Virgin America brand might keep flying after merger with Alaska Airlines

Discussion in 'Regional & National Airlines' started by Hatu, Jun 15, 2016.


  1. Hatu

    Hatu Veteran

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  2. jimntx

    jimntx Veteran

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    If what they (Virgin America) are doing is so very special, why are they up for sale?  And, if they continue doing what they've been doing just with a different owner, how does that make them a profitable operation?  I was always taught that if you do what you've always done, you'll get what you've always gotten.
     
  3. eolesen

    eolesen Veteran

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    First of all, they weren't unprofitable at the system level. Their transcons were subsidizing losers like DAL, but in general, they were making money.

    They were facing a bigger threat from B6 with Mint, so the timing was good on their part to put themselves up for sale.

    Going forward, with access to a better FF program than they could offer, they might be able to hold their own against Mint now that they have access to Mileage Plan, and possibly AAdvantage or Skypesos (assuming that the accrual rules aren't so restrictive as to specify specific markets only).

    Don't forget Alaska operated Horizon as its own brand for decades, so it's nothing new to the guys down on International Boulevard.
     
  4. jimntx

    jimntx Veteran

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    True, but wasn't (isn't?) Horizon an rj operation like AE?  Seems a different kettle of fish than mainline.  However, thanks for the explanation.  I just assumed that if they were for sale, then financial difficulties would be the reason.
     
  5. eolesen

    eolesen Veteran

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    The initial investors had wanted to get out for a while, so it was just a matter of the timing.

    I also think there may have been some "free money" offered from Richard Branson to keep the brand in place. Having the name disappear from one of the largest consumer markets in the world was a huge blow to his ego.

    Horizon has always functioned as a feeder, but into the 90's still kept its own branding, filed and sold schedules under their own airline code, and had their own onboard product.

    Eagle and all the other "X" Express operations were always tightly coupled to the mainline carrier and didn't sell services under their own code.
     
  6. swamt

    swamt Veteran

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    Don't forget the royalties that Branson will still get as long as they keep the name flying. He had installed in the agreement. Also another reason for the sale of Virgin, the offer was very lucrative for all investors.  Alaska over paid for good reasons, to get Virgin out as a competitor, period. Branson and the investors just couldn't pass it up.  I am expecting another reason they are wanting to keep them flying is due to the slots and gates at Love Field.  Must be enough profits there to keep them going.  It will be interesting going forward, just not sure how long they will keep the Virgin brand going as two different companies, time will tell...
     
  7. 700UW

    700UW Corn Field

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    Branson will earn $500 million from the sale.
     
  8. eolesen

    eolesen Veteran

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    I'm hearing the exact opposite. Royalties won't survive as they were structured.

    Nope, ALK overpaid to keep Jetblue from getting a stronger footprint in California. Period.


    Seriously?

    I suspect the experiment at DAL will likely start to be unwound once the deal closes later this year.
     
  9. eolesen

    eolesen Veteran

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    swaamt, I did a little dumptster diving on the T-100 data for DAL, and here's why I think that your line of discussion on DAL being important in the VX/AS merger:
     
    Code:
    VX LF     WN LF     Variance    Month     Orig     Dest
    64.9%     71.1%      -6.2%     1     DAL     DCA
    60.5%     69.8%      -9.3%     2     DAL     DCA
    74.2%     85.7%     -11.5%     3     DAL     DCA
    
    66.9%     87.6%     -20.7%     1     DAL     LAS
    76.5%     88.3%     -11.8%     2     DAL     LAS
    79.4%     88.2%      -8.8%     3     DAL     LAS
    
    80.8%     87.8%      -7.0%     1     DAL     LAX
    79.6%     88.1%      -8.5%     2     DAL     LAX
    82.5%     93.8%     -11.3%     3     DAL     LAX
    
    76.1%     87.6%     -11.5%     1     DAL     LGA
    68.3%     84.2%     -15.9%     2     DAL     LGA
    78.8%     92.6%     -13.8%     3     DAL     LGA
    
    79.0%     83.0%      -3.9%     1     DAL     SFO
    78.6%     85.2%      -6.6%     2     DAL     SFO
    76.1%     86.3%     -10.3%     3     DAL     SFO
    
    Those are some pretty big gaps compared to WN (which should be good news for you, eh?), and I don't see ALK being interested in running at a 8-20 point deficit.

    Compare that to how DL's running against WN:
     
    Code:
    DL LF     WN LF     Variance    Month     Orig     Dest
    83.9%     81.7%      2.3%     1     DAL     ATL
    77.0%     81.0%     -4.0%     2     DAL     ATL
    86.5%     83.3%      3.2%     3     DAL     ATL
    
     
  10. swamt

    swamt Veteran

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    Nice comparo. Thx for the info.  I did not know Delta was so much closer than VX.  Yea it would be good for us and quite possibly Delta too, I think. If/when VX pulls out from DAL that Delta will get their gate back as well as SWA getting their gate back. I would even be willing to bet that Delta will get the extra gate unless some weird sell-off or bids to get a new LCC in.  It will be interesting to watch how it all plays out.
     
