As reported by the Las Vegas Sun, a lawsuit has been filed in U.S. District Court in San Fransisco against Alaska Airlines. The lawsuit seeks to prevent the Alaska-Virgin deal. According to the article, a ground of 42 consumers are responsible for this lawsuit. Those consumers are concerned about the reduction in competition the merger will cause, and believe both airlines should remain independent.
I totally get the concern about a reduction in competition. We haven’t really seen anything positive from the mergers that formed the Big 3 airlines. Yeah, those airlines are now slowly making some improvements like the return of complimentary meals. But, the addition of base/basic fares and enormous devaluations of loyalty programs, including elite benefits (note an elite; doesn’t pertain to me), etc. are very negative changes. All valid concerns for sure.
Of course what doesn’t help is the fact that Alaska and Virgin has a bit of route overlaps. The deal is seen as simply a way to reduce competition for Alaska, as both airlines are based on and concentrate operations on the West Coast. Further, Alaska has been aggressively trying to expand its service in California, Virgin’s home turf. What’s more, Virgin’s fleets, in-flight experience, and routes are far more complimentary with the other airline that was courting it, JetBlue. Ultimately, though, this is an acquisition and the highest bidder won.
And while Virgin has been performing well financially, it’s been a struggle for the airline. Should fuel prices begin to climb again, the Virgin’s financial performance could soften quite a bit. Perhaps its executives knew this, and that’s why they decided. Selling the airline while it’s performing well would, of course, provide the best return for shareholders and make the airline more attractive to others.
Alaska, for its part, expected lawsuits such as this to arise. I agree, and I largely expect the transaction to close as planned. It’ll be interesting to see how the airlines are operated post-merger… As one or two separate, but it’ll be at least a year or two before that happens. What do you think?