Virgin America has reportedly put the airline up for sale. News first broke that the airline was shopping for bidders last week. It is rumored that Virgin America investors are ready to cash in now that airline stocks are trading at elevated levels. The time may be right for those investors to get out, as the airline has struggled with intense compitition and low fares on the routes that it serves. Virgin America has been an easy target for its competitors to engage in these battles, as the air carriers small size means there are fewer routes for them to compete on. The recent additions of Honolulu and Kahului in Hawaii only brings the airlines total up to 24 airports in the US and Mexico. The decision by the airline to move its base of operations in Dallas from DFW to Love Field was also viewed as a very poor idea. The airline is being squeezed at Love Field by gate space capacity, with only two available for their use. Southwest Airlines’ Bags Fly Free and no cost ticket change or cancellation policies has made it even tougher to compete there. American Airlines was a competitor that Virgin was far better matched up against from a fare and service standpoint.
Virgin America bidders
Alaska Airline and JetBlue are said to have already made offers for Virgin America. A merger with JetBlue is believed by the street to be the best match. Its hubs in the East include Boston, Fort Lauderdale, New York (JFK), and San Juan Puerto Rico. The only JetBlue hub in the West is based in Long Beach, California. Virgin America has 2 hubs in the West, at San Francisco (SFO) and Los Angeles (LAX). JetBlue also operates the same types of Airbus aircraft as Virgin America, improving crew and maintenance synergies. The two carriers also offer a higher quality of passenger service, with both ranking high in consumer satisfaction polls. The fit with Alaska Airlines is viewed as having less benefit from a route overlap view. However, with both carrier networks primarily based on the west coast, a merger between the two could help Alaska Airlines reduce seat capacity and improve ticket prices. Alaska Airlines has been under pressure from Delta Air Lines, which has been aggressively expanding in Seattle where Alaska is based at. Other airlines may still decide to place a bid as well, so it looks like time will tell what happens with Virgin America.
Image from www.virginamerica.com/