 on whether it will retain the Virgin America brand in the merged carrier.
Alaska says the $4 billion deal will provide more options to its customers while enabling the consolidated company to better compete against already-merged behemoths American Airlines, Delta Air Lines and United Airlines.
Those carriers, Alaska notes, control 84% of US air traffic.
"Alaska Airlines and Virgin America will spend the next year working to secure Federal Aviation Administration certification to allow the two airlines to operate as a single carrier," Alaska says in a 14 December media release.
Alaska, which earned an operating profit of $1.3 billion in 2015, expects the FAA will grant a combined certificate by early 2018, it says.
Virgin America, based in Burlingame, California, earned an operating profit of $177 million last year, according to financial filings.
Alaska adds that subsidiary Horizon Air, which currently operates regional aircraft under the Alaska brand, will continue to operate under its own certificate.
Though the merger brings together two disparate aircraft fleets – Virgin America operates only Airbus A320-family aircraft and Alaska operates Boeing 737s – it will eventually help the combined company realise $225 million in annual financial benefits, Alaska has said.
With the merger, Alaska and Virgin will operate a fleet of 286 aircraft and fly nearly 1,200 flights daily, serving 118 destinations in the USA, Mexico, Canada, Costa Rica and Cuba, Alaska says.
It will also operate more flights from California than any other airline, according to Alaska.
Alaska operates hubs at Seattle and Portland, but has substantial operations at several California airports, while Virgin America operates a San Francisco hub.
Growth will continue, with Alaska announcing that next summer it will launch new flights from San Francisco to Orlando, Minneapolis and Orange County.
With the deal closed, Alaska will move forward with combining aspects of the companies. On 19 December, members of each airline's frequent flyer programme will be able to earn rewards for travelling on the other's flights, Alaska says.
That same day, seats on Virgin America flights will sell on Alaska's website, it adds.
Alaska announced its intention in April to purchase Virgin America for $2.6 billion in cash plus $1.4 billion in assumed debt. Virgin America's shareholders approved the deal in July, leaving the decision in the hands of the US Department of Justice, which conditionally approving the merger on 6 December.
The conditions, which Alaska accepted, require the combined company to end codeshares with American on dozens of routes and prohibit the merged airline from divesting gates and slots that American was required to relinquish as a condition of its 2013 merger with US Airways.
Those gates and slots are at Dallas Love Field, New York LaGuardia and Washington National airport.
Alaska says the required codeshare changes will eliminate $60 million in annual codeshare revenue, but it expects new passengers will make up $40 million to $45 million of that loss.
In announcing the deal, executives acknowledge differences between the two carriers. Alaska operates largely like a traditional legacy airline, while Virgin America markets itself as a hip upstart to technology-savvy travellers.
"We believe different works," Alaska chief executive Brad Tilden says in the release. "The two airlines may look different, but our core customer and employee focus is very much the same."
In June, Tilden said Alaska was tinkering with the idea of retaining Virgin as a distinctive brand within Alaska.
Alaska now says "no decisions about the Virgin America brand have been made".
"Alaska plans to continue to operate the Virgin America fleet with its current name and product for a period of time while it conducts extensive customer research to understand what fliers value the most," says Alaska's media release.
"This is a big decision, and one that deserves months of thoughtful and thorough analysis," Tilden adds. "We plan to make a decision about the Virgin America brand early next year."
The carrier will, however, unveil today a 737 painted with a design intended to represent the merged carriers' brands.
Tilden will remain the combined company's CEO, while Alaska's chief operating officer Ben Minicucci will become Virgin America's CEO, succeeding David Cush.
Virgin America's previous chief financial officer Peter Hunt is now the airline's president, Alaska says.
The merger reduces to nine the number of US airlines with substantial domestic networks within the continental USA.
The others are Allegiant Air, American, Delta, Frontier Airlines, JetBlue Airways, Spirit Airlines, Southwest Airlines and United Airlines.
Other players include Hawaiian Airlines and Sun Country Airlines.
In recent years, Delta merged with Northwest Airlines, United merged with Continental Airlines, American merged with US Airways and Southwest merged with AirTran Airways.
Source: Cirium Dashboard
