Beyond the DOJ issues, the prospect kind of reminds me of when Frank Lorenzo kluged together PeoplExpress, Frontier, PBA, and Continental in one day in the late '80s. The resultant logistical mess took years, and Gordon Bethune, to sort out.

The big difference with VX is the F product, which is significantly more roomy (and better food) than any other domestic other than on the SFO/LAX to NYC legs where the legacies (sometimes) fly what is essentially their International Biz Class as F (e.g., Delta One).

The VX F seat has a pitch of 55", a very good recline, and a fully-extending leg rest. AS F has a pitch of only 36", poor recline, no leg rest. That's a pretty significant difference.

I agree that HA is nothing special, at least on the OAK-OGG route. They do serve at least a (small, fairly crappy) meal, even in coach.

That's one of the big questions people are discussing in the AS forum as well. Things won't change immediately after the purchase, but AS might want to keep that kind of service on that route in particular. They certainly can't ditch 50 leases immediately and refitting a cabin isn't easy. They might slowly phase out the 320's in favor of 737's and at some point get rid of the nice service up front.

I only flew first on VA once and I still remember the vanilla sauce on the dessert. AS has really nice flight crews mostly because they haven't been screwed over in a merger, so I'm hoping they treat the Virgin folks well also.

Very well said. I'm sure AS has a strategy for what they expect at the end of the merger. For them being bigger was necessarily for several reasons such as keeping the wolves at bay for takeover bids.

I would guess that they would keep profitable VA routes, codeshare with them with AS offerings that could help their route network, close the non-profitable routes over time and replace them with more niche routes. That said, who knows.

I'm sure AS has plans though. You don't write a check that big without some analysis of your plans and expected payoff. It is an odd marriage of equipment and product though as you said. It will be interesting to see how it plays out. It's a pipe dream to think that AS will change their business class offering, but for niche routes, they might consider it. Other domestic carriers do serve the long, profitable routes with more premium products.

Latest from WSJ suggests the deal is pretty done:
http://www.wsj.com/articles/alaska-a...ing-1459716960

I agree that this is the path that seems to make the most sense. AA, DL and UA are all too big to acquire any other competitors, even little ones like Alaska, JetBlue or Virgin.

A three-way tieup of Alaska, Virgin and JetBlue, however, is still very small and should have no problem with the antitrust regulators. In fact, it seems like the regulators might actually encourage such a combo, to try to create a fourth full-scale competitor to the big three.

A combined Alaska/Virgin/JetBlue would mostly have market share in the big coastal cities. If they then wanted to create hubs in the middle of the country, they could do so in places like St. Louis, Cleveland, Memphis, etc. -- the mini-hubs that the big 3 vacated.

A fourth, full-scale competitor to AA, UA and DL would likely help general competitiveness and fares in a meaningful way.

Having flown through the Southwest-AirTran merger, this seems like it is going to have a similar dynamic. People in the acquired firm are offended more on style and association. In the VX/AS case, SFO and NYC fliers who think they are sophisticated don't want to be associated with an airline which flies to places like Fairbanks and Bozeman (although that will start to veer into OMNI/PR land). Ex-AirTran fliers on the Southwest board still hate Southwest, and many of them always will. VX makes some people here feel better because they don't have to fly with "those" people who are connecting. That's not enough to keep the airline around if the primary investors want to cash out at the top of the cycle. Your anger should be at them, not AS or B6 or the people who fly them.

VX is what, 1/5 the size of AS? It is a snack, and AS need extra nutrition for its battle with DL. Acquiring a new hub in SFO right next to their other domestic partner is good for them, it gives them the option of starting to draw down SEA a little if necessary and building the west coast E-175 network into a true network operation serving mostly SEA/PDX/SFO to points within 1000 miles and primarily north of I-80.

Meanwhile, they can keep the better F product and the trendy Y product (and I do like the F&B on VX when I've flown it, although it's been a couple of years) and serve SEA/PDX/SFO/LAX-BOS/NYC/DCA with it as a flagship service sufficiently good enough to feed connections to the wide network of AS international partners. I think AA has noticed the appeal of the VX F&B, and while they are not implementing the technology and don't have the variety, they have substantially upgraded their food options on 3+ hour flights. I wouldn't be at all surprised to see a portion of the VX F&B make it to longer-haul AS flights, perhaps over 2.5 hours.

