Alaska Air Group Can Derive Route Benefits from the Acquisition
Alaska Air Group-Virgin America Merger: Fifth-Largest US Airline
Routes
Virgin America (VA) and Alaska Air Group (ALK) are strong operators in the US West Coast. However, the routes that they each serve are very different.
Currently, Alaska Air Group has hubs in Seattle, Anchorage, and Portland. The deal adds two more hubs in San Francisco and Los Angeles. In these two acquired hubs, Virgin America adds east to west routes to Alaska’s north to south strength.
It will expand Alaska’s current service from the Pacific Northwest to Los Angeles and San Francisco.
It also enhances Alaska’s service in some valuable East Coast airports like LaGuardia in New York, John F. Kennedy International Airport, and Ronald Reagan Washington National. At these airports, the number of flights is restricted. It’s very difficult for new players to gain entry.
Together the two companies have 1,200 daily departures.
JetBlue (JBLU) was the second-highest bidder for Virgin America. It also would have benefitted extensively. Currently, JetBlue is a strong player in the East Coast. The Virgin America acquisition would have given it a significant entry in the West Coast. Other players vying for a share of the West Coast include Delta Air Lines (DAL) and Southwest Airlines (LUV).
Different fleets
Currently, Alaska’s fleet includes 219 Boeing aircraft. Virgin America’s fleet has 60 Airbus aircraft. This is the first airline merger with two totally incompatible fleets. However, some experts think that since Virgin America’s fleet is big enough, it has advantages of its own.
Both of the airlines have young fleets with an average age of 8.5 years. This means low maintenance costs.
Next, we’ll see how the deal will impact Alaska Air Group’s financials and operational performance.
Alaska Air Group forms 1.4% of the iShares S&P Mid-Cap 400 Growth ETF’s (IJK) holdings.
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