Alaska and JetBlue are Bidding to Buy Virgin America!

There’s been speculation about JetBlue, Delta, and Etihad as Virgin America investors.

Now we know that there are two bidders and we know who they are: JetBlue and Alaska Airlines

Virgin America Inc. received takeover offers from JetBlue Airways Corp. and Alaska Air Group Inc. after the carrier backed by billionaire Richard Branson put itself up for sale, according to people familiar with the matter.

Discussions between Virgin America and the two bidders are ongoing, and a deal could be announced as early as next week, the people said, asking not to be identified discussing private information. It is unclear if other suitors will emerge, and Virgin America may yet decide to abandon sale negotiations in favor of remaining independent.

When word first spread that Virgin America was shopping itself to potential buyers, I suggested that some-what similar JetBlue with strength on the East Coast could make sense as a pairing for the West Coast-based Virgin America.

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.

We’ll see how this develops. Alaska would gain a San Francisco hub operation and East Coast slots, though they’ve been growing substantially without the acquisition and overfly San Francisco quite a bit with their current operation. JetBlue on the other hand would immediately become a bi-coastal player.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. My first reaction is that this is good news either way, in terms of opening up more options for many travelers, not least those of us based near San Francisco. Plus, as you note, Gary, this is one merger that on balance increases airline competition, something we sorely need in the US.

    Viewing this even more selfishly and sheepishly, I’m wondering whom I should root for here. I suppose Alaska, given its better frequent flyer program. But I’m open to persuasion.

  2. HUGE for Alaska if they can get it. It would finally allow them to have some footprint on the east coast that doesn’t require SEA…

  3. What’s keeping either of these airlines from expanding their current operations? I thought the market was deregulated. Why is acquisition the best way to grow? I can’t believe that it’s cheaper than buying or leasing additional aircraft.

  4. I think it makes little sense for AS to buy VX. They gain very little and would likely lose a lot as people flying VX would not necessarily want to take AS. JetBlue makes a lot more sense as they lack substantial service within the West Coast and would gain access to Hawaii. Even as reciprocal code-share and frequent flyer partners VX/B6 makes far more sense. Many people fly and like both. The fleets are compatible, reservation systems are too. Mint would remain a competitive transcon product which would give VX flyers a better longer haul experience. B6 West Coast passengers would gain lots of additional options through VX. Win-win all around.

  5. This seems like a great opportunity for both JetBlue and Alaska, and there is no doubt it is a positive for travelers, especially west coast travelers. Combining a AS with VX would create a route network that provides frequent service not only up and down the west coast but also across the country. That has not really existed since UA dramatically scaled back west coast flying (late 90’s or early 00’s). Every day it seems more and more like this may be last year as an AA loyalist, looking forward to Alaska’s new first class and the new premium class later this year – and now hopefully a bigger route network.

  6. I think both would be good for consumers in general but having flown all 3 airlines, JetBlue’s and Virgin AMerican’s experiences in coach are the closest aligned. Most of us are point junkies who love Alaska’s program, but if I was someone who flew VA 2-3x a year and didn’t care as much about points, I’d want the free snacks, tv, and better seat experience on JetBlue.

  7. Definitely hoping Alaska manages this purchase. Alaska Airlines management and staff will work well with VA culture.

  8. B6 makes more sense. Both FF program are revenue based vs AS’s mileage based.
    Both use Airbus fleets vs AS proudly all Boeing.
    It will be much easier for B6 to truly combine the operation (if that ever happens) than AS can.
    Of course, AS can also sell all the VX airbii to their best enermy DL, just like WN sold all the AirTran 717 to DL

  9. @nsx:

    Because making an order for B or A for 70 narrowbodies and hiring 5,000 employees and then having a hub in SFO (and a lot of additional LAX service, in AS’s case making putting them as a solid #4 with WN) isn’t something you can do overnight, let alone in a year?

    Heck, I don’t know if you could get leases on 10 or so gates at LAX/SFO in a year’s time, even if you begged the airport.

  10. And everyone who’s cheering for an AS/VX merger… consider that VX has a revenue-based program for acquire AND spend.

    There is going to be massive temptation to bite the bullet and do what the other cool kids did (go revenue-based) under the cover of a merger if AS/VX merge. So I wouldn’t be cheering on that merger. There’s a very good chance you’ll lose the last North American based FFP where a mile is a mile flown.

  11. I vote for VX remaining a separate brand selling investments to B6, AS and EK. They all codeshare and we sit back and watch DL management go ape$/;&.

  12. I don’t know why people automatically assume revenue-based ff programs are financially better for airlines. AS didn’t go that way and it is more profitable than the rest of them. Wall Street analysts, who are certainly interested in profitability, didn’t even have a single question of AA about its switch to a revenue-based ff system after it made the announcement. In fact, in the earnings call before AA announced the change, one analyst even asked if AA thought its mileage-based system was a competitive advantage.

    AS has better operational stats than DL and its front-line employees are just as nice if not nicer than DL’s. If AS could gain a national route structure, it would be a formidable competitor.

  13. I may be wrong but I like AS as it is and it seems to be growing well enough doing what it does best so I hope they don’t go wrong with any merger here. When DL started partnering with AS, I had DL friends ask ‘don’t you hope DL buys AS?’ – heck no was my response. AS is good, western-hospitality good, and DL would only foul it up. And DL has gotten worse in my opinion, and AS has gotten better. – So, should they buy VirginAm? I don’t know but I hope not. IMHO

  14. It’d be nice if they’d all merge and let the AS guys run the thing to give a real counterweight to the legacy guys.

  15. @John I agree. I’ve always thought that a differentiated system would be a plus over revenue based systems. Everyone mirroring everyone seems pretty myopic, assumes everyone is in a captive Hun market.

  16. @John I agree. I’ve always thought that a differentiated system would be a plus over revenue based systems. Everyone mirroring everyone seems pretty myopic, assumes everyone is in a captive hubmarket.

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