The Justice Department on Tuesday cleared the parent company of Alaska Airlines to buy Virgin America, but imposed some route-sharing conditions.
The $2.6-billion purchase of Burlingame, Calif.-based Virgin America by Alaska Air Group, which will create the nation’s fifth largest domestic carrier, is the latest of a series of airline combinations that have put more than 80% of all domestic flights under control of four major carriers, American, United, Delta and Southwest.
With the acquisition, Alaska Air Group will account for 6% of the nation’s domestic flights, moving it ahead of JetBlue Airways Corp., which lost the bidding war for Virgin. Alaska officials have yet to say whether they will operate the two airlines separately or combine them under the Alaska Airlines name.
Before clearing the purchase of Virgin America, the Justice Department’s Antitrust Division required Alaska to slim down its code-sharing agreement with American Airlines, the world’s largest carrier. Code-sharing agreements allow airlines to sell tickets to its customers on flights operated by rival airlines.
Alaska Airlines and American Airlines have code-sharing agreements to sell tickets on about 250 routes. But Virgin America has competed strongly with American Airlines, particularly on transcontinental flights.
To ensure that American Airlines continues to face competition, Alaska Airlines agreed to end its code-sharing agreement with American on those flights that complete with Virgin America, including routes out of Los Angeles International Airport.
“Today’s settlement ensures that Alaska has the incentive to take the fight to American and use Virgin’s assets to grow its network in ways that benefit competition and consumers,” Acting Assistant Atty. Gen. Renata Hesse said..
The settlement must still be approved by the U.S. District Court for the District of Columbia.
“With this combination now cleared for takeoff, we’re thrilled to bring these two companies together and start delivering our low fares and great service to an even larger group of customers,” said Brad Tilden, chairman and chief executive of Alaska Air Group.
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