SEATTLE and SAN FRANCISCO, April 4,
2016 /PRNewswire/ --
Highlights:
- Deal combines two leading airlines known for outstanding
customer service and low fares.
- Alaska Airlines expands its California presence, while creating new
opportunities for growth and competition.
- Expanded route network benefits customers, with 1,200 daily
departures.
- Transaction is expected to be accretive to adjusted earnings
per share in first full year, increases annual revenues 27 percent
to more than $7 billion and offers
$225 million total net synergies
annually at full integration.
- Alaska Airlines Mileage Plan™ to welcome Virgin America
Elevate® members.
- Company headquarters to remain in Seattle.
Alaska Air Group, Inc. (NYSE: ALK), parent company of Alaska
Airlines, and Virgin America, Inc. (NASDAQ: VA) today announced
that their boards of directors have unanimously approved a
definitive merger agreement, under which Alaska Air Group will
acquire Virgin America for $57.00 per
share in cash. Including existing Virgin America indebtedness and
capitalized aircraft operating leases, the aggregate transaction
value is approximately $4.0 billion.
With an expanded West Coast presence, a larger customer base, and
an enhanced platform for growth, Alaska Airlines will be positioned
to provide more choices for customers, increase competition and
deliver attractive returns to investors.
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. Combining Alaska Airlines' well-established
core markets in the Pacific Northwest and the state of Alaska with Virgin America's strong foundation
in California will make Alaska
Airlines the go-to airline for the more than 175,000 daily fliers
in and out of Golden State airports, including San Francisco and Los Angeles.
For Virgin America customers, service will expand in the
thriving technology markets in Silicon Valley and Seattle. The combined airline will also offer
more frequent connections to international airline partners
departing Seattle, San Francisco and Los Angeles. In addition, this transaction
will open up growth opportunities in important East Coast business
markets by increasing Alaska Airlines' access to slot-controlled
airports like Ronald Reagan Washington National Airport and the two
primary New York City-area
airports, John F. Kennedy
International Airport and LaGuardia Airport.
"Our employees have worked hard to earn the deep loyalty of
customers in the Pacific Northwest and Alaska, while the Virgin America team has done
the same in California. Together
we will continue to deliver what customers tell us they want: low
fares, unmatched reliability and outstanding customer service,"
said Brad Tilden, chairman and CEO
of Alaska Air Group. "With our expanded network and strong presence
in California, we'll offer
customers more attractive flight options for nonstop travel. We
look forward to bringing together two incredible groups of
employees to build on the successes they have achieved as
standalone companies to make us an even stronger competitor
nationally."
David Cush, Virgin America
president and CEO said, "Our mission has always been to create an
airline that people love – and we accomplished that while changing
the industry for the better. Joining forces with Alaska Airlines
will ensure that our mission lives on, and that the stronger,
combined company will continue to be a great place to work and an
airline that focuses on an outstanding travel experience."
"Today's merger announcement of two great airlines coming
together provides both pilot groups with an outstanding opportunity
to benefit from the growth of the expanded Alaska Airlines' route
network," said Captain Chris Notaro,
chairman of the Alaska Airlines MEC of the Air Line Pilots
Association. "We would like to welcome the professional pilots of
Virgin America to the Alaska
family and we look forward to a common goal of building a new joint
pilot group that will benefit from a stronger and more prosperous
airline that we have helped build."
"Alaska Airlines and Virgin America are both known for providing
an exceptional in-flight experience, thanks in large part to the
dedication of our respective flight attendants," said Jeffrey Peterson, president of the Association
of Flight Attendants-CWA Master Executive Council at Alaska
Airlines. "The combination of these two award-winning airlines
provides an exciting opportunity for our members and for the Virgin
America flight attendants, or Inflight Team Members. We look
forward to joining together and building on our legacies of
customer satisfaction to the benefit of both companies'
passengers."
A Larger Network, More Choices and an Enhanced Mileage
Plan
The transaction brings together two airlines that consistently
earn customer admiration and the highest industry accolades:
- Alaska Airlines has been ranked #1 among the nine largest
carriers in the United States by
The Wall Street Journal for overall operational
performance for three years in a row, while Virgin America has
placed #2 in the same study for the past two years.
