Newspaper article The Christian Science Monitor

Why Is Richard Branson Selling Virgin America Now?

Newspaper article The Christian Science Monitor

Why Is Richard Branson Selling Virgin America Now?

Article excerpt

Alaska Air Group Inc. is closing in on a deal that would see the Washington-based airline company acquire Virgin America Inc. for more than $2 billion, per Reuters.

If the sale is finalized, Alaska would beat out JetBlue Airways Corporation for the purchase of the ninth-largest airline in the United States. The acquisition could be announced as early as Monday.

The merger would be the first in the US since the 2013 deal that combined American Airlines and US Airways to form the largest commercial carrier in the world.

People familiar with the situation told Reuters that Alaska would pay between $56 and $58 per Virgin share in the acquisition. Virgin is currently valued on the market at $1.5 billion after going public in 2014, while Alaska has a market capitalization of about $10 billion.

Virgin is responsible for around 1.5 percent of domestic flights, and Alaska and its subsidiaries account for around 5 percent. JetBlue accounts for 6 percent and ranks fifth in travelers, meaning the merger would see the new company overtake JetBlue for that spot.

While Alaska has been in operation since its inaugural flights as McGee Airways in the 1930s, Virgin's aviation history began less than a decade ago when it launched in August, 2007 under the guidance of businessman Richard Branson's Virgin Group. The airline was intended to be a competitively-priced alternative to the larger carriers in the market, and added stylish seating, cabins, and in- flight entertainment to distinguish itself from more established airlines.

Despite its position as a smaller carrier, Virgin has seen growing passenger capacity and revenue over the past few years. The airline reported a net income of $340 million in 2015, more than five times what it earned the year before and by far the highest in its history.

The potential move to join with Alaska would come at a time when Virgin has experienced difficulty securing space at airports with respect to its competitors, and as Alaska is hoping to expand its reach into California. …

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