The airline group pays up $2.6bn (or $57 per share) to acquire Virgin America, but adding Virgin’s debts and operating leases this will likely rise to $4bn.
The Alaska-Virgin combination will become the fifth largest carrier in the US with strong presence in San Francisco and Los Angeles, which are considered highly lucrative airports to operate from. Alaska Airlines has a strong presence on the West Coast and the other parts of the USA. With the acquisition of Virgin America an extensive East-West network will be added operating from San Francisco and Los Angeles.
The combination is expected to carry 39 million passengers to their destinations with a fleet of 280 aircraft, operating 1,200 daily flights.
The subsidiaries of the Alaska Air Group are known for their signle type fleets. Alaska Airlines solely operates aircraft of the Boeing 737 Family (151), while Horizon Air solely operates the Bombardier Q400 (52). With Virgin America, the group adds a 3rd single fleet operator. Virgin America currently has a fleet of 60 Airbus A320 aircraft.
Corporate synergies are expected to be $225 mln annually, $175 mln in revenue synergy and the remaining $50 mln in. In the first year one-off costs of at least $300 mln are expected.
By Q4 2016 the merger should be regulatory approved, while the combination of operating certificates should be finalized in 2018.