How Will The US Election Affect The Alaska Airlines Virgin America Merger?

Last April Alaska Airlines won a competitive bid contest against Jet Blue to purchase Virgin America. Many people in the industry were initially surprised by this acquisition, but when looking at the competitive landscape it’s apparent why Alaska Airlines wants to purchase Virgin America. The deal was supposed to close in October and was delayed. Since then both airlines have been relatively quiet, with a few facts leaking out.

Let’s take a look at the different events since the announcement. I’ve included links to the corresponding article.

Alaska Airlines wins bid to acquire Virgin America. April 4th, 2016

The real reason Alaska wants to purchase Virgin. April 3rd, 2016

Richard Branson is disappointed over the deal, but can’t do anything about it. April 4th, 2016

Alaska Airlines considers keeping the Virgin America brand. July 21st, 2016

Virgin America shareholders OK Alaska Air merger. July 26th, 2016

Passengers File Suit To Block $2.6B Alaska-Virgin Merger. September 8th, 2016

DOJ extends time needed to approve Alaska Virgin Merger. October 28th, 2016

Virgin Atlantic and Virgin America drop as partners. November 1, 2016

Leaked image reveals possible design for promotional Alaska-Virgin plane livery post-merger. November 7th, 2016

Airline mergers are a messy business, and they always take longer than anticipated. To get up to date, we have Alaska Airlines announcing that they will purchase Virgin America on April 4th. Originally Alaska said they would discontinue the Virgin America brand, but after some time Alaska reconsiders this position, and admits they don’t want to alienate, or lose, a loyal following of Virgin America customers. Richards Branson regrets the merger, and vows not to let the Virgin America brand disappear. A group of disgruntled Virgin America passengers sue Alaska to prevent the merger. The deal was supposed to close in the October time frame, but the DOJ (Department of Justice) wants more time and a pound of flesh by requiring the dropping or modifying of Alaska Airline’s existing code share arrangements with Delta and American Airlines. In the meantime, Virgin Atlantic (49% owned by Delta) and Virgin America discontinue their partnership. A secrete and leaked photo of the Alaska Airline’s post-merger combined airline livery appears on social media. All of which brings us to this week – when Donald Trump wins the US presidential election and become President Elect Donald Trump.

From diecastjames’s twitter feed – the announcement livery for the combined Alaska Airlines and Virgin America

What we haven’t heard about is how will the US election affect Alaska Airline’s acquisition of Virgin America. The United States Department of Justice is headed by the US Attorney General who is nominated by the President and confirmed by the Senate. Typically, the DOJ is a politicized department, and will take on a different a priority during different administrations. In theory (and admittedly this is a VERY broad generalization), the antitrust division would be more stringent during a Democratic administration and more lenient during a Republican administration. In theory.

Coming back to the current state of the merger, one has to wonder what analysis is taking place both at Alaska Airlines and the DOJ. Two different events seem possible.

1. The current DOJ, seeing that their days are numbered push to finish the deal with more putative requirements in place. Alaska Airlines wanting to get this deal done, accepts the DOJ conditions and complete the merger. All before the end of the year. This scenario would bring forward the completion date.
2. Alaska Airlines thinks the change in administrations is a net positive for the total costs of the merger transaction, and decides to wait till after the inauguration, and the corresponding change in administrations, to complete the merger.

There are of course other alternate versions of events that can take place, including an acceptance by Alaska Airlines of current DOJ terms, and then a later effort to have the more stringent DOJ provisos dropped at a future date. In any case, some version of scenario 1 seems more likely, as the more time that elapses without a deal then there is a higher the risk of some event scuttling the acquisition.

During the next 60 days we will most likely get an answer to the question; “When will the American Airlines and Virgin America merger close?”