On April 4th, Alaska Airlines announced they had reached a deal to acquire west coast rival, Virgin America. The deal would see the new combined airline leapfrog jetBlue and become the fifth largest airline in America. The merged carrier would also have one of the highest customer satisfaction ratings as both Alaska and Virgin have won numerous awards for their customer service. However, this merger is not good for the industry and can create problems in the future.
To start, the merger will reduce the number of airlines in the United States again. This may not seem like the biggest issue, but since the beginning of the last decade, Virgin America has been the only successful new airline in the United States. Numerous start-ups have tried to get into the aviation industry, like the rebirthing of PeoplExpress and California Pacific. Established carriers have also diminished in the United States, with three disappearing into bankruptcy in 2008. Prior to 2010, the United States had six mainline or legacy carriers, today there are just three. This diminishing number of air carriers in the United States is bad for the consumer. With less competition, airfares will be on the rise. At the end of 2006, the average airfare in the United States was $318.16. By the beginning of 2015, after AirTran had merged with Southwest, the average had risen to $388.32. The merger of Alaska and Virgin will likely see an increase on shared routes between the airline, as there is now less competition to lower prices.
Although both Virgin and Alaska are both known for their customer service, they both provide different types of service. Alaska is known for their friendly staff however their amenities on board are strikingly different. Onboard Virgin’s Airbus fleet, passengers have in-seat video entertainment featuring complimentary satellite television with movies available for purchase. Alaska offers movies and TV shows available for purchase via the passenger’s own personal device. This works for those travelers who have a personal device, however those without are left to their own entertainment. Also, Virgin was one of the first airlines in the United States to offer mood lighting, a feature that enhances the passengers comfort onboard. With a merger to the Alaska brand and experience these features are likely to fade into history.
Finally, the Virgin America merger was not the airlines brainchild choice. Like most enterprises under the Virgin brand, Virgin America was Richard Branson’s idea. He wanted to upgrade the low cost experience in the United States by offering a higher quality product than other airlines. Branson was often featured in the airlines advertisements and made numerous appearances in the airlines commercials debuting the start of the airlines service to Hawaii. Even as recently as April Fools Day, Branson was featured in the airlines April Fools joke in developing the airline’s “new” logo. When the acquisition was announced the choice was not Branson’s. He was even quoted after the merger was announced saying ““I would be lying if I didn’t admit sadness that our wonderful airline is merging with another.”
Unfortunately because of the United States rules, a foreign investor cannot own more than 25% of a U.S. company. This means despite his wishes against the merger, he couldn’t stop it as he was not the majority shareholder.
Overall, the merger of Virgin America and Alaska Airlines would see a popular and internationally recognized brand fade out of existence in the United States. The two airlines are very different and it may be hard for Virgin America’s loyal flyers to adjust to the new life Alaska has envisioned for the airline. In order to maintain an iconic brand and to better integrate the two airlines, the two distinct brands should remain.
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