Skift Take

It can take some airlines as long as a decade after a merger before they truly operate as one entity. But Alaska Airlines is working much faster to gobble up Virgin America. Part of that is because both carriers were relatively small. But by any standard, Alaska is moving quickly.

Alaska Airlines is getting close to squeezing out the last vestiges of Virgin America, just about two years after closing an acquisition that made it the fifth-largest U.S. airline.

It’s a remarkably quick integration compared to Alaska’s four larger competitors, all of which took more time to combine two airlines into one during their recent mergers. Alaska is not done yet, but it is making steady progress.

For many former Virgin America employees and customers, this is sad news. Virgin America was around for only a decade, but it was beloved by many for its leather seats, friendly service, snazzy mood lighting and tech-forward approach. Employees liked it for what they thought was its special culture.

But for Alaska, which said Thursday it has completed about 95 percent of its merger-related milestones, it was vital to get this done as fast as possible. Airlines often struggle when they integrate two companies, and in 2017 Alaska’s unit revenue decreased significantly compared to the prior year. Last year, unit revenue was flat, but executives pointed to the fourth quarter, when it rose about 5 percent, as evidence the airline is getting past its merger-related woes.

Overall, Alaska reported net income of $23 million for the quarter and $437 million for the full year.

“We’re rapidly becoming a better version of ourselves with greater regional scale, with the same competitive advantage we’ve always had and with fantastic opportunities ahead of us,” CEO Brad Tilden told investors Thursday on the airline’s earnings call.

Making Progress

Alaska already has aligned operating processes, merged most of its systems, including its reservations platform, and reached joint labor contracts with all but one of its major unions.

It also has moved around the aircraft of both airlines, so former Virgin America planes now fly on legacy Alaska routes, and vice versa. In many cases, Alaska has moved smaller ex-Virgin America jets from coast-to-coast routes and replaced them with larger Boeing 737s. Alaska executives said they will continue to swap aircraft to create more efficiency.

Next week, all flight attendants will fly together, something that took United eight years after its merger with Continental. Pilots will come next, Tilden said. The airline will then focus on integrating systems used by its maintenance and dispatch teams.

What passengers see is changing, too. Over the next few months, Alaska will repaint the last of Virgin America’s jets, with 39 of 71 already sporting the new livery.

Also, by next year, all interiors will be retrofitted to match Alaska’s new specifications. The first plane was completed earlier this month, and has more first class seats than the old Virgin America’s configuration. Retrofitted planes also have new coach seats with tablet holders and power outlets, as well as an extra-legroom section and satellite Wi-Fi.

There’s still on some question of whether Alaska will keep Virgin America’s Airbus planes long-term, or if it may want to return them to lessors. Before the acquisition, Alaska flew only Boeing aircraft, even painting “Proudly All-Boeing” on its airplanes.

Now Alaska is flying both Virgin America’s older Airbus A319s and A320s, and its Airbus A321neos, the manufacturer’s newest model. Virgin America ordered them just before the acquisition.

“We have said for a long time the question is whether we will return to all Boeing or we continue with a mix of A321neos and a Boeing fleet,” said Mark Eliason, Alaska’s vice president for finance. “We don’t have the make that decision right away. We are learning a lot about Airbus as we operate that plane. We are learning a lot about the 321neo and the way Airbus supports its customers. As we evaluate the plane, we will be able to make a decision.


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Tags: airline innovation, airline passenger experience, alaska, alaska airlines, m&a, mergers, virgin america

Photo credit: Jets once flown by Virgin America soon will get an upgrade to Alaska's new interior, shown above. Alaska Airlines

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