Virgin America’s CEO sent a note to employees about being bought out by Alaska Airlines for $2.6 billion.
Most Virgin America employees will keep their jobs for the foreseeable future. Alaska Airlines doesn’t serve many of the cities that Virgin does. Alaska doesn’t have enough flight attendants and pilots to maintain Virgin’s operation without Virgin’s employees. Alaska’s pilots generally aren’t currently rated on Airbus equipment. Alaska’s mechanics aren’t either. And the Airbus equipment stays, at least for awhile.
The transaction won’t close for several months, and integration of the airlines will take a long time after that. ‘So… please don’t jump ship!’ more or less.
- Dear Teammates,
I am writing to share the news that we have agreed to be acquired by Alaska Airlines. With complementary West Coast-based networks and similar cultures focused on customers, employees and operational efficiency, the joining of the two airlines will create a stronger, better and more competitive airline for our Teammates and guests.
Thanks to your efforts over the past eight years, Virgin America has truly changed the industry and forced other airlines to improve their product and guest experience. And along the way we won pretty much every industry award there is to win. So you may be asking: why merge now – after we only recently became a public company and are now achieving record profits and growth?
For one, the landscape of our business has changed dramatically in the past few years. We now work in an industry where just four airlines control more than 80 percent of the U.S. market – a reality that is putting increased pressure on smaller carriers, even successful ones like ours. By merging with Alaska at a time when both carriers are highly profitable, have strong balance sheets and are buoyed by a stronger economy and low oil prices, the combined airline will have a much stronger competitive position and greater opportunities for success. By joining forces with Alaska – an airline that, like us, has a strong position on the West Coast, a history of operational excellence, and an employee- and guest-focused culture – we are creating the best airline in North America and one with the size and market share necessary to compete in this consolidated environment.
While we did not seek out this merger, this combination provides much more stability and opportunity for growth for our frontline Teammates. Today’s announcement also means that our major bases of operation – including SFO and LAX – will not only remain, but grow, while also opening up substantial new opportunities across Alaska’s larger network. The new combined network should provide substantial opportunities for our frontline Teammates, and all work groups with seniority rights will be integrated into single seniority lists using a fair and equitable process outlined by federal law. All non-frontline teammates will be needed until the transaction is closed, which is a process that typically takes a number of months, and the vast majority will be needed even beyond that point. We will keep everyone updated as we learn more from Alaska.
Combining our two companies will create a more competitive airline with a lower cost structure, more long-term growth potential and significant combined revenue and network advantages. In particular, this includes combining Alaska’s network strengths in the Pacific Northwest and our own loyalty among high-value business travelers in key transcontinental markets along the West Coast. For our travelers, the merger will open up a much larger travel and rewards network, with a continued focus on award-winning customer service and an unmatched record of operational excellence. This combination allows us to maintain our promise to flyers to deliver high-quality service – while significantly expanding their flying options across a new network of over 100 destinations across North America.
Today’s announcement is the first of many steps to come before the transaction closes and we officially become one airline. Pending various legal and regulatory approvals, we expect to complete the transaction sometime in the next several months. This means that, until then, we will continue with business as usual and there will be no impact on your job. We will continue to provide our guests the award-winning service for which we are known, and we will continue to run an efficient, safe operation. The closing of the transaction will be followed by a multi-year integration process across all facets of our business. You will be hearing more from me and your Department leaders about the integration process and how it affects Teammates in the coming weeks, beginning with an upcoming All Hands meeting later today at 3:00 PM PT. We will also be scheduling another All Hands in person meeting next week, which will include Alaska’s leadership – including President and CEO Brad Tilden. You can expect a message from Brad this week as well – he and the entire Alaska team are eager to connect with our Teammates and discuss future plans for a successful integration in more detail.
