Virgin America brand might keep flying after merger with Alaska Airlines

[Hatu]

Alaska Airlines CEO Brad Tilden said Wednesday that he might keep the Virgin America brand, running it and Alaska as two different products within the same airline group.

http://aviationblog.dallasnews.com/2016/06/virgin-america-brand-might-keep-flying-after-merger-with-alaska-airlines.html/

 

[jimntx]

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.

 

[eolesen]

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.

 

[jimntx]

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.

 

[eolesen]

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.

 

[swamt]

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...

 

[700UW]

Branson will earn $500 million from the sale.

 

[eolesen]

Don't forget the royalties that Branson will still get as long as they keep the name flying.

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

Alaska over paid for good reasons, to get Virgin out as a competitor, period.

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

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.

Seriously?

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

 

[eolesen]

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:
 

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:
 

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

 

[swamt]

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:
 

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:
 

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

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.

 

[700UW]

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.

 

[swamt]

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.

 

[eolesen]

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

 

[700UW]

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.

 

[swamt]

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

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.