In April it was announced that Alaska would purchase Virgin America in a $2.6 billion deal. Most people seemed to agree that Alaska way overpaid for Virgin America, though as more details emerged, it became clear that there was a bidding war.
Ultimately Alaska wanted to keep Virgin America away from JetBlue, since the airline would have become a huge threat to their hometown markets with such a merger, when you combine JetBlue’s East Coast presence with Virgin America’s West Coast presence.
The merger is expected to close in the fourth quarter of the year, though we still don’t know what what the combined airline will look like, and whether they’ll keep around the Virgin brand in any way.
One thing is for sure — competition in the US airline industry has been reduced significantly over the past decade, as we’ve gone from six US legacy carriers to “the big three.” Perhaps the merger between Alaska and Virgin America will be the last major one in a string of these for the time being. As a consumer this has been frustrating, as the big three carriers now all more or less look the same.
Well, it seems like some passengers are still trying to block the merger between Alaska and Virgin America. On Wednesday a lawsuit was filed in San Francisco court with 42 plaintiffs trying to block the merger. Per the Las Vegas Sun:
The plaintiffs argue the April 4 acquisition of Virgin America by Alaska Airlines is “substantial and foreboding,” and contributes to a growing trend of mega-airline mergers over the past decade, according to the complaint. Such mergers increase costs for airline consumers while eliminating expansion, the number of available seats and variety of travel destinations, Alioto said.
“Lesser competition can lead to monopolies, and the consumer really loses out in that situation,” Alioto said. “The existence of Virgin America for the free enterprise system is crucial.”
Eliminating competition between Alaska Airlines and Virgin America would cause ticket prices to rise, the complaint argues. Airline service would worsen and traveler capacity would also be lessened.
“The airline stood for new ideas, expansion, nice airplanes, wonderful service and low prices, and innovative ideas.,” Alioto said. “It’s the exact opposite of what these other guys are doing.”
I’m not an attorney, so I can’t really chime in on the merits of the case. Big picture, this seems like too little too late in terms of trying to preserve competition in the US airline industry. If the government really wanted to do anything meaningful in that regard, they would have done that a few mergers back.
Bigger picture I’m not sure I get what’s in it for the plaintiffs, though. Do they really think their lawsuit is going to stop the merger? In this case I assume there’s not really a practical way they’d otherwise “settle,” so on the surface it seems different than many frivolous lawsuits we see.
What do you make of this lawsuit trying to stop the Alaska’s takeover of Virgin America?