MIAMI — The merger between Alaska Airlines and Virgin America may be hitting some turbulence. The two airlines have agreed to delay their merger in order to allow the U.S. Department of Justice (DOJ) additional time to review the $2.6 billion deal, reports Brian Sumers at Skift.
The airlines originally agreed not to close before September 30, but that date has now been pushed back, according to sources familiar with the proceedings.
Officials at both Alaska Airlines and Virgin America reportedly met with antitrust division chief Renata Hesse last week in order to address the government’s concerns that a merger could lead to reduced competition. This would not be the first time a proposed merger hit a few snags – the recent merger between American Airlines and US Airways faced a lawsuit from the DOJ before ultimately gaining final approval.
Alaska and Virgin have adamantly stated that the merger poses little competitive threat, as the two airlines have very little route overlap. Virgin America is primarily an east-west airline, whereas most of Alaska’s service exists along the west coast. Across the two airlines’ route networks, only seven city pairs are in common.
The two airlines trot out a similar line of defense to previous mergers: that allowing the consolidation would benefit the consumer, as the combined airline would have greater strength to compete vigorously with the established carriers.
This is an argument which the DOJ has previously accepted, although it may be hesitating with fewer and fewer airlines left in the playing field. Many in the industry question what will be the DOJ’s breaking point, and how many more mergers it will allow. As in past mergers, concessions could be made to the DOJ in terms of route assignments to competitive carriers.
The proposed Alaska/Virgin merger still appears probable at this time, and is expected to eventually win approval. If allowed, the combined airline will represent a major player in the west, creating the “west coast’s premier carrier” according to the two carriers.
Alaska Airlines is headquartered in Seattle, Washington, while Virgin America maintains its headquarters in San Francisco, California.
We should stay tuned until more news emerges regarding the proceedings. In the meantime, it appears that the Alaska/Virgin deal will face less than smooth skies.