Every Teammate at Virgin America – regardless of whether you’re new to the airline, or whether you’re been with us since our founding – should feel nothing but pride for all that you have accomplished. Nearly twelve years ago, we set out to build an airline from the ground up with the guest in mind – an airline that reinvented the flying experience, and that actually made air travel fun again. After close to nine years of flying, by every measure, you did exactly that.
I recognize that today’s announcement is unexpected and will lead to some uncertainty, but please know that we will provide regular updates throughout the process. You can find out more information on the acquisition and how it affects your workgroup at flyingbettertogether.com. Additionally, we encourage you to send us any questions related to today’s news to merger.questions@virginamerica.com so we can keep you up-to-date with the latest information.
Our mission has always been to create an airline that people love – and we accomplished that while changing the industry for the better. I believe that joining forces with Alaska will ensure that our mission lives on, and that the new, stronger airline will continue to provide a great place for our frontline Teammates to work and a leading customer experience for even more travelers across the country.
Thanks
David
(HT: Dennis Schaal)
That petty much sums it up. What was Alaska thinking?
“So you may be asking: why merge now – after we only recently became a public company and are now achieving record profits and growth?”
Cuz all dat cash, doe.
If you leave, don’t leave now / Please don’t take my heart away
OMD, baby!
Perfect time to cash out of Virgin America stock and get a new job. JetBlue could probably use some new people to start some more service from LAX/SFO 🙂
“Alaska Airlines doesn’t serve many of the cities that Virgin does.” Where does that come from?
It’s not in David Cush’s letter, and it is completely, verifiably untrue. Virgin America doesn’t currently serve a single city that Alaska doesn’t serve. (Though obviously, the routes are different, with AS mainly from SEA and VX mainly from SFO, and some airports are different with IAH instead of DAL and EWR and JFK instead of all three NYC airports.)
One of the most surprising things I’ve found in the time after the merger was announced is how consistently BoardingArea bloggers are underestimating what a powerhouse Alaska is today. Sommer made this exact same mistake, thinking that VX was bringing new destinations to AS, and Lucky did a whole route analysis of the combined carrier’s routes in and out of NYC, completely overlooking that Alaska has multiple, daily flights to EWR. He seriously thought that Alaska had only a single (red-eye, no less) flight to NYC.
Where does this come from? Are people who don’t live on the West Coast just unfamiliar with AS and assume that it’s a tiny player?
…and in my rant about accuracy, I misspell Summer’s last name. Sorry Summer! (I have a good friend who spells it with an ‘o’. Still, sorry.) My point still stands, though. Where does that perception come from?
@Sam because quite simply AS is not a powerhouse. If you live on the East Coast and have no need to go to SEA, AS is pretty much useless. Is anybody really going to fly from the East Coast to the West Coast to go to Florida or anywhere else on the East Coast to stay on AS metal? Bay Area travelers are rarely going north unless they are going to SEA/PDX/YVR or Europe. AS brings nothing more to the Bay Area that what VX currently offers. The vast majority of the population outside of the PWN is only marginally or not at all served well by AS and most of those people will continue to not be served by them with the addition of VX.
@Sam @ SFO – I shouldn’t have said ‘many’, the point in the deal is that Alaska does gain access to facilities at airports they do not currently serve like LGA and DAL and that’s valuable real estate.
@Bay Area Flyer, I live in San Francisco (it appears you live close as well) and have gotten a ton of utility out of them. I fly them about 5x a year to Hawaii. (Directly from SJC or OAK, without going through SEA. The upgrade availability on those routes is spectacular.) As well as occasionally to Palm Springs, since they have great times to PSP to do a weekend there, and fly year-round, which is something VX only recently started doing. I also fly north a lot. (And this is leaving out the fact that their international partner network is really SFO-friendly.)
Obviously, nobody is going to route through SEA to go between East Coast destinations. Nobody outside of the AvGeek/Travel Hacking community is going to fly from the US to South America via FRA, either. That doesn’t make Lufthansa useless. Yes, Alaska is clearly based out of the PNW, but they have a much larger footprint, across the country (4 countries, actually), than Virgin does. They’re a much bigger airline, and that seems to be lost in the conversation.
