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Alaska Airlines to Do Away With Virgin America Brand in 2019
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One of the most notable events 2016 was the acquisition of Virgin America by Alaska Air Group (ALK - Free Report) , the parent company of Alaska Airlines. The completion of the buyout on Dec 14, 2016 saw the creation of the fifth-largest airline in the U.S. (in terms of passenger traffic).
Following the takeover, a West Coast powerhouse has been created. The deal has allowed Alaska Air Group to expand significantly, gaining access to most of the West Coast hubs (Seattle, Portland, Anchorage, San Francisco and Los Angeles). Moving ahead, the merged entity is expected to provide 1,200 departure options per day to 118 destinations across the U.S. and Mexico, among other countries.
At the time of the completion of the merger, Alaska Air Group’s CEO and chairman Brad Tilden had said that the picture regarding the amenities available on the erstwhile Virgin America flights will become clear only in the first quarter of 2017. Keeping the promise, the Seattle, WA-based carrier recently clarified the above aspect.
Nevertheless, the commentary proved to be a disappointment for those who had hoped that the Virgin America brand would remain. Disappointing loyalists of the banner, Alaska Air Group announced that it will do away with the Virgin America name likely sometime in 2019. Justifying the decision, it also added that to be a successful low-cost airline along with wide acceptance on the West Coast, it was a necessity to operate under one brand.
However, all the features of the erstwhile Virgin America will not be reduced to ashes. In order to enhance the flying experience of passengers, those availing Alaska Air Group flights will have some features like enhanced in-flight entertainment, mood lighting and music. Such features characterized Virgin America flights, prior to its takeover. The merged entity will operate under Alaska Air Group's name and logo.
We believe that the announcement to end the Virgin America brand in 2019 is not surprising and has precedence. The AirTran brand became history in 2014, following the purchase of AirTran Airways by Southwest Airlines Co. (LUV - Free Report) in 2011. In fact, merger driven consolidation is not new in the airline space. Apart from the Southwest Airlines-AirTran merger, other notable takeovers include Delta Air Lines’ (DAL - Free Report) tie-up with Northwest Airlines.
Following receipt of the single operating certificate, which is expected to take one year, the two airlines can operate as a single carrier. The Alaska Air Group-Virgin America merger is the first significant consolidation in the airline space since late 2013, when AMR (American Airlines' parent group) and US Airways had combined to create American Airlines Group (AAL - Free Report) . American Airlines Group received a single operating certificate in 2015.
Price Movement
Shares of Alaska Air Group have increased significantly following the merger. This is evident from the fact that the stock has returned 8.9% since Dec 14, comfortably outperforming the Zacks categorized Transportation- Airline industry’s loss of 1.5%.
Conclusion
Despite the uptick so far, it remains to be seen how the stock is impacted following the announcement to put an end to the Virgin America brand. It goes without saying that the update has disappointed Virgin America loyalists. Apparently, Richard Branson, the British billionaire, who partly owned Virgin America (prior to the takeover), has voiced his disappointment over the impending disappearance of the brand. The exact magnitude of the impact will, however, become clearer with the passage of time. Consequently, we expect investors to keenly await updates on this issue.
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Alaska Airlines to Do Away With Virgin America Brand in 2019
One of the most notable events 2016 was the acquisition of Virgin America by Alaska Air Group (ALK - Free Report) , the parent company of Alaska Airlines. The completion of the buyout on Dec 14, 2016 saw the creation of the fifth-largest airline in the U.S. (in terms of passenger traffic).
Following the takeover, a West Coast powerhouse has been created. The deal has allowed Alaska Air Group to expand significantly, gaining access to most of the West Coast hubs (Seattle, Portland, Anchorage, San Francisco and Los Angeles). Moving ahead, the merged entity is expected to provide 1,200 departure options per day to 118 destinations across the U.S. and Mexico, among other countries.
At the time of the completion of the merger, Alaska Air Group’s CEO and chairman Brad Tilden had said that the picture regarding the amenities available on the erstwhile Virgin America flights will become clear only in the first quarter of 2017. Keeping the promise, the Seattle, WA-based carrier recently clarified the above aspect.
Nevertheless, the commentary proved to be a disappointment for those who had hoped that the Virgin America brand would remain. Disappointing loyalists of the banner, Alaska Air Group announced that it will do away with the Virgin America name likely sometime in 2019. Justifying the decision, it also added that to be a successful low-cost airline along with wide acceptance on the West Coast, it was a necessity to operate under one brand.
However, all the features of the erstwhile Virgin America will not be reduced to ashes. In order to enhance the flying experience of passengers, those availing Alaska Air Group flights will have some features like enhanced in-flight entertainment, mood lighting and music. Such features characterized Virgin America flights, prior to its takeover. The merged entity will operate under Alaska Air Group's name and logo.
We believe that the announcement to end the Virgin America brand in 2019 is not surprising and has precedence. The AirTran brand became history in 2014, following the purchase of AirTran Airways by Southwest Airlines Co. (LUV - Free Report) in 2011. In fact, merger driven consolidation is not new in the airline space. Apart from the Southwest Airlines-AirTran merger, other notable takeovers include Delta Air Lines’ (DAL - Free Report) tie-up with Northwest Airlines.
Currently, Alaska Air Group, which carries a Zacks Rank # 3 (Hold), is striving to get the Federal Aviation Administration (FAA) certification. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Following receipt of the single operating certificate, which is expected to take one year, the two airlines can operate as a single carrier. The Alaska Air Group-Virgin America merger is the first significant consolidation in the airline space since late 2013, when AMR (American Airlines' parent group) and US Airways had combined to create American Airlines Group (AAL - Free Report) . American Airlines Group received a single operating certificate in 2015.
Price Movement
Shares of Alaska Air Group have increased significantly following the merger. This is evident from the fact that the stock has returned 8.9% since Dec 14, comfortably outperforming the Zacks categorized Transportation- Airline industry’s loss of 1.5%.
Conclusion
Despite the uptick so far, it remains to be seen how the stock is impacted following the announcement to put an end to the Virgin America brand. It goes without saying that the update has disappointed Virgin America loyalists. Apparently, Richard Branson, the British billionaire, who partly owned Virgin America (prior to the takeover), has voiced his disappointment over the impending disappearance of the brand. The exact magnitude of the impact will, however, become clearer with the passage of time. Consequently, we expect investors to keenly await updates on this issue.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging
phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>