The U.S. Department of Justice (DOJ) cleared Alaska Air Group’s proposed acquisition of Virgin America, Alaska announced Tuesday. The deal, announced in April, involves a $2.6 billion cash transaction and another $1.4 billion worth of Virgin America indebtedness and capitalized aircraft leases. At the time, the sides said they planned to close the deal by January 1 and merge their respective operating certificates in the first quarter of 2018.
Although the DOJ did not require Alaska to divest any assets as a condition of the approval, the airline did agree to make what it called limited changes to its code-share agreement with American Airlines. Specifically, the agreement requires Alaska to end code-share operations with American on some 20 routes where AA and Virgin America compete directly. However, the DOJ did not require changes to any other agreements between Alaska and American, including interline or reciprocal loyalty agreements, or any of Alaska's other airline partnerships, said the airline.
On Tuesday the company said it plans to close the transaction in the “very near future,” taking into account a lawsuit filed by private plaintiffs in U.S. District Court in San Francisco in September seeking to block the merger on antitrust grounds. The judge in the case has scheduled the trial to start on December 12.
“Lawsuits of this kind are not uncommon with mergers,” said Alaska in a written statement. “The company believes the plaintiffs’ claims are without merit and plans to defend its acquisition of Virgin America accordingly.”
Assuming the lawsuit fails, the combined airline will operate 1,200 daily departures from hubs in Seattle; San Francisco; Los Angeles; Anchorage, Alaska; and Portland, Oregon. It would fly some 280 aircraft, including regional airplanes, averaging 8.5 years of age. While the merger will allow more frequent connections to international airline partners departing Seattle, San Francisco and Los Angeles, it also will give Alaska Airlines access to East Coast business markets, most notably slot-controlled airports such as Reagan National in Washington, D.C., and JFK and La Guardia in New York.
"We remain confident in the merits of this transaction,” said Alaska Air Group chairman and CEO Brad Tilden. “The expanded West Coast presence and larger customer base create an enhanced platform for growth, which is good for investors, employees and especially customers, who benefit from more choices, increased competition and low fares.”