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Transportation

Alaska Air Seals Takeover Of Rival Virgin America

Seattle-based Alaska Airlines has closed the deal to take over West Coast rival Virgin America. The combined carrier will become the nation's fifth-largest airline.

Airline executives, workers and journalists flew down to San Francisco Wednesday morning on a specially-painted plane for an announcement and rally at Virgin America's main hub. The deplaning passengers were greeted with a boisterous pep rally including a balloon arch, music and flight attendants from both carriers shaking pom-poms.

Alaska Airlines had kept the commemorative Boeing 737 under wraps at considerable expense for months while its $2.6 billion takeover underwent extended government antitrust review.

The merged airlines will be operated from Alaska Airlines' headquarters near Seattle's airport. 

"Together, we'll offer more flights, with low fares, more rewards and more for customers to love, as we continue to offer a distinctive travel experience,” Alaska Air Group CEO Brad Tilden said in an early morning statement. “The two airlines may look different, but our core customer and employee focus is very much the same."

The plan by parent company Alaska Air Group to acquire a rival received scrutiny from the U.S. Justice Department's antitrust division because it eliminates a competitor on heavily traveled West Coast and transcontinental routes. In the end, the federal government demanded what Alaska Air characterized as relatively "limited" concessions to clear the merger.

To preserve low-fare competition, Alaska Airlines will have to trim back its ticket-selling partnership with American Airlines and seek government approval before selling or trading gates at three of the nation's most constrained airports.

Alaska Air on Wednesday reiterated its position that the merger would be pro-consumer because it would emerge in a stronger position to take on the “Big 4” airlines. American, United, Delta and Southwest all grew larger themselves through mergers over the past decade.

In a statement on the Virgin America website, the acquired airline told its customers it will be business as usual for quite a while longer because of the time it will take to merge complex systems and work forces.

Still undetermined is whether and how long Virgin America will survive as a separate brand. In a sign that the two brands will fly side by side for at least the near future, the airlines unveiled a new tag line, “Different Works.”

“Like bacon on a donut, electricity and guitars, or Labradors and poodles, we’re an odd couple that works well together,” read a brochure about the merger that appeared in seat back pockets Wednesday.

Newly-installed Virgin America CEO Ben Minicucci, who retains his current title as president and COO of Alaska Airlines, said a decision on the brands would probably be made sometime in the first quarter of 2017.

The newly wedded airlines both get high marks from customers, but the on-board experiences for passengers are different. Virgin aims for a hip, sassy ambience on its jets with mood lighting, boarding music, video at every seat and touch screen drink ordering. Alaska offers a more traditional experience and less fancy First Class cabin, but scores higher on punctuality.

"We plan to make this the most customer-friendly merger ever,” Tilden said. “And we will have much more to announce over the coming weeks."

On the day the deal closed, Alaska announced that reciprocal frequent flier benefits will begin on Monday, December 19. Members of Alaska's Mileage Plan and Virgin's Elevate frequent flier programs can earn credits on the other carrier's flights. Also starting on that day, customers can book Virgin America tickets on Alaska's website.

Fleet management also poses an integration challenge. Virgin exclusively flies Airbus 319 and A-320 jets in contrast to Alaska Airlines, which has long been loyal to home town plane maker Boeing.

"We have not yet made any decisions on our fleet and you can expect to see both Boeing and Airbus in our combined fleet for many years," stated the merger website.