The US Department of Justice has approved Alaska Air Group's proposed acquisition of low-cost carrier Virgin America, though the approval requires Alaska "significantly reduce" its codeshare agreement with American Airlines.
"The Department of Justice announced today that it will require Alaska Air Group to significantly reduce the scope of its codeshare agreement with American Airlines, the world’s largest airline, in order for Alaska to complete its $4 billion acquisition of Virgin America," the regulator says in a 6 December statement.
"The modifications will ensure that Alaska will have the incentive to vigorously compete with American as Virgin does today," the DOJ adds.
Alaska praises the news and describes the required codeshare changes as "limited".
"Alaska did agree to implement limited changes to its codeshare agreement with American Airlines. The majority of Alaska and American codeshare flights will remain intact," the airline says in a release. "The DOJ did not require changes to any other agreements between Alaska and American, including interline or reciprocal loyalty agreements, or any of Alaska's other airline partnerships."
The agency also did not require the companies make any divestitures, Alaska adds
Alaska, which owns Alaska Airlines and regional carrier Horizon Air, anticipates closing the deal in the "very near future", though it does not provide a more specific timeline.
Alaska announced its plans to merge with Virgin America in April, saying the deal would enable it to better compete with much larger rivals like American, Delta Air Lines and United Airlines.
The merger will create the nation's fifth largest carrier, DOJ notes.
The agency says the existing Alaska-American codeshare deal "creates incentives for Alaska to compete less aggressively on routes both carriers serve and to forgo launching new service in competition with American".
After the merger, Alaska and American will be forbidden from codesharing on routes where they compete today and "on routes where Alaska would otherwise be likely to launch new service in competition with American following their merger", says DOJ.
"The settlement permits Alaska and American to continue codesharing in limited circumstances where it is unlikely to lead to competitive harm and may offer some benefits to consumers," DOJ says.
Prior to closing the deal Alaska must still contend with a private lawsuit challenging the merger, the airline notes.
"The company believes the plaintiffs' claims are without merit and plans to defend its acquisition of Virgin America accordingly," Alaska says.
Source: Cirium Dashboard