- Virgin America has been voted "Best Domestic Airline" in both
Travel + Leisure's Annual World's Best Awards and Conde
Nast Traveler's Readers' Choice Awards for the past eight
consecutive years.
- Alaska Airlines has been ranked "Highest in Customer
Satisfaction Among Traditional Carriers" by J.D. Power for eight
years running, and has been ranked #1 for on-time performance six
years in a row by FlightStats.
- Virgin America has been rated #1 for the past three years in
the annual Airline Quality Rating report, an annual study of U.S.
domestic airline performance based on public data submitted to the
Department of Transportation and conducted by professors at
Wichita State University and
Embry-Riddle Aeronautical
University.
- Alaska Airlines has been named the most fuel-efficient airline
by the International Council on Clean Technology for the last six
years.
The combined airline will retain its safety-centric,
employee-focused culture:
- Alaska Airlines and Virgin America both have been named among
America's 'best employers' by Forbes, which annually ranks
500 U.S. companies based on responses to a survey of American
workers.
- Both Alaska Airlines and Virgin America are listed on the
International Air Transport Association's Operational Safety Audit
(IOSA) registry, the globally recognized benchmark for the airline
industry. Alaska Airlines has been on the registry for 10 years and
Virgin America has qualified for six years.
- Alaska Airlines expects that Virgin America's Pilots, Inflight
Teammates, Guest Services Teammates and maintenance technicians
will be protected in the combination.
Together, the combined airline will have:
- 1,200 daily departures, with hubs in Seattle, San
Francisco, Los Angeles,
Anchorage, Alaska, and
Portland, Oregon.
- Approximately 280 aircraft, which include regional planes, with
an average age of 8.5 years.
- Virgin America's fleet of 60 Airbus A319 and A320 aircraft
boast three classes of service, in-flight WiFi and power outlets on
every flight, as well as personal, touch-screen seatback
entertainment.
Following closing, Alaska Airlines will welcome Virgin America
Elevate loyalty program members into its Mileage Plan, ranked #1 by
U.S. News and World Report. With Alaska Airlines Mileage
Plan, members are able to redeem award miles for travel to more
than 900 destinations worldwide, rivaling global alliances. Until
the transaction closes, both loyalty programs will remain distinct
– with no short-term impact on members. Upon closing, the programs
will be merged. Alaska Airlines is committed to ensuring that
loyalty members of both airlines maintain the same high-value
rewards they've come to enjoy in both programs – with access to an
even larger network.
Attractive Returns for Shareholders
Under the terms of the agreement, Alaska Air Group will acquire
Virgin America for $57.00 per share
in cash, representing a total equity value of $2.6 billion. The combined company expects to
achieve $225 million annually in
total net synergies at full integration. One-time integration costs
are expected to be between $300-350
million. The combined airline is projected to have annual
revenues of more than $7 billion.
Alaska Air Group expects the transaction to be accretive to
adjusted earnings per share in the first full year, excluding
integration costs.
The transaction builds on both companies' strong financial
performance. In 2015, Alaska Air Group achieved a record full-year
adjusted net income of $842 million,
which increased 47 percent over 2014. Alaska Airlines also grew
passenger revenues by 5 percent year-over-year, and has increased
dividend payments 175 percent since initiation in 2013. In 2015,
Alaska Airlines added 20 new markets and 10 new cities to its
growing network and 11 new aircraft. As of March 31, 2016, Alaska Airlines had $1.6 billion in unrestricted cash and short-term
investments.
Since its successful IPO in 2014, Virgin America has reached a
number of milestones, most recently reporting a record annual
year-over-year net income of $201
million, an increase of 139 percent in FY 2015, the highest
in company history. In 2015, Virgin America also outperformed the
industry in domestic unit revenue growth and began growing the
airline with 10 new aircraft deliveries.
Preparing for Takeoff
The combined organization will be based in Seattle under the leadership of Tilden and his
senior leadership team, who collectively have nearly 15 decades of
combined airline industry experience. Until receiving regulatory
approval to close, Tilden and Cush will co-lead a transition team,
which will develop a specific integration plan.
