B6/VX merger would be the only one that makes sense.

Au contraire I think AS/VX makes more sense. Both have their own unique quirky culture, and the route overlap is minimal with the exception of the West Coast to Hawaii/Mexico.

That being said, AS management is pretty conservative, so it would seem more likely that B6 is the suitor as they would love to snuff the competition on the transcon routes.

Let's hope that it is not DL, nobody I know wants more worthless skypesos.

Isn't the AS/VX route overlap actually quite large? They are both highly concentrated on the West Coast. Being from the Bay Area (as I see you also are), I feel like there are almost always VX and AS options -- Portland, Seattle, LA -- when I am traveling on the coast (or Hawaii). The East-bound routes are a little different (I've never seen an AS route that made sense fore me going that way), but that's pretty small portion of either airline's volume. Neither has much in the way of coverage to small-market airports in flyover country (leaving me stuck on United if I have to go to, e.g., St. Louis).

I think classifying both airlines as "quirky cultures" is too broad of a sweep. VX's brand is "high-end/tech"; AS's brand is more truly "quirky/mom-and-pop." B6 (which I haven't flown in a decade, when I last lived on the East Coast) seems much closer in brand to VX.

I think the most likely outcomes are (a) nothing happens or (b) an investor (not an airline) buys in. As a VX loyalist, I hope we don't get any merger/acquisition by another airline; but I'd take B6 over any other suitor. I would also take DL over UA (a non-starter with the regulators anyway) or AA, if it came to that -- it would provide a much better SFO option than UA, product and service-wise, and I care more about that than points.

It's actually very low; AS doesn't serve LAX/SFO-Hawaii, and the vestigial SFO-PVR/SJD routes from the days where SFO was a focus city aren't too much overlap. From a route map perspective, having hubs at SFO and LAX + focus cities in SJC/SAN is pretty amazing in terms of California coverage.

That being said, the fleet and service model dissimilarities would be huge; VX's F is way way waaaaay different than AS F, and there's no real way to resolve it without angering a lot of the existing customer base; AS elites expect free upgrades (and the merged airline can't just give those out for free in VX cabins, it would crash revenue), VX F pax expect a much better F product than what AS provides (and I suspect the VX revenue model doesn't work as well on AS's route network- SFO/LAX is VERY different than SEA/PDX/ANC in terms of the kinds of people who will throw money around for F). And that doesn't even get into the Airbus/Boeing thing (and we're not talking a merged AS/VX airline that turns into a AA/DL/UA sized airline where you can make some efficiencies of scale work for you even if there are lots of different options in the fleet).

Oh, and there's the elite program. If you turned AS Mileage Plan into VX Elevate the screams of anguish among AS customers would be very loud. Buhbye EK/CX/AA/BA/AF/DL awards at anything resembling a reasonable price. Hello earning pennies back on the dollar in a revenue-based program.

I just don't see them matching up well.

AS/VX, G4/HA, and HA/VX merger wouldn't work out at all, AA, DL, UA, WN/VX merger wouldn't be allowed by the DOJ, so that would leave B6/VX or NK/VX. Spirit and Virgin America are two completely different airlines with too different route networks, so that leaves B6/VX who have complimentary fleets, routes, and business structures.

What the article linked to does not note, and no one else has is that DAL owns 49% of Virgin Atlantic, and the remainder is owned by Branson. Branson in turn owns 22% of VX. There is currently no FF tie up between DL and VX, and there is a very strong tie up between VS and DL.

Delta has been taking non-controlling stakes in various airlines, and using them to tie together benefits for its flyers, thereby expanding its effective network outside of Skyteam (this is what NW did with CO years ago). Delta has a lot of cash, and it is expanding on the West Coast, where its weakest presence is now at SFO. My guess is DAL would like better network ex-SFO. It also badly wants access to Love Field, which VX has. The articles, see e.g. here http://www.bloomberg.com/news/articl...iving-interest point to a sale of "part or all" of VX, which can include a lot of things.

