Alaska Air is paying $2.6 billion for Virgin America, creating the fifth largest commercial U.S. airline. Fred Katayama reports.
Alaska Air is buying Virgin America for $2.6 billion in cash. Together, they'll become the fifth largest U.S. airline. Seattle-based Alaska is paying a 47 percent premium to Virgin's closing price on Friday after waging a fierce bidding war with JetBlue Airways. Alaska CEO Brad Tilden will lead the combined company. The merger combines two airlines known for their customer service and strong presence on the West Coast. CRT Capital analyst Michael Derchin upgraded Virgin's stock to "neutral," saying, "Virgin America provides Alaska with an expanded California presence, a strong frequent flier base in Silicon Valley, and access to gates and slots in constrained airports, including Washington, JFK and LaGuardia." Virgin America's stock zoomed higher on the deal in early trading while Alaska Air's lost ground. The purchase would mark the first U.S. commercial airline merger since American Airlines and U.S. Airways combined in 2013. CRT says it doesn't expect many obstacles in getting regulatory approval because of the relatively small scale of the deal. The companies expect to get the blessing of regulators and complete the deal by January of next year.