Alaska Air CEO says hard to predict when Virgin deal will close
An Alaska Airlines plane is pictured with a paint job to mark the centennial of The Boeing Company in Seattle, Washington July 15, 2016. REUTERS/Jason Redmond
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(Reuters) - Alaska Air Group Inc's (NYSE: ALK) chief executive said on Thursday it was hard to predict when its deal to buy Virgin America Inc (NASDAQ: VA) will receive approval from the U.S. Justice Department, which is considering the impact of the latest airline merger on competition and airfares.
Late-stage discussions included the possibility of Alaska jettisoning part of one or more code-sharing agreements it has with larger U.S. carriers as a concession for winning antitrust approval, a source close to the matter has said.
The scope of the department's review is manageable, Alaska Air CEO Brad Tilden said on an analyst call. The airline is confident the deal will close and proceed in a way that benefits shareholders and customers, he said.
In code-sharing agreements, an airline that does not fly a particular route sells tickets on behalf of another carrier that does. Both airlines place their identifying codes on the flight, and travelers can earn frequent flyer miles under either carrier's loyalty program.
Alaska has code-share arrangements with larger U.S. rivals American Airlines Group Inc (NASDAQ: AAL) and Delta Air Lines Inc (NYSE: DAL). The merger would open the possibility of the airlines agreeing to share codes on flights currently operated by Virgin America, which might alter competition at a time when the top four carriers control more than 80 percent of the U.S. market.
American put its code on nearly 163,000 Alaska Airlines scheduled flights in 2016, and Delta put its code on more than 78,000, according to data from air travel intelligence company OAG. Alaska Airlines places its code on nearly 588,000 of those carriers' scheduled flights as well.
JPMorgan analyst Jamie Baker has estimated that those relationships amount to $350 million in revenue for Alaska Air per year.
Alaska Air has said its $2.6 billion merger would create the largest airline on the U.S. West Coast and help it rival bigger U.S. airlines.
"This is a pro-consumer merger of two smaller airlines that will bring new low-fare competition," Tilden said.
(Reporting by Jeffrey Dastin in New York and Alana Wise in Washington; Editing by Dan Grebler)
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