A sale of "all of the company" would involve a tender (since part of the shares are publicly owned) and would involve DOJ approval. But a sale of part of the airline (say 25-30%) and a marketing tie, with perhaps a golden share, would likely not present any major issues. I don't think DOJ would block an ownership stake, with reciprocal FF benefits, and there might not be an issue on coordination of schedules. My guess is that they would view a DL/VX alliance as being pro-consumer at SFO, DAL, and likely LAX as well.

Its possible that it is B6, but I don't think they have the cash to buy all of VX, and I don't think any "tie in" benefits would be enough for this to be they way they burn their $$$$ in just buying a partial stake.

Alaska (for whom the Bay Area is the network hole) might be interested, but as others have noted their fleets are entirely incomparable.

p.s. in the interests of full disclosure, I own some VX stock, so my opinions are impacted by my own self interest. While A tender for the entire company would push up the price of the stock, I think a tie in (most likely with DL) is probably most beneficial to Virgin America's future.

I'm not so sure about that, given the DOJ/DOT hostility to DL at DAL, as well as their attitude towards the DL/UA NYC slot swap. Anything that gives additional power to a dominant player in a market seems to be something that the DOJ looks askance, and I have a hard time buying that they would be fine with an ownership stake that essentially guarantees that an existing LCC wouldn't ever try to compete with DL's service in markets like ATL, MSP, SLC, NYC, LAX and SFO (LAX and NYC are pretty important markets). If VX and DL are able to coordinate schedules, you've basically allowed some of the same immunity to antitrust the TATL/TPAC JVs have- can you show me an example of where the DOJ has allowed that in a strictly domestic market?

Having enabled too much legacy consolidation already, DOJ is very unlikely to bless anything that gives DL even more influence -- especially if we get more Democrats in power this November. The government's best remaining defense of airline customers is to protect a strong B-tier of carriers. I think B6-VX would pass muster on that basis, but one result would then be domino pressure on AS, which would suddenly look like a very small fish, to make a move for more critical mass -- perhaps AS-F9, AS-SY, or even AS-HA.

The latter presents little route overlap and results in an interesting network stretching from MIA and BOS out to SYD and MNL.

DOJ is not "hostile" to any airline, and I think you both misunderstand the governing legal framework. The current Anti-trust approach look at the impact of any purchase, swap, or "alliance" on a route by route basis. If routes/hubs are impacted so that divestitures are needed they require them. You are suggesting that none of the mainline airlines can join up with other smaller airlines, and that is clearly not correct. While DOJ would balk at UA buying VX (as it would take out its major competitor at a major hub, and on most routes VX is the ONLY competition), the same does not apply to DAL and VX.

The examples you give are the DAL gates (two). The goal there was to insure that an airline had sufficient routes to compete to some extent with WN (which had 18). The preference was for a new competitor with new service. Delta got rejected as it was just going to fly to its hubs with small planes. And the DL/UA route swap, you are missing that DOJ/DOT only raised issues with the UA/EWR part of it. Why? UA has a 70%+ market share at a slot constrained airport, and given them more slots was anti-competitive. But at JFK it was not an issue since there are 3 airlines with a major presence (AA, DL, B6) and VX's market share is extremely small.

If you look at a tie up between VX and DL (and as I noted early, I suspect DAL purchases a 25-49% interest, not control) it does not materially add to market concentration anywhere. VX does not serve ATL or SLC, or MSP (and I don't expect them to anytime soon). So no impact. DL does not have too much concentration at LAX or the NYC airports (see approval of DL taking UA's slots at JFK), and at SFO combining VX and DL is pro-competitive as it provides enhanced competition to UAL. On the very few routes that that VX and DL "compete" - I can only think of SFO-LAX/SEA; SFO-JFK; and LAX-JFK - allowing coordination does not change the competitive landscape as all of these routes already have at least 3 other competitors flying them.

And I want to be clear, in no way do I see Delta taking a controlling interest in VX, or buying the entire airline, my guess is they buy an interest, as they did with Virgin Atlantic.

So like VA, the brand is still the same, just DL owning majority stock?

