After a more than two-month delay, the U.S. Department of
Justice has granted antitrust approval to Alaska Air Group's $2.6 billion acquisition
of Virgin America.
The approval came with the stipulation that Alaska
"significantly reduce" the scope of its codesharing agreement with
American Airlines, according to the DOJ. Alaska markets American flights on
more than 250 routes, whereas Virgin America has been competing fiercely with
American on 20 nonstop routes. The DOT's decision requires Alaska to drop
codeshares on the routes where Virgin is a competitor and on routes on which
"Alaska would otherwise be likely to launch new service in competition
with American following the merger," according to the decision.
"Smaller airlines, such as Alaska and Virgin, provide a
critical competitive check on the larger carriers," DOJ antitrust division
acting assistant attorney general Renata Hesse said. "Although this merger
offers hope that a strengthened Alaska can be an even stronger competitor than
before, because of Alaska's extensive codeshare agreement with the world's
largest airline, the merger threatened to blunt important competition and
reduce choices for consumers."
Alaska noted that the majority of its codeshare flights with
American will remain in place and that it can continue interline and loyalty
program reciprocation agreements. The DOJ did not require any changes to
Alaska's other partnerships, including its partnership with Delta Air Lines.
There also was the question of slots that Virgin America had
gained as part of the DOJ's approval
of the American Airlines/US Airways merger. The Dec. 6 DOJ decision prohibits
Alaska from returning those slots to American and requires DOJ approval should
it wish to sell or lease them to any other carrier. Alaska is not required to
divest any of its own assets, however.
Alaska initially had hoped to finalize the
deal, which will push Alaska past JetBlue to become the fifth largest
airline in the United States, by the end of September, but the extended
antitrust review pushed it well past that deadline. The carrier now expects it
to close "in the very near future."
Alaska
chairman and CEO Brad Tilden said, "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."