Alaska Officially Becomes 5th Largest US Airline w/ Virgin America Merger, Separate Visa Cards for Now

by Adam

Well, it’s now official. Alaska has won a “frenzied bidding war” with JetBlue according to the WSJ to buy Virgin America. Alaska will pay $57/share (a +47% premium on their most current closing price), valuing the deal at $2.6B.

A person familiar with the jousting said it was “a fierce back and forth between the two sides, with multiple bids for a number of days.” But ultimately, JetBlue “put the pencil down” because the price had gotten too high.

Alaska issued a formal press release this morning at their new combined site where they’ve announced that the combined company will be based in Seattle and that Alaska Airlines Mileage Plan will welcome Virgin America Elevate members at some time in the future. An FAQ section answers some of the more interesting questions for mileage collectors:

  • What about the separate Visa cards? Today, both Visa Signature® card programs will remain distinct – with no short-term impact on members. Holders of both Alaska Airlines and Virgin America Visa Signature cards can continue to accrue and use miles and points as before. In the future, we look forward to welcoming Virgin America Visa Signature members onto the Alaska Airlines Visa Signature card. Points accrued on Virgin America Visa Signature card during the transition period will be transferred and honored. Alaska Airlines is committed to ensuring that members of both card programs will maintain the same high-value rewards they’ve come to.
  • What about Virgin’s premium In-Flight experience? Today, nothing changes – we are still two separate airlines until the transaction is approved. We recognize the strong loyalty Virgin America’s customers have to the brand, and we will explore how best to leverage that as we pursue integration.
  • International Partners? Both Alaska Airlines and Virgin America will continue to work with our international partners throughout the transition. As a combined company with five international gateways, we will be one of the most compelling partners for international carriers on the West Coast.

So yeah, of course no specifics on international partners this early on (though one has to imagine that several of Virgin’s partners will go away as they have a direct competitor already in Mileage Plan (BA/VS, CX/SQ, QF/VA). Emirates is partners with both programs.

On the cards, as we’ve seen with most mergers, there will be an opportunity to apply for the current Virgin America cards before the Alaska cards become the only product for the combined company.  The currently have a Visa Signature card (10,000 points and non waived $49 fee) and a Premium Visa Signature card (15,000 points and non waived $149 fee). Will Comenity (the issuing bank) up the sign-up offers as we saw with Barclays for the US Airways cards? TBD

Virgin America Visa Signature Card Application
  • Get 10,000 bonus reward points after you spend $1,000 in your first 90 days as a cardholder; that’s up to $200 toward no-blackout reward flights on Virgin America.
  • Earn 3 bonus reward points per $1 spent with Virgin America.
  • Earn 1 bonus reward point for every $1 spent on all other card purchases.
  • Check one free bag each for you and your plus-one on Virgin America flights.
  • Bring a friend along for the ride with $150 off a companion ticket every year.
  • Save 20% on all of your RED™ in-flight purchases, including meals, snacks, cocktails, and on-demand entertainment.
  • Book reward flights for as few as 2,500 points, and travel whenever you want with no blackout dates on Virgin America.

Click here to see the current offer and then select “show more results” two times at the bottom of the page. You’ll see both the current Alaska and Virgin offers.

Full press release:

Alaska Air Group, Inc., parent company of Alaska Airlines, and Virgin America, Inc. today announced that their boards of directors have unanimously approved a definitive merger agreement, under which Alaska Air Group will acquire Virgin America for $57.00 per share in cash. Including existing Virgin America indebtedness and capitalized aircraft operating leases, the aggregate transaction value is approximately $4.0 billion. With an expanded West Coast presence, a larger customer base, and an enhanced platform for growth, Alaska Airlines will be positioned to provide more choices for customers, increase competition and deliver attractive returns to investors.

The combination expands Alaska Airlines’ existing footprint in California, bolsters its platform for growth and strengthens the company as a competitor to the four largest U.S. airlines. Combining Alaska Airlines’ well-established core markets in the Pacific Northwest and the state of Alaska with Virgin America’s strong foundation in California will make Alaska Airlines the go-to airline for the more than 175,000 daily fliers in and out of Golden State airports, including San Francisco and Los Angeles.

For Virgin America customers, service will expand in the thriving technology markets in Silicon Valley and Seattle. The combined airline will also offer more frequent connections to international airline partners departing Seattle, San Francisco and Los Angeles. In addition, this transaction will open up growth opportunities in important East Coast business markets by increasing Alaska Airlines’ access to slot-controlled airports like Ronald Reagan Washington National Airport and the two primary New York City-area airports, John F. Kennedy International Airport and LaGuardia Airport.

“Our employees have worked hard to earn the deep loyalty of customers in the Pacific Northwest and Alaska, while the Virgin America team has done the same in California. Together we will continue to deliver what customers tell us they want: low fares, unmatched reliability and outstanding customer service,” said Brad Tilden, chairman and CEO of Alaska Air Group. “With our expanded network and strong presence in California, we’ll offer customers more attractive flight options for nonstop travel. We look forward to bringing together two incredible groups of employees to build on the successes they have achieved as standalone companies to make us an even stronger competitor nationally.”

