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Alaska and Virgin America Finalize Merger, Just in Time for the Holidays

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By Casey C. Sullivan, Esq. on December 19, 2016 1:14 PM

On the eve of the one of the busiest travel periods of the year, two major airline carriers announced that they'll soon become one. The Alaska Air Group said last week that it had finally wrapped up its acquisition of Virgin America, a deal that had been delayed for months, in part due to anti-trust review by the Department of Justice.

The merger has a total value of $4 billion, according to a statement by Virgin America. Their merger will create the fifth largest airline in the nation. To celebrate, the companies launched a new aircraft with combined branding from San Francisco International airport last week.

DOJ Focused on Codeshare Issues

The airlines originally predicted that their merger would be finalized in September, but that date was pushed back months due to DOJ review. The parties were able to come to an agreement in principle in October, however, according to the Street:

Under that agreement, the department continued to review aspects of the code-share agreement between Alaska and American, but the possibility of divestitures of other assets such as gates or slots at congested airports was off the table, said two sources who were familiar with the negotiations and who asked that their names not be used.

Codeshare agreements allow to airlines to share the same flight, with each publishing and marketing the route under its own name and number. Thus, you may buy a flight from Delta only to arrive at the airport and see that you're actually on a plane operated by WestJet.

Codesharing became a major issue in the DOJ's review, according to the Street's source, where Justice "honed in on this one issue and turned over every stone [and] took time to work through it." The DOJ was similarly concerned with making sure that the merger did not result in single-carrier markets where Virgin America had previously "kept pressure on fares."

The government approved the merger earlier this month. The companies settled a consumer lawsuit the next day, with the acquisition deal finalized shortly after.

A Bigger Presence on the West Coast

The merger is set to expand the airlines' reach on the West Coast. Alaska has long been a major player in Pacific Northwest routes, while Virgin America has a large footprint in California. Combined, these two airlines will have even more flights across the West, with almost 300 daily flights out of Seattle and over 100 from San Francisco and Los Angeles each. The merger will also increase Alaska's access to Washington National Airport, John F. Kennedy, and LaGuardia, according to Virgin America.

Meanwhile, loyalty program members can start earning points on either airline starting today, while fliers will be able to start spending their miles on either carrier after the New Year.

But whether Alaska will keep Virgin's neon-tinted, night club exterior and high-quality entertainment options remains to be seen.

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