  11. 700UW

    700UW Corn Field

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    Remember gates in question from VX are owned by AA, they dont automatically go to DL, and the gate in question is the former UA gate.
     
  12. swamt

    swamt Veteran

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    The former UA gate you speak of will more than likely go to SWA. The gates you say AA owns, if VX pulls out, will more than likely go to another airline, which airline? I have no clue, but it will not go to AA as you are indicating. They are restricted for 10 years to fly from DAL. So i feel Delta will get their gate, (full gate) and SWA will get the gate "15", which is shared currently, the left over gate to be had is completely unknown. I would think Delta will more than likely put in for it, OR, the airport will put it up for a new entrant LCC to apply and possibly receive. AA can lease their gates to whom ever they want with approval from all involved. But AA will not fly out of DAL until the agreement within the 5 party agreement is fulfilled.
     
  13. eolesen

    eolesen Veteran

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    AA's already 3 years into their 10 year agreement, and arguably, the DOJ could always review and recind that earlier...
     
  14. 700UW

    700UW Corn Field

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    My understanding is AA is prepared to fight to start flying from DAL and they can't be forced to lease them to DL as the DOJ said no to DL on that already.
     
  15. swamt

    swamt Veteran

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    I might be misunderstanding your post here, but, the DOJ cannot just review and rescind any part of the agreement. They can submit for changes thru the proper channels (legal system) and all 5 parties have to agree to the changes.  Which as far as a few on that list would not allow it unless, just thinking out loud here, not saying it's going to happen.  I would be willing to bet that AA could be very successful to get that change prior to the 10 years.  If AA wants it bad enough they could say "give us our gates back at DAL , please, and we will lift the restrictions for SWA to enter over at DFW, AND (big AND here but very key) AND lift the international restrictions at DAL?"   Or, lift the restrictions on the number of gates and allow the original 32 instead of the current 20?  Never say never. If certain parties want changes it can be done, the question is, how bad do they want changes and how much are they ready to rescind in order to get them what they want. 
    Wow. Your right we are already 3 years into this. Kinda forgot about that. See how smart Delta was fighting for the squatters rights? They have successfully remained in the gate for 3 years beyond the date they were suppose to vacate. I can only assume that SWA will take any advantageous route to add flights or lift any of the restrictions a little at a time just as they did attacking the W/A changes thus far. And remember our leaders have stated that they will indeed look at trying to lift more restrictions and or add gates some time down the road, just not sure when that time frame will take place.  Right now the main focus of SWA is the international flights being added elsewhere, as well as Mexico and the up coming Cuba routes.
     
  16. FrugalFlyerv2.0

    FrugalFlyerv2.0 Veteran

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    I apologize if I'm mistaken, but I thought the restriction on AA flying out of DAL for 10 years was a DOJ imposed condition of the AA-US "merger" and has nothing to do with / is separate from the Wright Amendment 5 party agreement?
     
    Therefore, the issue of AA getting the gates VX might vacate at DAL might come down to legal arguments between AA and the DOJ - but I'm not a laywer ...  ... ...
     
  17. swamt

    swamt Veteran

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    Oh wait a minute. I may be completely wrong here and may be the one apologizing.  You make a great argument there.  It very well could be the way you say. I may have prematurely spoke saying it was tied to the 5P agreement.  I was thinking it was in the 5 party agreement probably because of the restrictions put on SWA about going to DFW.  So I was thinking those two restrictions were kinda going hand and hand. But, now that you mention it I may be completely wrong and your completely right.  I will do some homework later on today to try and find out, it would be interesting to know which way is correct as that mean a great deal of difference on how AA could and would fight to get back in at DAL. If you get time pls post, I need to get ready for work and I will do the same. Thx for that heads up. With all the crap going on and changes at DAL it's hard to keep straight what was what.
     
  18. 700UW

    700UW Corn Field

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    The restrictions were part of the merger, nothing to do with the Five party agreement.
     
  19. eolesen

    eolesen Veteran

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    AA's banishment from DAL was self-imposed in the settlement agreement that got DOJ to drop it's antitrust lawsuit against the merger.

    It has nothing to do with the 5PA, WARA, or anything else that's an act of Congress, so all they have to do is mutually agree to rescind that section of the agreement, and file the right papers with the court who approved the settlement.

    Worst case, they'd have to go in front of a judge to get approval if DL or someone else objected (which is entirely possible).

    Also, DL has only been squatting for about 18 months. They had a legitimate lease with UA up until the point UA pulled out and subleased to WN.
     
  20. swamt

    swamt Veteran

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    Then I do apologize to you E. I was wrong. Sorry about all the confusion I caused. With (if) Virgin does pull out of DAL it will get interesting on who gets what.  We could possibly end up with 3-4 airlines wanting gates at DAL.
     

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