Get 40% Off
👀 👁 🧿 All eyes on Biogen, up +4,56% after posting earnings. Our AI picked it in March 2024.
Which stocks will surge next?
Unlock AI-picked Stocks

Alaska Air wins U.S. antitrust approval for Virgin deal with conditions

Published 06/12/2016, 20:46
Updated 06/12/2016, 20:46
© Reuters. A rainbow from a passing rain shower sits over Virgin Australia aircraft at Sydney's Airport in Australia

By Diane Bartz

WASHINGTON (Reuters) - Alaska Air Group Inc (N:ALK) has won U.S. antitrust approval for its $2.6 billion (2.05 billion pounds) acquisition of Virgin America Inc (O:VA) on condition that it scale back its code-sharing with American Airlines Group Inc (O:AAL), the Justice Department said on Tuesday.

The merged company would be the fifth largest U.S. carrier after American Airlines (O:AAL), Delta (N:DAL), United Airlines Inc (N:UAL) and Southwest Airlines Co (N:LUV).

Alaska Air said in a statement that it was pleased with the approval and plans to close the purchase "in the very near future."

Under the settlement with the Justice Department, Alaska and American would be banned from code-sharing on routes where Virgin and American now compete, the department said.

Code-sharing is also barred on routes that Alaska Air might start in the future if American also flies that route.

The settlement is a good one for Alaska since it does not require the company to dispose of any gates, slots or other hard assets, said airline analyst Robert Mann of R.W. Mann & Company, Inc. "It's not a material impact on the economics of the deal," said Mann.

American put its code on nearly 163,000 Alaska Airlines scheduled flights in 2016, and Delta put its code on more than 78,000, according to data from air travel intelligence company OAG. Alaska Airlines places its code on nearly 588,000 of those carriers' scheduled flights as well.

Alaska, which paid a premium of about 86 percent for Virgin, pursued the deal to better compete against Delta Air Lines Inc (N:DAL) and American, the company has said.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Virgin is the offshoot of billionaire Richard Branson's London-based Virgin Group, which had become famous for its mood lighting and media-rich entertainment on flights.

The big four airlines control more than 80 percent of the U.S. travel market, and the Justice Department is hoping that a stronger Alaska Air will compete with the giants.

"Today’s settlement ensures that Alaska has the incentive to take the fight to American and use Virgin’s assets to grow its network in ways that benefit competition and consumers," Renata Hesse, the acting head of the Justice Department’s Antitrust Division, said in a statement.

Alaska in April announced its $2.6 billion cash deal for Virgin America, which will make it the top carrier on the U.S. West Coast.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.