uclacolumbiaunc

If Sir Richard Branson doesn't want to sell VX, but he can't do anything about it, then what's the driving force for VX to sell to Alaska (if not for poor financial performance)???

SFGuy37

umm, the investors want a return? What other reason is there?

lhl12

Exactly. The price that AS is paying for VX is extraordinarily high - much higher than most analysts were predicting. The reason is that there was a bidding war between AS and B9 for VX. VX was a strategic asset for both of them and they both wanted to buy it badly. They both kept bidding higher and higher until the price simply ceased to make sense for B9, at which point AS won the deal. The effect of that auction process was to produce a fantastic price for all VX shareholders, including Branson. They should all be ecstatic - they built an asset (VX) that had immense strategic value to two competing bidders and they reaped the benefit.

BearX220

For VX investors, who have been patient for ten years and endured not only endless losses but erratic, inscrutable, costly route experiments, this is a golden moment.

The airline is finally making short-term money and accrued some value. We're between recessions, and there's an appetite for consolidating the B-tier domestic carriers, and there were two flush suitors calling. You bet they want out now.

Two years from now there might be any number of pull-the-plug scenarios for a stand-alone VX, from an AS-B6 merger to another oil shock, and investors would be left high and dry. Absolutely, they want to monetize before sundown.

edcho

+1... and they hit the jackpot.

spin88

Their will be no issues with the Feds. Combining the airline does not create any hubs where they dominate more, and does not remove any routes where they are the only competitors. The only overlap that I can think of is SEA-SFO and VX's presense is small, and it is also served by WN, DL, and UA, its a very competitive route, and VX has not been the low price leader (its usually UA), and SEA-LAX, and that is served by WN, AA, DL (and if you can call it "service") UA, again, VX is not the price leader usually. The Feds will see this as providing better competition to the big four.

As to the price, I don't know if VX+AS will eventually merge with B6, but if so the winner of this "auction" will be the surviving entity of that merger. That was probably worth AS's management going all in.

Only thing I can see from their joint web-site is that the name will be Alaska (big surprise there ), the suriving program will be MileagePlan (which is better than Elevate by a lot, no surprise there), and a statement about VX's superior service that "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."

The folks that run Alaska are not stupid, and they have never had a LLC mindset. When facing markets that it was needed to deployed better food, wider meal windows (for example you get food in F on SFO-SEA on AS and VX, not on UA), and to make up for the lack of IFE hand out video players in F and rent them in Y. They are a short haul airline that has been trying to adjust product wide as they added more long flights.

I expect them to preserve as much of the VX cool as they can, and my guess is that they do a form of what b6 (and European airlines) are doing, have short haul product and longer haul product.

What I expect to happen as well. AS will not want to lose the passengers now paying good money on VX to OAL by cutting the experience/product. AS management is well aware of what happened to UA when it destroyed its hard and soft product (it picked up lots of those passengers ex-SEA and PDX) and it will not want to repeat the mistake, particularly with DL improving its in flight product.

I don't see anything by 1:1, otherwise people will be pissed off, and these things matter. People see points=miles, and AS will not mess with that. AS is a good program, better than Elevate IMHO, I actually think my bank of VX "miles" that I have been saving for 4 tickets to HKG on SQ in J, will be very usable on AS if I don't pull the trigger by then.

My question is how they combine the MM programs (which AS has), and it makes me wonder if VX keeps the miles people flew, or AS will just have to use status points in place of miles.


In full disclosure I am a not insubstantial VA shareholder, very happy today. Both AS and B6 knew the winner of this "auction" would be in a strong position to survive, and eventually take over the other, so they had an incentive to go as far as they could. But AS just had more financial firepower...

vxflyer

For starters, there is nothing cool about the name Alaska. They should chuck that and the Eskimo.

spin88

I don't know, color him red and call him the Virgin Eskimo.....

flyingcat

Excellent call, give him the branson beard. Would it not be better to have Alaska brand for regional and the 737 cargo operations.

How well does Alaska work in transcon markets that are not SEA especially for premium travel. If anything Alaska has to do something about Mint and all the premium cabin legacy improvements. Otherwise they will loose whatever cachet Virgin has built.

edcho

Makes me wonder wonder how much VX pays for the Virgin license. I would think Branson would try to make an enticing offer if AS was even interested.

In regards to transcon, now that they will be a solid #5, they could introduce something that competes with B6's mint. Wishful thinking I know...

radiowell

I found the following quote quite comical

http://www.latimes.com/business/la-f...404-story.html

Not hard to do if you are the only game in town, in Alaska...

It's like Comcast in a monopolized zone and claiming that they are the #1 in cable service

Firewind

...then DL teases/agitates AS while it goes through the throes, and downrange, gobbles it up in one swell foop.

Siberian_Viktorya

How much $$$$$ does Alaska have to pay VX if the purchase doesn't receive regulatory approval from the U.S. government?

BTW, did anyone catch what former governor Sarah Palin have to say about Alaska's purchase of Virgin America?

PVDtoDEL

I don't think it's particularly comical at all. AS has treated its passenger in Alaska rather well, which is why they were loyal to AS even when DL tried to expand its Alaskan network. AS continues to have stronger yields on its Alaska routes.

eponymous_coward

Hardly the only game in town in SEA/PDX though, which are nothing near fortress hubs and never have been. UA had a lot of service out of SEA in the 1970's, AS was an afterthought and worked for their market share.