US Department of Transportation announced (08-Jan-2010), after conducting a thorough review, it has found that Virgin America "remains a US citizen and remains under the actual control of US citizens". Under US law, only airlines that meet the standards for US citizenship may hold authority to operate as a US airline. [more] [more - Perspective]
Virgin America remains a U.S. citizen, DOT finds
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Logic dictates approval of Alaska-Virgin America merger; anti-trust hawks loom large
A pushback in the closing date of the merger of Alaska Air Group and Virgin America – to allow the US government more time for its review of the transaction – created some jitters among investors about the eventual approval of the tie-up, evidenced by a drop in Virgin America’s stock price, which had soared after the deal was tabled in Apr-2016.
Despite the extra time regulators are taking to review the merger, a full-blown rejection of the deal is unlikely given the drastically smaller scope created by Alaska and Virgin America. Indeed, the combined airline creates a more viable entity to compete with the mega-carriers created by previous mergers; not a threat to consumer choice.
Close scrutiny by US regulators was always expected, as are some form of concessions in order for the agreement to ultimately gain the government’s approval. The form those concessions could take has spurred significant speculation from slot divestitures to the relinquishment of gates. Perhaps the key for Alaska is ensuring that the composition of those concessions does not compromise the economics of the transaction.
Fuel helps US low cost airline CASK performance; Southwest's labour costs have grown 17.5% y-o-y
Significantly lower fuel costs were a major driver in the outcome of the four main US low cost airlines – Southwest, jetBlue, Alaska and Virgin America – posting significantly lower unit costs year-on-year in 2015. According to CAPA’s CASK database, most of those airlines posted double-digit decreases as the average decrease in top-line fuel expense among those airlines was 31% year-on-year.
Most of those airlines should continue to record a favourable unit cost performance in 2016 as fuel costs, while rising, will remain below historic highs. Southwest, which has recently forged a new contract agreement in principle with its pilots after years of long and tense negotiations, may need to refine its current cost forecast if the deal is ratified. jetBlue has revised its cost forecast downward slightly during 2016, while Alaska on a stand-alone basis should continue to post a solid cost performance.
Over the course of the next one to two years Southwest is likely to ratify agreements with three of its major labour groups – pilots, flight attendants and mechanics. If the pay raises in the tentative pilot deal are an indication of salary increases for other work groups, Southwest is likely to find itself outside the cost boundaries of a traditional low cost airline.