@Gary, I totally agree that Alaska is picking up some very valuable gates and routes here, absolutely.
What triggers my pushback is that I think the sentence that I think you were paraphrasing, “Today’s announcement also means that our major bases of operation – including SFO and LAX – will not only remain, but grow, while also opening up substantial new opportunities across Alaska’s larger network,” actually means the opposite of how you presented it. There will be more opportunities for VX employees in Alaska’s wider network. That’s great, and true, and the opposite of “Alaska Airlines doesn’t serve many of the cities that Virgin does.”
And it’s not about any particular minor research mistake. Your larger point is still valid. (And your post was still useful to me!) As was Summer’s, and Lucky’s analysis is still interesting. I’m just annoyed that Alaska is frequently being underestimated by a group of very knowledgable people. AS is 5x the size of VX and serves twice as many countries. With twice the number of destinations in Hawaii, 3x in Mexico and almost 3x overall.
I’m truly bummed to hear about this merger. Alaska Airlines has a LOT TO PROVE!!!! In my opinion, Virgin America is By Far THE BEST AIRLINES in the US!
@Anne Lyons,
We have been in continuos flight operations serving passengers and cargo since 1932 with no bankruptcies. In fact we are one of, if not the most profitable airlines in the world with the lowest debt to equity ratios in the industry (well at least until we spent billions for 8 Virgin Airbuses, they only own 8 planes, the rest are leased. We own most of our fleet). We are the only airline in the world that is rated as “investment grade”. That is a testament to our senior mgt.. We have an excellent safety record flying in some of the most hostile climates and terrain in some of the most remote areas in the world. We have pioneered many navigation and safety features found on modern jet airliners and are always on the leading edge of technology. Our pilots are required to have a 4 year college degree at a minimum and nearly half are former military pilots or have flown with other airlines for many years with totally clean records. We have a very long and tough training program for our pilots. We are consistently ranked #1 on time and ranked #1 for customer service by numerous surveys and reports. We have the best frequent flier program in the industry. We are not a hip quirky upstart airline founded 8 years ago by an eccentric billionaire record producer with cool disco lights in the cabin and trendy uniforms. We do have the new Boeing Sky interior though, which features really nice LED ambient lighting with colors to adjust to the time of day (or night) and the new overhead space bins (the largest in the industry) along with Recaro seats which makes seats for Porsche’s and other high end automobiles. Virgin employees and customers only can gain on this deal. AS employee’s, esp. the pilots are the only ones that have anything to loose. I have 20 plus years here and stand to loose nearly half of my seniority to Virgin pilots with less than 7 or 8 years with their company and we have over 2 1/2 times as many pilots and jets. I was a Captain at this company 7 years before Virgin’s first flight! All of the pilots at Alaska are giving up years of seniority and lost career earnings as a result, while the Virgin pilots get a healthy pay raise and increased benefits. We will of course still have a smile when you board the plane and give you friendly professional award winning service and a very safe flight regardless of how the merger plays out. I am just curious what you want us to prove that we have not proved every day for the past 84 years? We are always working on improving our operation and product, never resting on our laurels. I don’t doubt that Virgin has great service and friendly employees. However they only squeked out a very modest profit (for the first time, reversing consistent losses since their inception) as a result of the oil prices hitting rock bottom this past year when even the most unprofitable airlines are making huge profits because of OPEC over producing oil. This buyout ensures that the Virgin product (under a different name) will survive when the price of oil goes back up again. As a consumer or Virgin employee this is a very good deal. Alaska gains more gates at SFO, LAX, JFK, and DCA and 3000 friendly Virgin employees, although it comes at an extremely high premium price (2.6 billion dollars plus assuming the1.4 billion dollar debt that Virgin has incurred for maybe 250 million dollars of assets). With that in mind, using your logic, maybe it is Virgin that “has a lot to prove”?