Alaska Air ’s $2.6bn takeover of Virgin America brings together two airlines enjoying solid profits to create the US’s fifth-biggest carrier by revenues. The deal not only contrasts in the health of the airlines involved — in the last big US airline merger between US Airways and American Airlines in 2013, American was in Chapter 11 bankruptcy protection. It also contrasts in price. The $57-a-share price is 110% above the company’s share price in February and far above expectations as recently as last week. Virgin’s shares surged 41.6% to $55.09 by lunchtime in New York. Yet it is far from clear that the merger of Alaska — the US’s sixth-biggest carrier by revenues — and Virgin — ninth biggest — will give Alaska the edge that its senior executives are seeking. Brad Tilden, Alaska’s CE, said the deal complemented Alaska’s route network. Alaska, based in Seattle, is strong in Alaska, Washington and Oregon, while Virgin’s main operating bases are San Francisco and Los Angeles. “We’re in a position here where we felt it was maybe the one-time opportunity to really get a much stronger foothold in California,” Tilden said. “It’s really valuable real estate and it gives us a shot at being your go-to airline if you live anywhere up and down the west coast.” However, George Hamlin, head of Hamlin Transportation Consulting, said it was unclear what Alaska was acquiring. Virgin’s 60 A319 and A320 aircraft are mostly leased, while the airline has a diffuse route structure, lacking dominant positions. Virgin serves 18 cities in the US and three in Mexico. “They don’t have really significant concentrations anywhere,” Hamlin said.<br/>
unaligned
The $2.6b sale of Virgin America shows that it just doesn’t pay to be different. Despite the mood lighting, club music, touchscreen food orders, and additional frills that made it a customer favorite, Virgin America couldn’t escape the reality that ticket price is king. For a niche player, the new world order for airlines means passenger goodies and competitive industry pricing are an almost impossible combination. Virgin America’s fares aren’t remarkably different from what other airlines charge, even with all its extras. They can’t be, given the fierce pressures on every major route. In fact, Virgin America was a “price disruptor” in the industry, and its sale should prompt less discounting, Standard & Poor’s analyst Jim Corridore said in a note to clients. Still, British billionaire and Virgin founder Richard Branson feels that the airline dusted off a customer service ethos that had been lost over the years. “Because of Virgin America, the industry finally had to consider the customer,” Branson wrote on Monday in a blog post about the deal with Alaska Air Group. Branson said he feels “sadness” about the airline’s sale, but as a foreign shareholder with a minority stake he was unable to block it. Virgin America began flying in summer 2007, before US airline mergers concentrated 84% of industry revenue among four behemoth carriers, up from 65 percent in 2010. That consolidation wave left most of the remaining market to three second-tier airlines, including Virgin America, and an additional three ultra-low cost carriers.<br/>
Saudi Arabia's aviation authority said Monday it had banned Iran's Mahan Air from using its airports and air space over safety concerns. The General Authority for Civil Aviation said it decided to "stop completely permits granted to Iran's Mahan Air, ban it from landing in the kingdom's airports or passing through its air space," according to a statement carried by SPA state news agency. The authority cited "violations of national regulations related to safety of international carriers". Saudi Arabia severed all air links with Iran in January after the two countries cut diplomatic ties following Riyadh's execution of prominent Shiite cleric Nimr al-Nimr.<br/>
Jambojet, the low-cost carrier owned by Kenya Airways, plans to add seven routes in east Africa in the next five years to expand in the region. The airline, which says it controls 37% of Kenya’s domestic aviation market, is considering starting its first international route this month, CEO Willem Hondius said, declining to give more details. It will also add at least one more aircraft this year to its existing four as it gradually boosts the fleet to 10, he said. “We want to be a greater Eastern African operator, flying to Rwanda, Burundi, Tanzania, Uganda, the Comoros, South Sudan and Goma and Kisangani in eastern Democratic Republic of Congo,” Hondius said March 31. Economic growth in the countries that Jambojet is targeting, along with its home market of Kenya, is expected to average 5.2% this year, outpacing the 4.3% expansion in sub-Saharan Africa that’s forecast by the IMF. Rival FastJet, which was founded with the ambition to become a pan-African carrier, last month said it’s closing routes on the continent after sales failed to meet expectations. Jambojet has no plans to become a pan-African operator, nor will it seek to target other markets outside the continent, Hondius said. “The target is to grow the market and increase passenger frequencies at a controllable pace,” he said. “We will never fly intercontinental -- you cannot make money there.”<br/>