I can't believe how some are so positive about the development. I guess such optimism should be commended (I'm not being sarcastic, having seen many mergers, it's amazing some people are still positive that it will work out well).

With AS upping their bid to $2.5 billion, which is completely insane, it is no wonder the initial investors are cashing out, still you would think they would want what they created to live on. Oh well, get up early and sell your shares of VX if indeed the price of their shares skyrockets tomorrow. A small consolation prize.

That is a crazy price. My mind is blown and can't believe even B6 had bid that high. Maybe they want to move the SEA and buying would be cheaper?

When do you think we would hear from the feds? I wonder what the unions are thinking too.

While there are some routes (and flights) where load factors aren't great (the early morning DCA-DAL flight comes to mind), overall load factors aren't bad. Of course, even a supermajor carrier with a 95% load factor is mixing a lot of 98-99% load factors with some modicum of 50-60% load factor flights which are basically positioning moves (e.g. "At a desirable yield I can fill three LAX-SFO planes between 1700 and 1900 but I can only fill two planes between 1200 and 1700 SFO-LAX...so given the choice between shorting a prime slot, parking a plane for half a day, and running a flight at a modest loss I choose the latter").

Honestly I think a AS+VX+B6 tie-up ends up working out about as well as the Penn Central merger. Straight mergers are enough of a mess (you invariably have different corporate cultures clashing as a handy example); doing a three-way merger becomes a real problem since now you have three cultures to deal with. With that being said, the other problem with such a tie-up is that you likely wouldn't get a majority "winner" in it: B6 and AS aren't too far off in terms of size by passenger count (B6 has a larger fleet) though Horizon probably nudges the Alaska Group ahead of JetBlue as a whole. Market cap-wise B6 is worth $6.87bn, AS is worth $10.23bn (I expect this to take a hit this week...AS is paying WAY too much), and VX was at (I think) $1.6bn pre-merger. AS would be the largest component, yes, but not by that much and I think they'd have a lot more trouble trying to "digest" the other components.

I suspect that the relevant authorities will, should they approve any tie up, sandbag it with all sorts of conditions and caveats (e.g. limit AS's ability to cut routes for some time). As we've noted, there are a lot of pairs where VX is the only competitor to United and if AS merges and then suddenly whacks out some of those pairs that would be a problem.

Also, I'd like to note one key difference between the AS/QX situation and this: Horizon always was "just" a short-haul carrier (I'm thinking the "[Insert Legacy Here] Express" brandings, albeit with a bit of differentiation due to the history). Again, if I'm in AS's position (and at least AS isn't plural or that would be awkward to write) I'd be mighty tempted to simply limit VX's "direct" Seattle business and otherwise let it do its thing (which it seems to be doing fairly well).

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On the whole, I think this merger is FAR from done. Frankly if I'm an AS shareholder I'm grabbing my pitchforks and going after the CEO for offering what amounts to close to a 60% premium for VX.* That being said, I don't think this is happening terribly soon (IIRC one of the early stories predicted that it would take two years to get approval) and if the economy were to slump off hard in that time it seems quite believable that the deal could collapse (e.g. if VX were to suddenly have its profit margin collapse while this is working its way through approval, does anyone want to bet that AS wouldn't try to pull the plug given the price)?


*My best guess is that JetBlue played Alaska like a fiddle on the price. Yes, they wanted a merger, but they probably "tactically overbid" when it became clear that Virgin preferred Alaska.

It's official.

Alaska just posted on FB: https://www.facebook.com/alaskaairli...080208157486:0

http://www.flyingbettertogether.com

No mention of RED.
HQ in SEA.
I feel terrible for all the great VX HQ Team Members who will lose their positions. UGH.

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Looks like they are not keeping anything VX-wise minus the planes and routes. :(

The only positive thing is that I don't see any changes until 2017.