Alaska Airlines Nears Virgin America Acquisition with $2 Billion Deal

By Staff Writer

Apr 03, 2016 04:03 AM EDT

Alaska Airlines is prepared to acquire Virgin America airlines for $2 billion. This move will merge two famous smaller airlines in the latest round of consolidation within the industry.

Virgin Airlines' acquisition would be the latest example of deal-making in an industry that has decline over the past 10 years, focusing power in the hands of less major airline. Aside from Alaska and JetBlue, huge airline companies joined the competition like American, Delta and United. However, due to the restriction by anti-trust regulators, these big companies backed out and allowed smaller companies to participate instead determined to expand their network.

Alaska and JetBlue battled in the final round of bidding. Alaska prevailed with an investment-grade credit rating and has more money on its books than some others. During the competition, Alaska also indicates that it only needs to expropriate fewer airport slots compared to JetBlue, according to The New York Times.

Virgin America is owned by New York-based Cyrus Capital Partners LP and Richard Branson's Virgin Group Ltd. The airline went public in November 2014.

Alaska Airlines which is based in Seattle has been in the business for 84 years and is one of the pre-deregulation carriers that have prevented bankruptcy court protection.  The company has been narrowing costs for the past 15 years and counter invasion into its West Coast base by discounter Southwest Airlines Co. and others.

Some industry experts call Alaska Airlines a hybrid but have the ability to offer perks for passengers without the profusion of fees. Previously it flew from Alaska to Mexico but has filled out in its course map over the past decade and now serves most principal markets in the East and Midwest making a big bet on Hawaii a few years ago.  The flight capacity now accounts 20% to that state, The Wall Street Journal reports.

Alaska Airlines is about to pay between $56 and $58 per share to obtain Virgin America. A deal could be made public as early as Monday according to the people involved who requested not to be identified since the deal had not been closed yet, as reported by Reuters.

As of the moment, no comments have been given by Virgin America, Alaska Air and JetBlue.

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