Bradley Tilden's Dilemma Following the Alaska Airlines-Virgin America Deal
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Case Code: BSTR510 Case Length: 18 Pages Period: 2015-2016 Pub Date: 2017 Teaching Note: Available |
Price: Rs.600 Organization: Alaska Airlines,Virgin America Industry: Aviation Countries: US Themes: Business Strategy, Merger and Acquisitions,Strategic Alliances |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Virgin America
The history of VA can be traced back to early 2004, when the British conglomerate Virgin Group announced its intent to launch a new low-fare airline in the US that would offer a higher level of service than traditional airlines provided. The airline finally took to the skies in 2007 under the name “Virgin America,” basing most of its operations out of San Francisco International Airport. Virgin Group initially owned a 49% stake in the new airline but controlled only 25% of the voting rights as the rules stated that all US airlines could have a maximum of only 25% foreign ownership in the US....
The Merger
During the early 2000s, the aviation industry in the US faced difficult times due to the global financial crisis, increase in oil prices, and the aftermath of the 9/11 terrorist attacks. The crisis pushed many airlines in America such as US Airways, Delta Airlines, Northwest Airlines, and United Airlines to the brink of bankruptcy....
Challenges
According to analysts, AA and VA were different in many ways, and this would raise several integration challenges and decision points related to operations and services. The two airlines had distinct public images, corporate cultures, fleets, and on board services, they added...
Identity Crisis
In the US, airline mergers traditionally led to the end of one airline’s brand. Analysts pointed out that, in the past, Southwest Airlines, Delta Airlines, and American Airlines had replaced the AirTran, Northwest Airlines, and US Airways brands with their own respective brands. With regard to the AA-VA merger, analysts wondered whether Tilden would keep the two airlines separate or absorb the VA brand....
Looking Ahead
As he awaited regulatory approval for the merger, Tilden said he was still undecided on whether to keep the VA brand alive or get rid of it once the merger went through. He said everything was still on the table and all options were being evaluated by the management team...
Exhibits
Exhibit I: Wall Street Journal’s 2015 Airline Scorecard
Exhibit II: Alaska Air Group –Selected Financial Data
Exhibit III: Alaska Air Group, Inc. - Condensed Consolidated Balance Sheets
Exhibit IV: Airline Quality Rating Scores (2008-2015)
Exhibit V: Virgin America Selected Financial Data
Exhibit VI: Consolidation in the US Airline Industry (1980-2015)
Exhibit VII: Top Ten US Airlines System-wide (Domestic + International)*
Exhibit VIII: Stock Price of Alaska Airlines and Virgin America
Exhibit XI: Timeline of the Alaska Airlines and Virgin America Deal
Exhibit X: Comparison of Alaska Airlines and Virgin America (as of May 2016)
Exhibit XI: Market Share of US Airlines by Domestic Capacity
Exhibit XII: Route Network of Alaska Airlines and Virgin America (Post-Merger)
Exhibit XIII: Seat Share of Alaska Airlines (Post-Merger)
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