David Cush, Virgin America president and CEO said, “Our mission has always been to create an airline that people love – and we accomplished that while changing the industry for the better. 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.”

“Today’s merger announcement of two great airlines coming together provides both pilot groups with an outstanding opportunity to benefit from the growth of the expanded Alaska Airlines’ route network,” said Captain Chris Notaro, chairman of the Alaska Airlines MEC of the Air Line Pilots Association. “We would like to welcome the professional pilots of Virgin America to the Alaska family and we look forward to a common goal of building a new joint pilot group that will benefit from a stronger and more prosperous airline that we have helped build.”

“Alaska Airlines and Virgin America are both known for providing an exceptional in-flight experience, thanks in large part to the dedication of our respective flight attendants,” said Jeffrey Peterson, president of the Association of Flight Attendants-CWA Master Executive Council at Alaska Airlines. “The combination of these two award-winning airlines provides an exciting opportunity for our members and for the Virgin America flight attendants, or Inflight Team Members. We look forward to joining together and building on our legacies of customer satisfaction to the benefit of both companies’ passengers.”

A Larger Network, More Choices and an Enhanced Mileage Plan
The transaction brings together two airlines that consistently earn customer admiration and the highest industry accolades:

    • Alaska Airlines has been ranked #1 among the nine largest carriers in the United States by The Wall Street Journal for overall operational performance for three years in a row, while Virgin America has placed #2 in the same study for the past two years.
    • Virgin America has been voted “Best Domestic Airline” in both Travel + Leisure’s Annual World’s Best Awards and Conde Nast Traveler’s Readers’ Choice Awards for the past eight consecutive years.
    • Alaska Airlines has been ranked “Highest in Customer Satisfaction Among Traditional Carriers” by J.D. Power for eight years running, and has been ranked #1 for on-time performance six years in a row by FlightStats.
    • Virgin America has been rated #1 for the past three years in the annual Airline Quality Rating report, an annual study of U.S. domestic airline performance based on public data submitted to the Department of Transportation and conducted by professors at Wichita State University and Embry-Riddle Aeronautical University.
    • Alaska Airlines has been named the most fuel-efficient airline by the International Council on Clean Technology for the last six years.

The combined airline will retain its safety-centric, employee-focused culture:

    • Alaska Airlines and Virgin America both have been named among America’s ‘best employers’ by Forbes, which annually ranks 500 U.S. companies based on responses to a survey of American workers.
    • Both Alaska Airlines and Virgin America are listed on the International Air Transport Association’s Operational Safety Audit (IOSA) registry, the globally recognized benchmark for the airline industry. Alaska Airlines has been on the registry for 10 years and Virgin America has qualified for six years.
    • Alaska Airlines expects that Virgin America’s Pilots, Inflight Teammates, Guest Services Teammates and maintenance technicians will be protected in the combination.

Together, the combined airline will have:

  • 1,200 daily departures, with hubs in Seattle, San Francisco, Los Angeles, Anchorage, Alaska, and Portland, Oregon.
  • Approximately 280 aircraft, which include regional planes, with an average age of 8.5 years.
  • Virgin America’s fleet of 60 Airbus A319 and A320 aircraft boast three classes of service, in-flight WiFi and power outlets on every flight, as well as personal, touch-screen seatback entertainment.

Following closing, Alaska Airlines will welcome Virgin America Elevate loyalty program members into its Mileage Plan, ranked #1 by U.S. News and World Report. With Alaska Airlines Mileage Plan, members are able to redeem award miles for travel to more than 900 destinations worldwide, rivaling global alliances. Until the transaction closes, both loyalty programs will remain distinct – with no short-term impact on members. Upon closing, the programs will be merged. Alaska Airlines is committed to ensuring that loyalty members of both airlines maintain the same high-value rewards they’ve come to enjoy in both programs – with access to an even larger network.

Preparing for Takeoff
The combined organization will be based in Seattle under the leadership of Tilden and his senior leadership team, who collectively have nearly 15 decades of combined airline industry experience. Until receiving regulatory approval to close, Tilden and Cush will co-lead a transition team, which will develop a specific integration plan.

Alaska Airlines and Virgin America are two of the most respected aviation brands in the United States (and globally in the case of Virgin). While the companies apply for a single operating certificate, Alaska will maintain its new, refreshed brand and will work closely with Virgin America to learn more about the award-winning Virgin America brand and customer experience. And 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.

The merger, which has been approved unanimously by the boards of directors of both companies, is conditioned on receipt of regulatory clearance, approval by Virgin America shareholders and satisfaction of other customary closing conditions. The companies expect to complete the transaction with regulators’ approval no later than Jan. 1, 2017.

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