Alaska Airlines and Virgin America are two of the most respected
aviation brands in the United
States (and globally in the case of Virgin). While the
companies apply for a single operating certificate, Alaska will maintain its new, refreshed brand
and will work closely with Virgin America to learn more about the
award-winning Virgin America brand and customer experience. And
over the next few months Alaska
will explore with the Virgin Group how the Virgin America brand
could continue to serve a role in driving customer acquisition and
loyalty to get the best from both brands.
The merger, which has been approved unanimously by the boards of
directors of both companies, is conditioned on receipt of
regulatory clearance, approval by Virgin America shareholders and
satisfaction of other customary closing conditions. The companies
expect to complete the transaction with regulators' approval no
later than Jan. 1, 2017.
Advisors
BofA Merrill Lynch and UBS Investment Bank acted as lead
financial advisors to Alaska Airlines on the transaction. Cowen
& Company also acted as a financial advisor to the company.
Evercore Group LLC acted as financial advisors to Virgin America.
O'Melveny & Myers LLP acted as legal advisors to Alaska
Airlines, and Latham & Watkins LLP acted as legal advisors to
Virgin America.
Microsite and multimedia assets
Additional details about the transaction, including multimedia
assets, are posted at www.FlyingBetterTogether.com and include:
- A video featuring Alaska Airlines CEO Brad Tilden discussing the announcement;
- A blog post with Tilden's take on merging the two West Coast
airlines;
- Customer and investor FAQs; and
- High-resolution, broadcast quality b-roll footage and
images.
Investor and Media Conference Call and Webcast
Executives from Alaska Airlines and Virgin America will host a
call for the investment community and media today at 5:30 a.m. Pacific time/8:30 a.m. Eastern time to discuss the
transaction. To access the conference call, please dial
1-800-300-0356, referencing conference ID # 82998792. A slide
presentation and the live audio webcast will be available and
archived on the investor relations section of the Alaska Air Group
website approximately one hour after the call concludes.
About Alaska Airlines
Alaska Airlines, a subsidiary of Alaska Air Group (NYSE: ALK),
together with its partner regional airlines, serves more than 100
cities through an expansive network in Alaska, the Lower 48, Hawaii, Canada, Costa
Rica and Mexico. Alaska
Airlines ranked "Highest in Customer Satisfaction Among Traditional
Carriers" in the J.D. Power North American Airline Satisfaction
Study for eight consecutive years from 2008 to 2015. Alaska
Airlines' Mileage Plan also ranked "Highest in Customer
Satisfaction among Airline Loyalty/Rewards Programs" for the second
year in a row in the J.D. Power 2015 Airline Loyalty/Rewards
Program Satisfaction Report. For reservations, visit
www.alaskaair.com. For more news and information, visit the Alaska
Airlines Newsroom at www.alaskaair.com/newsroom.
About Virgin America
Known for its mood-lit cabins, three beautifully designed
classes of service and innovative fleetwide amenities — like
touch-screen personal entertainment, WiFi and power outlets at
every seat, Virgin America has earned a host of awards since
launching in 2007 — including being named the "Best U.S. Airline"
in Condé Nast Traveler's Readers' Choice Awards years and "Best
Domestic Airline" in Travel + Leisure's World's Best Awards for the
past eight consecutive years. For information, visit
www.virginamerica.com.
Cautionary Statement Regarding Forward-Looking
Statements
This communication contains forward-looking information about
Alaska Airlines, Virgin America and the proposed transaction.
Forward-looking statements are statements that are not historical
facts. These statements can be identified by the use of
forward-looking terminology such as "believe," "expect," "may,"
"likely," "should," "project," "could," "plan," "goal,"
"potential," "pro forma," "seek," "estimate," "intend" or
"anticipate" or the negative thereof, and may include discussions
of strategy, financial projections, guidance and estimates
(including their underlying assumptions), statements regarding
plans, objectives, expectations or consequences of announced
transactions and statements about the future performance,
operations, products and services of Virgin America and/or Alaska
Airlines. Alaska Airlines and Virgin America caution readers not to
place undue reliance on these statements. These forward-looking
statements are subject to a variety of risks and uncertainties.
