Alaska Airlines acquired Virgin America in 2016 and did away with the Virgin brand.
Richard Branson pledged he would launch a new Virgin airline in the U.S., which suggests Branson certainly thought use of the trademark reverted to Virgin. He repeated the claim multiple times.
Virgin’s position at the Commercial Court of the High Court of Justice of England and Wales is that Branson was making claims he could not deliver on – that Virgin had no right to use the trademark for an airline in the U.S. anymore – and that Alaska Airlines had purchased the exclusive right through 2039 whether they used it or not. (Or Branson, like Alaska, assumed the license to the Virgin name would terminate.) As a result, they argued, Alaska owed $8 million a year for 20 years after eliminating Virgin America. And they won the $160 million judgment though Alaska says they’ll appeal.
As a result of the transaction,
- Alaska Airlines got slots and gates at congested airports, many of which Alaska has walked away from or underutilized.
- Alaska inherited a San Francisco hub which is valuable, and helped diversify when they faced growing competition in Seattle. They bought a customer base for their Bank of America co-brand credit card which is more lucrative than Virgin’s co-brand deal was.
- As an additional benefit they blocked JetBlue from becoming a major competitor on the West Coast when they overpaid in a $2.6 billion deal for the privilege, outbidding the East Coast carrier whose fleet would have been a better match for Virgin’s. (Alaska committed to its Boeing fleet, in contrast to Virgin’s Airbus narrowbodies.)
Virgin had a nicer first class product, so it was sad to see Virgin’s planes reconfigured in advance of exiting the fleet.
Alaska was never going to use the Virgin America brand. However with new, grander ambitions I thought a renaming was in order – something like ‘Alaska America’. Instead Virgin was largely folded into Alaska’s existing brand and operation.
Did Virgin Group actually lose anything from this transaction?
- Virgin saw their shares in Virgin America acquired at a premium to market.
- Virgin says Alaska’s exclusivity meant they couldn’t start a new U.S. airline with the Virgin name but they probably couldn’t have done that anyway. Virgin America had to jump through enormous hoops to demonstrate that it was U.S.-owned and controlled airline to begin with, Virgin can’t legally control a U.S. carrier to begin with.
- Indeed, Alaska’s position is that if Virgin’s read of the contract were true then it would have been illegal under the conditions agreed to which allowed Virgin America to launch – the airline had to operate fully free of Virgin.
Alaska’s position was that the Virgin brand is useless to it, and it’s “a bizarre” reading of the agreement to require payments after a change in control and cessation of use. However the U.K. court agreed with Virgin.
Glaring typo in the second sentence (… he would do launch…”) renders post indecipherable.
I used to fly out of SFO, and I really liked Virgin America.
After seeing all the Damage that Alaska Airlines did to Virgin, I wish Jet Blue had bought them out instead.
Alaska’s acquisition of Virgin America was a failure on many counts. Having to defend their licensing agreement in a UK court for a small US airline had to be expensive and challenging.
They also lost the flight attendant case so it wasn’t just about foreign courts.
They failed to use the gates at Dallas Love Field that the DOJ wanted them to have as a result of the AA/US merger and DL now has a gate that AA thought that AS could care for until AA can return to Love Field.
AS is a fraction of its merged self at both LAX and SFO.
and of course the remaining Airbus aircraft are being disposed of with a charge.
But, yes, AS kept B6 from growing on the west coast at a whole lot of costs that AS clearly did not see.
Kind of shows the business smarts? of Alaska.
Is this why Alaska’s airfares have suddenly shot ridiculously sky high across the board?
Agree with R
Alaska airfares have gone through the roof 500 dollars one way in coach to fly las to lax ?
Southwest please 100 bucks
Maybe they shouldn’t have bought the airline
And 30k in miles to fly one way in coach sfo san? I’ll pass
The food sucks in First class too but that I suppose can be said for most carriers these days
So, basically, the end result of the merger was the purchase, dismantling and elimination of a competitor. When people grumble about the DOJ being too heavy-handed on anti-competitive behavior, you can go right ahead and look at this case study.
By the way, this further reinforces the long-standing argument that Alaska Airlines is ultimately limited by the lack of any kind of viable growth strategy. The *only* strategy they have is “defend and grow Seattle.” That’s not going to cut it.
Literally every other growth attempt they’ve made in the last 10-15 years involves pushing into a market, getting beat to crap on yield by competitors, and then retreating back to a defensive position in Seattle. I would read that as Alaska not having a competitive product outside its home market, namely because they think they can play it cute by trying to straddle the line between LCC/ULCC and Legacy in terms of service & price point. That “goldilocks” market doesn’t exist in America because it’s not a feasible market.
Free advice for Alaska Airlines: re-establish Virgin America as a “virtual brand” that codeshares on all of their flights. Get their Oneworld partner British Airways to add the code on all departures from Heathrow to the United States. Set the stopwatch until Virgin wants them to stop using the brand.
I left Virgin when Alaska took us over -so many team members and guests left too-Alaska solely bought VX to eliminate the competition-they tried to do their version of virgin and failed miserably -eliminating a winning brand that stood out was the worst thing they could have done -karma is a bitch!
I used to really love flying Alaska, but since joining OneWorld they’ve shown that their main priority is to ostracize customers that don’t follow a narrow social view, and their secondary priority is to push customers in their regional markets to other airlines because suddenly they have no clue how to build schedules that don’t force regional customers into an overnight stay in Seattle on both ends of a round-trip that is easily eliminated simply by flying with another airline.
I earned elite status on Alaska n ’20 and ’21, but in ’22 that status went to another airline mostly due to Alaska’s ridiculous scheduling.
Give Alaska Airlines a yellow card for public shaming.