I found that interesting as well. Since neither contract (well one contract) forbid it, was wondering if this would be the first of ALK Holdings Group operating different airlines of different types.

But it does say SOC is the goal.

Nope. For years AS operated MD-80s, an aircraft brought on the property via the JA merger. In fact, AS was slated to be the first MD-90 operator. That eventually fell through.

To be perfectly frank, the Boelng centricity of AS is now in question. An additional benefit of this merger puts pressure on Boeing to cut the price of the AS book using the threat of switching to the Airbus. Very clever, these Anglers.

The nature of the corporate transaction does not affect the integration of pilot groups - unless there is fragmentation or sale of VA assets. It's still a merger of 2 ALPA represented groups if operated as a SOC. Delta "acquired" NWA as well. Big Q is do they integrate Airbus into the fleet, or sell them for slots on more 737's?

What would be more worrisome to me would be the nature of AK Scope and what that allows for an independent brand under the corporate umbrella. I think that is unlikely because this is probably in part a competitive move to keep SEA and the left coast AK dominant and dampen DAL's SEA expansion.

It will be interesting to see what DAL's response will be.......

2005-ish is what I remember.

DALs response will be to agree to take whatever castoff airbi that alk choses to dispose of ala Swa-AirTran merger

Big whoop. Delta was an "all Boeing fleet" as a sales moniker until it wasn't right after the NWA merger. I think the manufacturers know their competition.

Not correct. AS had MD's of their own at the time of that merger and older 737's as well.

True. My bad. I forgot AS was the launch customer for the MD-83.

I thought they had some in the 2008-2010 range when fuel spiked after age 65 passed.

We had pilots on furlough from 2009 until early 2012......

I wouldn't call over paying 1.5 billion for an airline clever, hopefully it works out. How much is this pressure going to save them with Boeing?

Aquisitions and mergers are the exact same thing.

I wouldn't be so sure, UAL has said they are looking for any used A320/319 on the market now. Hence the 30-40 they're getting from China and Spirit....who knows

Proof that you should never take business or financial advice from a pilot.

Merger vs Acquisition ?
 

This nonsense talk is the first step in the SLI process. Sad, but true.

As far as integrating two pilot groups are concerned, Hockeypilot44 is right. Regardless of how the business transaction is structured, or referred to by Wall Street and the media, the SLI will be a "merger" of the two lists. It's semantics. McCaskill/Bond, or ALPA merger policy, they both lay the groundwork for merging the lists. What the money managers and lawyers do with the business has no bearing.

I will be very surprised if in two years Alaska will be more then 60 percent of the combined entity.

And I do not mean that to cast aspersions on ANY Alaska or VX employees.

Make no mistake.....Alaska Air Group fought hard to prevent Virgin from ever starting....spent millions on that.....This time they paid a premium for the right to kill them.....I would imagine that Alaska Airlines inc will be directed to not back fill retirements for a couple years to bring the combined total down to a number that Alaska Air Group is comfortable with....One can hope not but history shows otherwise

Va arbus' have the wrong engines for ua

United paid $3B for Continental that had 348 airplanes (all stock transaction)

Delta paid $2.6B for Northwest that had 320 airplanes (all stock transcation)

Alaska pays $4B for Virgin America that owns 6 planes and leases about 60? Plus is has to give up $2.6B of its cash, which neither Delta nor United had to do since they did a stock only purchase.

What am I missing? Wouldn't it be cheaper to just buy planes and grow organically into California? An all Boeing airline buys an all Airbus airline?

This whole thing looks nuts.

I wish you all luck.

basic economics besides the fact that no way this makes a good fit

You're missing lots of context along with the very basic premise of capitalism.

gotta like how every pilot becomes a CEO after a merger is announced.

How to dodge taxes and scam your employees out of decent pay?

Lol somebody said that the other day. Did you steal his quote or was that you who said that?

I'm not an "instant CEO" but I think this fellow's analysis is pretty spot on, or at the very least touches on the relevant issues. It does appear that Alaska's prime motivation is to achieve rapid growth and a more competitive position, quickly. I don't think it's to "eliminate the competition" since they don't compete on very many routes. The goal is to dominate the West Coast. Growing organically would take too long and involve costly fare wars. The deal is also about shutting out JetBlue. The financial pain now may be a long term strategic win.

ANALYSIS: Alaska Airlines Buys Virgin America

So pointing out that Northwest and Continental were purchased for far less than Virgin America, a LCC, is me trying to be a "CEO"? I think its a fairly basic financial comparison. Why wait until now? Only because JB wanted to buy them? Why not buy them last year, or 3 years ago when they would have been cheaper. The upside reasons (growth in west coast) would have still existed, plus VA would have had far less debt back then.

