Alaska Airlines-Virgin America merger clears regulatory hurdle

Alaska Airlines/Virgin America merger clears regulatory hurdle

This week, the merger of Alaska Airlines and Virgin America was cleared by the US government, forming the fifth largest airline in the country.

The US Department of Justice approved the deal and the combined airline will compete with the four largest airlines in the US: Delta, United, American and Southwest.

The new airline, in the ruling, is required to scale back a codeshare partnership with one of its largest partners, American Airlines, for the deal to go through. In mergers of this sort, airlines are generally required to divest assets such as airport gates, but this deal, at this point, does not include such requirement.

According to USA Today, Alaska agreed to stop selling seats on American flights on 45 routes — which will be a $15 to $20m shortfall for the airline in yearly revenue. The airline, according to the Wall Street Journal, will make up that lost revenue with more of its own routes.

The Seattle-based airlines will account for only 6% of the domestic airline market (the top four control 80%) in the US, but does have a strong foothold in the western part of the country.

It is still unclear whether or not Alaska will keep the Virgin America brand intact. Earlier this year, Sir Richard Branson contemplated a competing airline after the initial deal was announced. Additionally, labor issues from Virgin America’s flight attendants could signal bumps in the road.

Independent agency Mekanism is the agency of record for Alaska Airlines and opened a new office in Seattle back in February.

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