Alaska Airlines Virgin America Merger Bottom Line

As many of you already know, Alaska Airlines completed its purchase of Virgin America last week. The Alaska Airlines-Virgin America merger has been buzzing in the news for the past few weeks. So, the merger means that Alaska is now the country’s 5th largest carrier. Alaska has always been a regional carrier, focused mostly on the West Coast. They have had their own culture and deep roots in markets such as Seattle and Portland. With the acquisition of Virgin America, a lot of new hurdles will need to be overcome. Two very different airlines need to be able to mesh together different cultures and be able to offer passengers a seamless experience.

Virgin America Culture

Virgin America has been Richard Branson’s quirky American project. It carries with it all the flair of the Virgin brand, similar to its former sister company Virgin Atlantic. They pride themselves on being fun and making travel an experience. Just look at Virgin America’s safety video. The company culture was more that of a niche carrier than that of a cull service network carrier. They have operating bases in San Francisco, LAX, and, to a much smaller degree, in Dallas Love Field. The airline has an all-Airbus Fleet (compared to Alaska’s all Boeing Fleet) with A319s and A320s. Even with the corporate cultural differences, the fleet integration process will be a hassle.

Virgin America offers the best first-class seat in a domestic configuration in the US, in my opinion. They also offer IFE on every seat, and the ability to order on-demand from the entertainment screen. Whereas Alaska has just started to get IFE on its seats only in its newest aircraft, with no mention of updating the rest of the fleet. Both now offer an enhanced economy product, Premium Class on Alaska, and Main Cabin Select on Virgin America.

Merger Issues

Some of the main issues the merger will run into revolving around its codeshare network, frequent flyer programs, and (as mentioned before) cultural integration. Alaska currently codeshares very strongly with Americans and to a lesser degree with Delta Airlines. The DOJ, as part of the merger conditions, required Alaska to reduce its codeshares with American from Hub-to-Hub city pairs, such as LAX-SEA or PDX-MIA. This will not affect the airline as much as a complete shutdown of the codeshare agreement, but it does limit the ability for frequent flyers to connect between each carrier.

Another issue that will arise will be the frequent flyer programs. Alaska currently offers status matches from many domestic airline programs to their Mileage Plan program. Virgin America offers a two-tier elite status program, while Mileage Plan is three-tiered. I assume that Virgin Elevate Silver will translate to MVP on Alaska, and Elevate Gold will transfer to MVP Gold. The issue of transferring points between each program has been addressed, with Elevate points transferring at 1.3X the Mileage Plan points. This gives a great chance to transfer Starwood points to Alaska Airlines. Alaska and Virgin America will begin reciprocal elite benefits effective immediately and allow the airlines’ passengers to connect between the airlines easily.

Landing Thoughts

I am a big fan of this merger because it will allow Alaska-Virgin to compete better against larger carriers such as Delta, American, and United. We have begun to see benefits already with new flights being launched by Alaska and the slow integration of the elite programs. The airline has also launched a new website promoting the two airlines’ combined strengths. It does make me sad, however, to see the Virgin America culture fly into the sunset. I had a chance to fly them once on Main Cabin Select on a very short flight, and I can say it was one of the most pleasant experiences I have had in coach. I truly hope to see enhanced travel benefits and improved Mileage Plan redemption opportunities. Who knows, maybe even the Virgin America brand will live on as Alaska’s Premium transcontinental option!

What do you think? Are you in favor or against the Alaska-Virgin Merger? Let us know your thoughts.