You thought the merger craze ended three years ago with the American Airlines-US Airways hookup?
Think again.
The Antitrust Division of the United States Department of Justice completed its review and approved Alaska Airlines' acquisition of Virgin America on Tuesday, creating the fifth-largest airline in the U.S. The process went relatively smoothly, with Alaska having to agree to one slight concession made by the DOJ and then having to deal with one non-regulatory hurdle.
Alaska was not required to divest any assets as a condition of DOJ clearance, but the DOJ did impose changes to its codeshare agreement with American Airlines. Because Virgin America is a big competitor with American in about 20 U.S. markets, forcing American to keep fares more competitive in those markets, the DOJ told Alaska Airlines to refrain from collaborating with American on codeshare agreements in those cities.
[READMORE]READ MORE: Alaska Airlines Names Executives To Run Virgin America[/READMORE]
Otherwise, the majority of Alaska and American codeshare flights will remain intact. The DOJ did not require changes to any other agreements between Alaska and American, including interline or reciprocal loyalty agreements, or any of Alaska's other airline partnerships.
"We couldn't be more excited about receiving DOJ clearance for our merger with Virgin America," Alaska Air Group Chairman and CEO Brad Tilden said in a statement. "With this combination now cleared for take-off, we're thrilled to bring these two companies together and start delivering our low fares and great service to an even larger group of customers."
The only other hurdle preventing a close of transaction is to settle a lawsuit filed by private plaintiffs in U.S. District Court in San Francisco. The 42 plaintiffs say the merger is "substantial and foreboding" as such mergers increase costs for airline passengers and diminish the number of seats available.
Alaska Airlines said it believes the plaintiffs' claims are without merit and plans to defend its acquisition of Virgin America accordingly.
"We remain confident in the merits of this transaction," Tilden said. "The expanded West Coast presence and larger customer base create an enhanced platform for growth, which is good for investors, employees and especially customers - who benefit from more choices, increased competition and low fares."
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