W ell, here we go again: yet another airline merger has been announced, as the news of Alaska Airlines to acquire Virgin America for $2.6 billion in cash seems to have people generally more puzzled than emotional about it — and there has been plenty of emotion regarding this announcement.
The announcement is being discussed ad nauseum just about everywhere by the media and authors of weblogs, speculating what will happen, what if this, will this that. What a waste of time.
What We Know
Let us first stick to what we do know — or can fairly reliably predict, anyway:
- First, this merger — really an acquisition, which is expected to be completed by the beginning of 2017 — is not yet a done deal despite Alaska Airlines successfully outbidding JetBlue Airways for the acquisitions of Virgin America. It requires approval by federal antitrust regulators — including the United States Department of Justice, which could possibly block the deal. In the wake of the precedence of consolidation in the commercial aviation industry in the United States over the past ten years, this deal is more likely to be approved — although some stipulations and concessions could be added.
- The transaction has been unanimously approved by the boards of directors of both airline companies; and is subject to approval by the shareholders of Virgin America — an airline which launched in 2007 and is currently based in the San Francisco area.
- The Alaska Airlines | Mileage Plan and Virgin America | Elevate forums on FlyerTalk will most likely eventually be combined into one new forum with the former forums as sub-forums of the new forum.
- The combined airline would become the fifth largest airline in the United States.
- The new entity will be based in Seattle, Washington.
- Your frequent flier loyalty program miles are expected to be combined seamlessly, with the Alaska Airlines Mileage Plan frequent flier loyalty program to be the surviving entity — although exactly how and when is still unknown. If you have “orphaned” frequent flier loyalty miles in both programs, congratulations — you are that much closer to be able to redeem them for an award ticket without having to lift a finger; and that is one of the few benefits of the merging of two airlines. I expect my 500 Virgin America Elevate frequent flier loyalty program miles to be integrated into my Alaska Airlines Mileage Plan account.
- Competition in the commercial aviation industry in the United States will be reduced to four major airlines: American Airlines, United Airlines, Delta Air Lines and Southwest Airlines — all of which completed major merger deals within the past ten years — and several smaller entities which include Alaska Airlines, JetBlue Airways, Spirit Airlines, Frontier Airlines, Allegiant Air and Sun Country Airlines.
- Bradley D. Tilden will be the president and chief executive officer of the new entity.
Questions Yet to Be Answered
Now, the questions on which I do not intend to speculate — despite marketing jargon which suggests otherwise, in some cases — include but are not limited to the following:
- Will capacity and service increase or diminish?
- Will airfares increase?
- What problems will occur as a result of merging the corporate cultures?
- Will the partners of Virgin America be retained by Alaska Airlines?
- Will the travel experience improve or worsen overall?
- How many employees will be relieved of their positions from the merged entity?
- How will routes be adjusted for efficiency regarding the new Alaska Airlines?
- What hub airports will disappear into oblivion?
Possible Answers to Those Questions Might Be Derived From History
Unless you want to believe the official answers to frequently asked questions released earlier today from Alaska Airlines — whose members of its Mileage Plan frequent flier loyalty program suffered from a perceived lack of trust due to the sudden and unannounced devaluation of its premium class awards for travel via airplanes operated by Emirates Airline — any of these questions can be answered simply by looking at the mergers of other airlines within the past ten years. Employees will indeed be let go. Earning elite status could become even more difficult to attain. Airfares may likely increase. Flights will probably be more crowded. Benefits and perks potentially will eventually be reduced overall for many frequent fliers — except for the business and leisure traveler high spenders, of course…
…and although the merger should be smoother than those of the major airlines, do not expect it to go quickly or without issues. There will be a period of inconvenience for you as a customer as the culture and technology of both airlines are combined. Problems will arise, and the pace of their resolution will be lethargic at best.
The Emotional Aspect
Few people seem to be happy: those who like the idea of suddenly having more frequent flier loyalty program miles towards award travel as they are combined from the two airlines merging into one; and — of course — those who stand to profit greatly from the deal financially.
“Our US airline, Virgin America, also started out of frustration. As more airlines consolidated and grew larger and more focused on the bottom line, flying in the US became an awful experience. Despite moves to block our airline from flying, Virgin America began service in August 2007 – with the goal of making flying good again”, said Richard Branson — who founded Virgin America — in this statement, where he then lamented that “I would be lying if I didn’t admit sadness that our wonderful airline is merging with another. Because I’m not American, the US Department of Transportation stipulated I take some of my shares in Virgin America as non-voting shares, reducing my influence over any takeover. So there was sadly nothing I could do to stop it.”
FlyerTalk member Thunderroad opined that “I’m somewhat persuaded by all of the very good points that have been made here, doubting the wisdom of this deal. Still, I wonder whether (and hope that) AS management has some method to its apparent madness in terms of avoiding marginalization that might have resulted from a JetBlue-Virgin merger; intelligent use of the Virgin planes for appropriate markets, so as to retain existing Virgin loyalists and expand the combined airline’s appeal; and distinguishing itself in other ways (not least the aforementioned FF program).”
However, FlyerTalk member vxflyer stated bluntly that “Today is a sad day. VX is dead to me. Elevate account will be canceled.”
More reaction of the announced transaction between Alaska Airlines and Virgin America from members of FlyerTalk and InsideFlyer can be found in the following discussions:
- RIP VX
- VX for sale?
- AS to Buy VX in $2.6bn Deal
- Alaska reportedly bidding on Virgin America
- Alaska nears $2B bid for Virgin America
- How could AS Mileage Plan and VX Elevate combine or co-exist?
- AS/VX Merger Impact on SFO-BOS
- AS/VX Merger Inpact on DCA/LGA
- Flyingbettertogether.com
Summary
So what should you do about it?
Nothing. What can you do — aside from take the whole thing in stride and wait and see what actually happens?
If you are mourning the loss of anything even remotely related to the merger between Alaska Airlines and Virgin America, guess what? The sun will still rise tomorrow, and the planet will still revolve. Life goes on; and the airlines will operate as business as usual — for now.
However, if you are truly miserable about this news, you can always defect to another frequent flier loyalty program — even though they are dwindling in numbers — or quit the “game” altogether…
Photograph ©2015 by Brian Cohen.
