Alaska Air is nearing a deal to acquire Virgin America for more than USD$2 billion, having outbid JetBlue Airways, according to a media report.
The acquisition would be the first US commercial airline merger since US Airways and American Airlines combined in 2013. It would boost the size of Alaska Air's home market by allowing it to expand into lucrative hubs such as San Francisco and Los Angeles.
Alaska Air is set to pay between USD$56 and USD$58 per share to acquire Virgin America, Reuters reported people familiar with the matter as saying. A deal could be announced as early as Monday.
Virgin America went public on the US stock market in 2014 as an offshoot of billionaire Richard Branson's London-based Virgin Group. Launched as a low-cost US airline, it became famous for its mood lighting, leather seats and media-rich inflight entertainment system.
Alaska Air and its partner regional airlines serve more than 100 cities in the United States, Canada, Costa Rica and Mexico.
Virgin America accounts for about 1.5 percent of US domestic flight capacity, while Alaska Air and its subsidiary Horizon Air account for 5 percent, Deutsche Bank analyst Michael Linenberg wrote in a recent research note. JetBlue accounts for 6 percent, according to the note.
"It's inevitable that we would see some form of combination (among smaller airlines) as they strive to find a way to compete with the larger carriers," said travel industry analyst Henry Harteveldt.
Government regulators are expected to study the deal between Alaska Air and Virgin America for potential overlap in routes and airport slots.