Alaska's market value is $9.9B. That includes Horizon. So they basically are paying over 40% of their existing value to acquire VA? I don't think SFO and LAX "gate space" is worth $4B. Especially when you have to consider that you've just added a different fleet type to your airline. Plus if they decide to scrap the Airbus and buy new Boeing's they have to pay for those as well.

I've always admired Alaska's conservative pro-airline management. My faith in them is starting to crack.

You're missing consolidation. Which means less competition. Which means more pricing power. Which means higher ticket prices for all remaining airlines. Which means higher profitability for all remaining airlines.

I'm expecting a few more mergers in the airline industry over the next few years.

As an airline employee, I applaud industry consolidation because higher airline ticket prices means higher pay for those of us who work in the industry. Just like our post-911 pay cuts translated into lower ticket prices for the public. I want to get some of that money back from the public.

He stole the quote. Perhaps the subject matter's too complex for him? :rolleyes:

All valid points and it doesn't take an internet CEO to note that. In my opinion, it's pretty obvious Alaska's purchase of Virgin is to keep yet another competitor (JetBlue) from establishing themselves and infringing on their west coast territory. With Delta putting the full court press on Alaska in Seattle, the last thing they wanted to see is JetBlue setting up shop down south. The price paid for the limited assets that Virgin brings to the table borderline reeks of desperation. We shall see how it pans out.

Until the last couple of years, I think that ALK's management was willing to wait until VX died, ala IndependenceAir and Skybus.

There were a couple of original investors that finally walked away from VX while Branson and Cyrus kept throwing money into a black hole known as VX. I'd have to go over all of the money Cyrus and Branson poured into VX with the multiple restructurings, but I suspect that they didn't do much better than break even on ALK's buyout.

With fuel prices being where they're at and VX taking more aircraft this last year, VX's business model was reaching critical mass where they could survive without any additional capital. ALK management made a pragmatic decision to kill competition.

So what happens to the strategy of keeping JB out of the west coast if/when they buy HA and do exactly that.

What's HA's west coast presence? Gates and daily flights? How does that overlay with JBLU? Is it possible to expand operations at any overlapping airports?

How many east coast JBLU customers want to fly to HA and the Pacific? Wouldn't this cannibalize JBLU's Caribbean service?

I don't think that they'll fit together very well.

JB could get instant access to WBs and future orders and redistribute them to areas they currently or hope to expand to soon.....Caribbean, Central/South America, Western Europe, etc.....

HA has gates in areas VX had (SFO, LAX) as well as many others on the west coast.......

Don't know what the cost would be, but I can see this as a very viable alternative for JB to significantly increase their west coast presence....

I agree with this completely. The other airlines benefit from the consolidation without having to foot the bill.

HA's widebody deployment is likely more profitable than the routes you're suggesting.

HA doesn't have significant west coast presence...

Every surviving airline's expected to 'take one for the team...'. It's eat or be eaten.

Here are your basic financials in the transaction

Alaska pays 13x of VA net worth to:

- eliminate a carrier whose pricing in common AS markets hurts their ability to fare war against DL/AA/UA.

- purchase slot controlled gate spaces at airports which would significantly delay the opportunity to gain gates organically

- transfer DC/NY/California customers who fly between markets not currently served by AS into near-term AS earnings

- prevent the merger of VA + B6 (or virtually anyone else) whose pricing could further bleed out AS earnings or be cost-prohibitive to organically creating new AS markets

- leverage the discounted cost of the new ground services operation AS announced plus the introduction of QX E-175s across a larger network in competitive markets

The fact that there is a dissimilar fleet, leased equipment, VA historical earnings, value of VA, cost comparison of any other airline transaction or any other reason you can point out is actually irrelevant. The 2016 market rate to buy out the officers and investors of an airline who could continue to undermine AS ability to compete independently was 13x VA value...which at $2.6B cash is a steal considering waiting until a larger legacy to enter a bidding war could've driven the acquisition cost to high for AS to win.

Routes currently more profitable? Probably. I'm just a dumb pilot, not a route designer/analyzer. But the future WBs could be distributed elsewhere.

As far as HA and their west coast presence, is it really that much less than VX's?

Haven't kept up on the news reports about this, but I have to assume its more for defensive reasons with JB than to truly capitalize on M&A synergies. Last thing AK needs is for another large airline with ample connections to the east coast to have west coast presence. Imo, JB doesn't lose anything, Delta is going to have a slightly larger challenge making money in the northwest now, United impact remains to be seen because I don't think AK wants all the VX airplanes anyway, and AA with no dog in the fight wins. Big loser is AK for overpaying, but they kind of had to avoid JB taking it. AK was kind of doomed after the legacy mergers. They just don't have the route network to stay relevant with Delta making the SEA push and everyone else expanding due to favorable market conditions. Buying VX isn't going to solve any problems. JB buy AK 10 years from now. Heard it here first.