Branson Had No Choice But To Merge Virgin America With Alaska Airlines

Alaska Airlines is reportedly going to buy Richard Branson’s Virgin America Airlines for $2.6 billion, according to Forbes.

It’s suggested that the buyout was actually disappointing to Branson for a variety of reasons. According to Business Insider, Alaska Airlines bought Virgin America to merge both companies and to set laws by the Department of Transportation in order to lessen Branson’s influence in the American airline industry because he’s not American.

Branson made a statement on the Virgin Air website where he talks about the start of the company and how it grew out of frustration.

“In 2007, when the airline started service, 60 per cent of the industry was consolidated. Today, the four mega airlines control more than 80 per cent of the US market. Consolidation is a trend that sadly cannot be stopped. Likely feeling the same competitive pressures as Virgin America, Alaska Airlines approached Virgin America with a proposal to merge. The board of Virgin America has accepted an offer from Alaska, and if the merger is approved by Virgin America shareholders and regulatory authorities, the two airlines will become one.”

Branson states that the reason he started the Virgin Air company was to provide quality service to the customer as other airlines were ignoring them. Branson even said that he would set the safety standard for the airline industry.

In the statement, Branson says that his company shares – which are 30 percent – had been turned into non-voting shares so that he did not have any influence in the merger.

Alaska Airlines merger via Facebook
The merger between Alaska Airlines with Virgin American was enforced under the rules, from the Department of Transportation that no foreign entity can hold more than a certain percentage, of an American market, in the airline industry. “Flying better together. Today we’re joining with Virgin America to create the West Coast’s premier airline.” [Image from Alaska Airlines via Facebook]
Virgin Airlines got its start in the early 80s when Branson partnered up with Randolph Fields and Alan Hellary, leasing a Boeing 747-200 to transport travelers between Gatwick and Newark.

Virgin Airlines has been touted for its exceptional customer service.

The airline has also touted the same record; Alaska Airlines updated their statement on their site last July.

“Alaska Airlines is the seventh-largest U.S. airline based on passenger traffic and is one of the most popular U.S. West Coast air carriers. Headquartered in Seattle, Alaska carries more passengers between the state of Alaska and the Lower 48 than any other airline. The airline has expanded significantly to serve several U.S. East Coast and Southern states including Nashville, Charlotte and Raleigh/Durham and will begin flying to Costa Rica later this year.”

The Cornell University Law School site refers to a law which states that more than 25 percent of an American company cannot be owned by a foreign entity, such as Branson.

Can Alaska Airlines continue the Virgin American experience?
The Virgin group has always claimed exceptional service, and a exclusive atmosphere onboard. It would appear that most of his consumers and staff agree, but will Alaska Airlines be able to do the same now, after the merger? Some doubt it. [Image by Atomic Taco via Flickr | CC BY-SA 2.0]
Aside from Virgin America, Branson still has 10 travel affiliates that he is currently operating.

The Wall Street Journal discussed the merger and tried to explain that Alaska Airlines is not all that different from Virgin in the quality of service they offer.

In this source and others, it explains that Virgin shareholders still have to approve the deal, but considering Richard Branson’s statement, it appears to be a done deal.

The article quotes a marketing executive from San Francisco – where this airline is based – who travels on Virgin enough to give some insight into their brand.

“It’s really a boutique airline experience. The flight attendants are extremely amiable. You get the sense that they really love working for Virgin. The gates don’t look like anyone else’s gates. The furniture is different.”

The article points out the trend in mergers like these where the quality is likely to go down, given that Alaska Airlines’ CEO Brad Tilden is still learning about the Virgin brand to see how different they are.

But the Dean Of Aviation College at Embry-Riddle Aeronautical University, Brent Bowen, has said that quality is sure to drop.

“When larger airlines merged in recent years, their quality ratings dropped. Such combinations usually entail a ‘period of chaos.'”

Alaska Airlines has also apparently been able to make the airport experience less stressful while Virgin America has made the flight less stressful.

The merger is set to be completed by January of 2017.

[Featured image by Atomic Taco via Flickr | CC BY-SA 2.0]

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