Alaska Air Buys Virgin America for $2.6 Billion

After a weekend of speculation around Alaska Airlines and JetBlue Airways attempting to buy Virgin America, Alaska has emerged as the winner, announcing this morning that it was acquiring Virgin for $57 per share in cash.

Combined with Virgin’s debt and aircraft operating leases of approximately $1.4 billion, the ultimate value of the deal is $4 billion.

The deal gives Alaska Air, which has a strong presence on the U.S. west cost, access to important east coast airports in Washington, D.C. and New York City. It will have 1,200 daily departures, making it the U.S.’s fifth largest airline. After the merger, the airline’s headquarters will remain in Seattle.

Brad Tilden, chairman and CEO of Alaska Air Group, will lead the company after the merger is complete, with Virgin America president and CEO David Cush remaining with the company up to that point.

Virgin’s Elevate loyalty program will absorbed by Alaska’s Mileage Plan, which has a broad collection of other airline partners.

Virgin is 54%-owned by Richard Branson’s VX Holdings and New York-based Cyrus Capital Partners LP.

The Virgin Brand

It appears that the Virgin brand will give way to Alaska’s brand, but in the announcement the companies allowed for some wiggle room in the future:

“Alaska Airlines and Virgin America are two of the most respected aviation brands in the United States (and globally in the case of Virgin). While the companies apply for a single operating certificate, Alaska will maintain its new, refreshed brand and will work closely with Virgin America to learn more about the award-winning Virgin America brand and customer experience. And over the next few months Alaska will explore with the Virgin Group how the Virgin America brand could continue to serve a role in driving customer acquisition and loyalty to get the best from both brands.”

Both CEO’s appeared on CNBC this morning to discuss the merger and the conversation quickly moved the the future of the Virgin America brand. Alaska’s Tilden said, “The Virgin brand is powerful. That company does a great job of attracting customers and hanging on to them. Alaska does, too. We’ve been around for 84 years and we’ve got an extraordinarily loyal following. The Alaska brand will definitely stay.”

“We will look at the Virgin name and we will look at ways to use it into the future.”

Cush was much shorter in his response: “They’ll make the right decisions at the right time.”