Virgin America is reportedly considering a sale.
Virgin America Inc., the airline backed by U.K. billionaire Richard Branson, is reaching out to potential buyers about a sale of part or all of the company, people with knowledge of the matter said.
The carrier, which flies to destinations throughout the U.S. and Mexico, is working with a financial adviser after receiving takeover interest, the people said, asking not to be identified as the matter is private.
As of this writing Virgin America shares are up sharply on the news.
There’s not a lot of room for consolidation left in the US airline industry, and there’s only a limited appetite for it among federal regulators.
After Delta bought Northwest, Continental acquired United, Southwest bought Airtran and US Airways took over American each of the largest 4 airlines has been made bigger through a merger.
These deals were done in a different era, when airlines were struggling financially and working to survive. There was a belief that consolidation would help both the individual carriers and the industry as a whole.
By the time the American-US Airways deal was being done, though, and even though American was in bankruptcy the Justice Department opposed the merger and finally settled for some minor concessions.
Virgin America isn’t large. They started in 2007 with 22 aircraft and have grown to about 60. (They recently petitioned the DOT to lift the limit on the number of aircraft they can have.) In contrast, American Airlines has close to a thousand.
Still, we can be pretty confident that United Airlines wouldn’t be permitted to buy them given overlapping strength in San Francisco. And major carriers generally might face a tough time in a political season.
Nonetheless, we’ve seen speculation about consolidation in the low cost carrier sector. Spirit’s former ownership took over Frontier and seems to be mimicking its model. One could imagine the new Spirit CEO (who sold AirTran to Southwest) doing a deal with Frontier.
And it’s conceivable that JetBlue, a more boutique-style carrier focused on New York, bulking up on the West Coast by aligning itself with Virgin America. Such a deal could actually make for a stronger competitor to the prevailing large four domestic airlines and increase rather than reducing competition.
Nonetheless, this is a small indication that consolidation — which has only just begun in the hotel industry — might not be over for airlines. It could also free up Virgin America CEO Dave Cush to become Secretary of Transportation in a hypothetical Trump administration.