Lawsuit seeks to block Alaska Airlines' $4 billion acquisition of Virgin

Published: Sep. 9, 2016 at 12:57 PM AKDT
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On behalf of a group of more than 40 consumers, a San Francisco law firm is trying to stop a $4 billion merger between Alaska Airlines and Virgin America.

The plaintiffs argue the deal would weaken competition in the industry, causing job loss and higher fare prices.

Alaska Airlines announced on Aug. 4 that it would acquire Virgin America to create the West Coast’s “premier carrier.” If completed, the merger would make the Seattle-based company the fifth largest airline in the United States, with a fleet of more than 280 aircraft and annual revenue exceeding $7 billion, according to information released by the company earlier this year.

“The combination expands Alaska Airlines' existing footprint in California, bolsters its platform for growth and strengthens the company as a competitor to the four largest U.S. airlines,” the company wrote in an April press release.

But San Francisco attorney Joseph Alioto says the merger would have detrimental effects to both airlines and the commercial aviation industry in the US as a whole. On Thursday, his law firm filed an injunction seeking to prohibit the transaction. The complaint names more than 40 plaintiffs, some of whom are frequent fliers and travel agents who feel their businesses will be harmed as a direct result of the airliner’s plans.

“Alaska Airlines has a very good presence in Alaska, Washington, and Oregon. For it to compete for more business in California would be a good thing, not only for Alaska, but for people, passengers, and customers,” Alioto told Channel 2.

“They’re two very good airlines and we want to make sure they can continue to compete.”

According to Aliotto, the loss of competition brought on by the merger would remove incentives for the company to lower prices, resulting in an increase to the already high air fares to which Alaskans are accustomed.

But in addition to the increased prices, the merger could be a potential source of job loss if the company removes employees that are no longer needed.

“They’re letting these people go because they don’t need them anymore if they don’t have competition,” Alioto told Channel 2.

Moreover, the complaint argues that Alaska Airlines’ position as the fifth largest airliner in America would force the airline to play into what has become an increasingly closed market, where recent mega-mergers have given four major airliners control over 84 percent of all passenger airline service in the United States.

“The vital and critical importance of the enthusiastic and innovative competition of Virgin America and its presence in the airline markets can be measured against the near total lack of competition among the other major airlines,” the complaint reads. “Virgin is the most important bulwark to block this almost unstoppable trend toward complete concentration and monopoly in the airline industry.”

With Alioto’s injunction filed, Alaska Airlines now has a deadline to provide the courts with information proving that the merger should be allowed to proceed, something that the company fully expects to achieve. Alaska Airline’s spokeswoman Ann Zaninovich issued the following statement in response to the lawsuit:

“We’re making good progress toward fulfilling the DOJ’s (Department of Justice's) second request for information and are working under our existing timing agreement, which states that we will close sometime in early Q4 and not before Sept. 30. We fully expected various litigation following our April 4th announcement and are not surprised by this particular firm, who has a history of making these types of filings,” Zaninovich said.

If the merger goes forward as planned, Alaska Airline’s hopes to close the deal by Jan. 1 2017 and have both airliners flying under a single operating license by the first quarter in 2018.