Alaska Air Group is to take over US budget carrier Virgin America in an agreement the operator values at some $4 billion.
It says the acquisition has been “unanimously approved” by the boards of both carriers.
Alaska Air Group, the parent of Alaska Airlines, will pay $57 per share in cash for Virgin America – the equivalent of $2.6 billion in equity value; the remainder of the transaction value is calculated from Virgin America debt and capitalised aircraft operating leases.
It expects to achieve $225 million in annual net synergies upon full integration with low-cost carrier Virgin America, and is estimating one-off integration costs of $300-350 million.
The group says the acquisition will increase the company’s revenues by 27% to more than $7 billion, and will be “accretive” to adjusted earnings per share in the first full year.
“With an expanded West Coast presence, a larger customer base, and an enhanced platform for growth, Alaska Airlines will be positioned to provide more choices for customers, increase competition and deliver attractive returns to investors,” says Alaska Air Group.
The combined operation will provide “growth opportunities”, it says, on the East Coast with greater access to Washington National, New York JFK and New York LaGuardia airports.
Merger of the operators will give the combined entity a fleet of some 280 aircraft and enable around 1,200 daily departures, with hubs in Seattle, San Francisco, Los Angeles, Portland and Anchorage.
“With our expanded network and strong presence in California, we’ll offer customers more attractive flight options for non-stop travel,” says Alaska Air Group chief Brad Tilden.
Virgin America chief David Cush says the “stronger” combined company will be one which “focuses on an outstanding travel experience”.