The "governing legal framework" always operates within a certain, changeable political environment. That is why M&A actions face different receptions from regulators, and outcomes, under Republican versus Democratic administrations, whether you are talking about wireless providers, banks, or airlines.

That's still a competitor in the DAL market, unless you can show me another airline other than WN flying DAL-LAX, DAL-LGA or DAL-MSP. It was a legitimate way to add service (and note that the DOJ could have given a gate to VX and one to DL and split the difference, and added multiple competitors- they did no such thing).

The DOJ wasn't having any of that and chose VX because historically they're not interested in handing out slots to dominant airlines to help them become more dominant if LCCs can provide alternatives in the market. AS wouldn't be operating at DCA were it not for this kind of intervention.

They are fairly logical markets that VX might expand to once new jets end up on the property over the next few years. ATL, MSP, DTW and IAH are the biggest holes right now in VX's domestic markets (in terms of market size).

It de facto eliminates an LCC at LAX. "Coordinating airline schedules" with the blessing of the DOJ is shorthand for "we want a cartel and the privileges of ownership without actually being an owner". It is of note that AS doesn't do this with AA, and didn't with DL back when they were on friendly terms. US didn't do this with UA when they were partners. Did CO and DL get to do this back in "golden share" days?

Those are some fairly important routes (two serve a DL hub, one is a premium route where effectively eliminating an LCC competitor by allowing "coordination"/cartel behavior would be looked fondly on by DL).

Anyways... so there's no examples of the DOJ allowing schedule coordination between putatively competitive airlines (that really aren't because if DL "owns" some of VX but doesn't really "own" it, wink wink, and can coordinate scheduling, they might as well "own" it- being able to control schedule and capacity in markets might as well be owning it) in USA markets?

I still think the DOJ is going to be intensely skeptical of any merger or transaction involving the big four at this point that knocks out a competitor (even if it's not a "merger", just one where it's a de facto merger that allows for things like schedule coordination that would normally be antitrust fodder). We're on a knife's edge of having a cozy little cartel in the airline industry anyways with current consolidation. I have to think the DOJ has noticed that a "big four" is getting awfully close to a comfortable little cartel.

Ever since the DL-NW merger I've been against airline mergers, but I'm leaning towards a B6/VX merger as the new airline would result in in a larger airline capable of providing more stiff competition to the Big 4.

yes, like with (as with VS) cross selling of tickets. Delta has now done this is several airlines and it has worked out well for them. VX gives them a "hub" at SFO w/o having to build one, adding to their ability to attract high value business travelers.

The governing legal framework does not change that much, and it certainly is unlikely to from Obama to Clinton. Legally DOJ can only stop a merger (and cross-selling is even harder to stop) if it materially impacts competition. Since VX is not a major competitor of DL's anywhere, and they have almost no overlap, there is just nothing to block. With DAL's build up at SEA, DOJ might balk at them buying AS, but a VX tie up presents no real issues.

The bold part is the key part. DOJ will look at "knocking out a competitor" but as I noted, in no materially way does VX compete with DL at this point. They do with UA, but not DL.

And Anti-trust does not look at "what might happen", you don't say "well Delta can't partner with VX because if they don't partner, years later - when VX has more A/C - VX might add service to DL hubs." It is just not how it works.

Plus, given VX's market nitch (young, high tech) and if you look at their patterns, we are much more likely to see the next adds (after Hawaii) as being re-adding PHL (medical/drugs/bio), and then perhaps adding Houston or perhaps Vancouver.

Of the Delta hubs, I would think that DTW is the only one that has much tech pairing with the Bay area, and then I would think there was more connection with Research Triangle in NC.

Why would a combined entity need a midcon hub?? Does not fit either business model. Even the larger legacy carriers use second tier partners to shuttle passengers into the spoke (Allegiant, etc.)

Agree. There are opportunities in both Dallas and Chicago for the target demographic. But maybe not so lucrative, at least for ORD, as we've seen repeated fare sales thanks to good competition there. Certainly IAH should be on everyone's target list (4th largest metro area in USA, where UA has a lock).