Passengers Sue To Block Alaska’s Takeover Of Virgin America

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.

Alaska-Virgin-America-Merger

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.”

Virgin-America

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?

Comments

  1. Only by showing your opinion and opposition to bad development in an industry can you create small incremental changes. And in the US the only way to demonstrate that, is in court. So yes, they may not have standing or even win the case, but you should actually give them some credit that they use the established system as intended, rather than just being armchair airlines CEO in aviation forums.

  2. I don’t think it would be hard to show standing; I fly on a regular. basis and intend to keep doing so would probably work, or maybe I’m a shareholder in Alaska and they pay too much would work. But while they are in a friendly court now, this Supreme Court is exceedingly probusiness. Even without Scalia.

  3. Lucky I’m a lawyer. While I doubt this will kill the merger there is always some clauses in the merger docs about ‘no pending litigation’ as a condition of the merger actually happening. This may be what they are trying to achieve – it may just delay the merger for a few months because both parties will be nervous about completing the merger while there’s still litigation pending.

  4. Google the lawyer… as soon as I saw your post I knew it had to be Alioto. I’ll bet against any case he brings and assume it’s a nuisance suit.

  5. The idea isn’t bad, but it’s way, way too late. If the DoJ allowed the DL-NW, AA-US, and UA-CO mergers, it can’t possibly now turn around and say “this far, but no further”. In fact, I’d argue that the AS-VX merger is *good* for competition, since it allows AS to grow large enough to remain at least somewhat competitive with DL, AA, and UA. Heck, on that score, I’d like to see AS scale up to be even larger.

  6. What they should be concentrating on is tort reform. If the losers of the cases were responsible for the legal fees and time wasted, there would be a lot less of this kind of BS choking up the court systems in the US.

  7. How coincidental that and Ford you are in San Francisco, and the attorney that filed this suit is Joe Alioto Jr., son of well-known former Mayor of SF, Joe Alioto. Well timed Ben! Enjoy the city!

  8. Not only do I doubt they have standing, but this is one of the few mergers that is likely to be pro-competitive. A combined Virgin Alaska is more likely to be able to add some real competition to the current oligopoly than they are as standalone entities.

  9. Standing aside, I’m glad to see Alaska drug through the mud some more. They bought VA without understanding it and it’s a terrible culture fit. I hope this gives legs to Alaska’s idea to continue running Virgin as an independent brand, though in the end I doubt it will matter.

  10. This merger is a massive culture clash. People who fly Virgin America, like myself, fly on it for the costomer service, cheaper prices, mate on time flights, more in flight services…. etc. Alaska is like look, we fly to Alaska and Hawaii. We have garbage seats and garbage costomer service. (I have flown them as well). The people who fly each airline fly for reasons that the two airlines don’t have in common. Alaska said they would going to double their west coast service by picking up all of VA’s market. But they won’t. I will in fact fly JetBlue from now on. At least you get an in flight television.

  11. @ … Its funny because Alaska has way better on time performance and they are known for their customer service. Granted they don’t PTVs but I can use my tablet just fine. Good luck being a West coast based flyer on Jetblue. Because the reason alaska bought Virgin was to prevent Jetblue from being competative.

  12. I feel that if the JetBlue/Virgin merger had gone thru, there would likely be Mint A321’s winging their way to Hawaii daily! (and if not-there would probably at least be a launch date)

    I for one think the lawsuit is a bit frivolous and it seems as Gary had mentioned that the lawyer is known for these types of things.

    On a personal note, when I fly, I much prefer the Virgin or JetBlue cabins/experience in Y/Y+ in the domestic US market.
    (HA’s cabin/experience does come in a close third-only for flying to Hawaii obviously)

    For the folks that prefer the VX/B6 type of flying experience/cabin/service, let’s review the seating stats:

    B6 “even more” seats – 37-41″ x 18″
    B6 Y seats: 34″ x 18″
    B6 Mint- 58-60″ pitch/lie flat
    B6 Mint/A321 Y: 33″ x 18″
    VX F- 55″ x 21-22″
    VX Main Cabin Select: 38″ x 17.7″
    VX Y: 32″ x 17.7″

    And then there’s Alaska:
    AS Y: 31″ by 17″
    AS “F”: 36″ x 21″
    Alaska is “proudly all Boeing” which means narrow bodied 737 ‘butt squeezing’ 17″ seats vs the B6/VX Airbus width standard of ~18″

    I know some folks absolutely love AS. I’ve heard they’ve got great customer service in regards to changes/IRROPS etc. and a great (actual) mileage plan with upgrades for elites (still VX/B6 have better cabins/seats) So for me, on a ~6 hour transcon or transpacific to Hawaii, I’ll take the cool factor and better cabins/service on VX, B6 (please lord let Mint to Hawaii happen SOON) or perhaps HA all day! Potentially even for a couple bucks more!

    Alaska’s cabins just don’t have the cool (or comfort) factor of VX/B6 as it relates to Y/Y+ and they’d have to do some serious work to their cabins (maybe buying some Airbii with the wider seats and mood lights would help lol) to bring them up to the comfort level of VX/B6 or even HA

    *Side Note as to the Northern Light mood lighting:
    Icelandair/FI actually has a 757 named Hekla Aurora that has the northern lights mood lighting and paint job (the lighting could potentially be in all their cabins)

  13. This is merely highway robbery. All Alioto wants is a cash settlement that mostly consists of legal fees and just a small fraction will be paid to those named, if not actual, plaintiffs. As a lawyer who tries to make an honest living, it makes my skin crawl seeing how these bandits have lucrative careers taking advantage of any situation.

  14. This suit will go nowhere. Relatively little route overlap between Virgin America and Alaska, no material market concentration change, and what increase in market power the combined airline will have could actually increase competition.

  15. I hope the most unique domestic carrier experience when the merger goes through , is upheld by ALASKA..
    NOTHING can come close to my experiences of VIRGIN America Flights and Airceaft interior ..
    More STERILE WHITE PLASTIC CABINS and TINY NAVY BLUE LEATHER SEATS …
    Im already nauseous thinking about it ….

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