People, Travel

Alaska Air in Deal to Buy Virgin America for $2b

Alaska Air in Deal to Buy Virgin America for $2bAlaska Air in Deal to Buy Virgin America for $2b

Alaska Air Group is nearing a deal to acquire Virgin America, the ninth-largest US airline by passenger traffic, for more than $2 billion, having outbid JetBlue Airways Corp, people familiar with the matter said on Saturday.

The acquisition would herald the first US commercial airline merger since US Airways and American Airlines combined in 2013 to form the world’s largest carrier. It would boost the size of Alaska Air’s home market by allowing it to expand into lucrative hubs such as San Francisco and Los Angeles, Reuters reported.

Alaska Air is set to pay between $56 and $58 per share to acquire Virgin America, the people said. A deal could be announced as early as Monday, the people added, asking not to be identified because the agreement had not yet been finalized.

Alaska Air, Virgin America and JetBlue did not respond to requests for comment.

Burlingame, California-based Virgin America went public in the US stock market in 2014 as an offshoot of billionaire Richard Branson’s London-based Virgin Group. Launched as a low-cost US airline, it became famous for its mood lighting, comfortable leather seats and media-rich in-flight entertainment system.

Based in Seattle, Alaska Air and its partner regional airlines serve more than 100 cities in the United States, Canada, Costa Rica and Mexico. It has a market capitalization of $10.2 billion.

Virgin America accounts for about 1.5% of US domestic flight capacity, while Alaska Air and its subsidiary Horizon Air account for 5%, Deutsche Bank analyst Michael Linenberg wrote in a recent research note. JetBlue accounts for 6%, according to the note.

“It’s inevitable that we would see some form of combination (among smaller airlines) as they strive to find a way to compete with the larger carriers,” said travel industry analyst Henry Harteveldt.

Government regulators are expected to scrutinize the deal between Alaska Air and Virgin America for potential overlap in routes and airport slots.

Mega-mergers in the past decade have reduced the US industry to four top players that control more than 80% of the market.

The Wall Street Journal reported earlier on Saturday that Alaska Air had emerged as the likely winner of an auction for Virgin America.