Virgin America has just sold out to Alaska Airlines.
Richard Branson, who owns only a clear 22% of Virgin America, felt so bad about it that he wrote an open letter concerning the takeover.
He could not do too much to stop it because some of his take was in the form of non-voting shares. This effectively reduced his influence in a sell deal to that of a spectator. Because he is not an American, according to USA law, he was never allowed to have majority ownership. Still, he remains optimistic about the airlines’ future. As he put it, “Besides the turbulence and headwinds, the journey remains thrilling and joyful and I look forward to more future flights with virgin America.”
In many ways, the takeover makes sense. Yes, Virgin is a great brand and Virgin America was a cool airline to fly on. The banter on board, the groovy lounges, the reception, everything was pure Virgin. The only weakness of the original Virgin America set up was that the curious bystander often wondered why they could not link Virgin America to Virgin Atlantic for international travel. Now with Alaska, they simply add much more domestic connectability.
Frankly, now that Virgin America sold to Alaska Airlines the brand is going to become diluted.
Alaska might be famous for its onboard cuisine if you fly in business, but beyond that it is pretty much bog standard. In other words, you get what you pay for. Alaska could only benefit greatly from the bounce of the Virgin brand as they go head-to-head with the Southwest and Jet Blues.
It’s all about consolidation. Airlines are making bigger profits, oil is cheap as chips, the seats are shrinking, the food is sucking even more, and Richard just walked away with a cool half billion dollars.
The same thing kind of happened on Virgin Atlantic.
In 2012, Branson said that he could not survive competitively unless he had an alliance. There was talk of aligning with British Airways and Singapore, but in the end it was Delta who picked up the mantle – the largest airline in the world married a virgin!
Essentially, Delta picked up all Virgin slots and 49% of Virgin Atlantic. It gave both airlines more access in a highly competitive market and it gave Delta a hot card to play against its transatlantic nemesis, British Airways. Imagine this, now there would be nine daily round-trip flights from London to JFK and Newark and 31 peak day daily flights to London! More importantly, for Delta fans, you get the chance to visit the groovy Virgin lounge as opposed to the abysmal Delta one where they won’t let you bring in a desperately needed sandwich because they are scared you will compare it to the rubbish you are getting inside. So there are benefits. Although currently Delta flies into Terminal 4 at Heathrow whereas Virgin is in Terminal 3, so you need to have a 10 minute limo service to connect you between the lounges! Not so good.
In the end, when we travel on Virgin, we buy the brand.
The brand’s God is Branson. It starts at the counter with the red suited flight attendants and the funky fishbone configurations in upper class on the planes. It is a kind of an antidote to British Airways and it worked. People became Virgin groupies. The lounges are the best and the people that work at Virgin all carry the brand with pride.
So how is the marriage going? It’s probably working well economically but I do get the feeling having dealt with both sets of staff that this marriage is definitely destined for twin beds at the very least and separate rooms in the future. Maybe that’s how marriages last!
Image courtesy of ABC News: http://abcnews.go.com/Business/virgin-america-alaska-air-merger/story?id=38143131
