In April it was first announced that Alaska would be taking over Virgin America in a ~$2.6 billion deal. We still don’t actually know what the future of Alaska and Virgin America will look like in terms of branding, and it sure seems like Alaska doesn’t know either, as they’ve gone back and forth.
For a while Alaska had set a deadline of October 17, 2016, for the deal to close. However, prior to the deadline we learned that wouldn’t happen. It later became apparent that the reason for this was that the DOJ was concerned about this merger reducing competition too much, and they wanted some concessions from the new merged airline. Rumor had it that the DOJ was asking Alaska to cut codesharing ties with either American and/or Delta, to ensure that sufficient competition remains.
While this obviously isn’t officially from Alaska (their only statement about the delay in the merger is that they’re “making good progress”), TheStreet has a rumor of the concessions that Alaska is being required to make in order for the takeover to close:
A source familiar with the negotiations said in order to win DOJ approval the airlines have agreed to give up two to four gates in both the San Francisco and Los Angeles airports. Alaska will have to terminate its code-sharing agreement with Delta Airlines and limit its code-sharing arrangement with American Airlines to markets where neither Virgin American nor Alaska have service. It was unclear whether the code-sharing with American will have to wound down completely over time.
Ouch! Arguably Alaska already way overpaid for Virgin America (because they got in a bidding war with JetBlue), so it can’t be good if on top of that they’re going to have to give up 2-4 gates at LAX and SFO, and also terminate their codesharing agreement with Delta and limit their agreement with American.
On the codesharing front I think it’s worth noting that terminating their codesharing agreement doesn’t necessarily translate to them cutting their partnerships and frequent flyer agreements. However, it very well could, given that there’s limited upside for airlines that are otherwise competitors with one another without a codeshare agreement.
At this point I suspect the deal will close given how far along they are, though I’m guessing they wouldn’t have paid so much for Virgin America if they knew they’d have to make these concessions up front.