Consequently, actual results and experience may differ materially
from those contained in any forward-looking statements. Such risks
and uncertainties include: the failure to obtain Virgin America
stockholder approval of the proposed transaction; the possibility
that the closing conditions to the proposed transaction may not be
satisfied or waived, including that a governmental entity may
prohibit, delay or refuse to grant a necessary regulatory approval;
delay in closing the transaction or the possibility of
non-consummation of the transaction; the occurrence of any event
that could give rise to termination of the merger agreement; the
risk that stockholder litigation in connection with the
contemplated transaction may affect the timing or occurrence of the
contemplated transaction or result in significant costs of defense,
indemnification and liability; risks inherent in the achievement of
anticipated synergies and the timing thereof; risks related to the
disruption of the transaction to Virgin America and its management;
the effect of announcement of the transaction on Virgin America's
ability to retain and hire key personnel and maintain relationships
with suppliers and other third parties; labor costs and relations,
general economic conditions, increases in operating costs including
fuel, inability to meet cost reduction goals, an aircraft accident,
and changes in laws and regulations. These risks and others
relating to Alaska Airlines and Virgin America are described in
greater detail in their respective SEC filings, including (i) as to
Alaska Airlines, Alaska Airlines' Annual Report on Form 10-K for
the fiscal year ended Dec. 31, 2015,
as well as in other documents filed by Alaska Airlines with the SEC
after the date thereof, and (ii) as to Virgin America, Virgin
America's Annual Report on Form 10-K for the fiscal year ended
Dec. 31, 2015, as well as in other
documents filed by Virgin America with the SEC after the date
thereof. Alaska Airlines and Virgin America make no commitment to
revise or update any forward- looking statements in order to
reflect events or circumstances occurring or existing after the
date any forward-looking statement is made.
Additional Information About the Merger and Where to Find
It
This communication may be deemed to be solicitation material in
respect of the merger of Virgin America with a wholly owned
subsidiary of Alaska Air Group. Virgin America intends to file
relevant materials with the Securities and Exchange Commission (the
"SEC"), including a proxy statement in preliminary and definitive
form, in connection with the solicitation of proxies for the
merger. The definitive proxy statement will contain important
information about the proposed merger and related matters. BEFORE
MAKING A VOTING DECISION, STOCKHOLDERS OF VIRGIN AMERICA ARE URGED
TO READ THE DEFINITIVE PROXY STATEMENT AND OTHER RELEVANT MATERIALS
CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT VIRGIN AMERICA AND
THE MERGER. Stockholders will be able to obtain copies of the proxy
statement and other relevant materials (when they become available)
and any other documents filed by Virgin America with the SEC for no
charge at the SEC's website at www.sec.gov. In addition,
stockholders will be able to obtain free copies of the proxy
statement from Virgin America by contacting Virgin America's
Investor Relations Department by telephone at (650) 762-7000, by
mail to Virgin America Inc., Attention: Investor Relations
Department, 555 Airport Boulevard, Burlingame, California 94010, or by going to
Virgin America's Investor Relations page on its corporate website
at http://ir.virginamerica.com.
Participants in the Solicitation
Alaska Air Group, Virgin America and certain of their respective
directors, executive officers and other employees may be deemed to
be participants in the solicitation of proxies from Virgin
America's stockholders in respect of the merger. Information
concerning the ownership of Virgin America securities by Virgin
America's directors and executive officers is included in their SEC
filings on Forms 3, 4, and 5, and additional information about
Virgin America's directors and executive officers is also available
in Virgin America's proxy statement for its 2016 annual meeting of
stockholders filed with the SEC on March 25,
2016, and is supplemented by other public filings made, and
to be made, with the SEC by Virgin America. Information concerning
Alaska Air Group's directors and executive officers is available in
Alaska Air Group's proxy statement for its 2016 annual meeting of
stockholders filed with the SEC on April 1,
2016. Other information regarding persons who may be deemed
participants in the proxy solicitation, including their respective
interests by security holdings or otherwise, will be set forth in
the definitive proxy statement that Virgin America intends to file
with the SEC. These documents can be obtained free of charge from
the sources indicated above.
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SOURCE Alaska Air Group