Thread: Virgin America Considers Sale? B6, DL Possible buyers..

Is the U.S. airline industry ready for more consolidation? A report published Thursday by Bloomberg revealed that Virgin America (NASDAQ: VA) is exploring a partial or full sale and has retained a financial advisor to assist it in the process. Citing "people with knowledge of the matter," the report said no decision has been made yet, and the company might ultimately elect not to proceed.
Virgin America responded to the report with a brief email statement in which it said, "as a public company, we have a policy of not commenting on any market or media speculation concerning mergers or acquisitions.''
Industry observers speculated that Jet Blue and Delta Air Lines could be potential buyers. Jet Blue's position as an alternative budget carrier is roughly similar to Virgin America's, while Delta would beef up its presence on the West Coast -- Virgin America is headquartered near San Francisco.
At the moment, however, the U.S. air travel industry is highly consolidated with only four incumbents -- American Airlines Group, Delta, United Airlines, and Southwest -- dominating the market. In the early 2000's, there were 10 such players. Regulators may well be wary of further consolidation and resist any attempt to fold Virgin America into an existing carrier. This could open the possibility of a buyer outside of the airline, or even travel, industry making an offer.
The report did not give any indication as to why Virgin America is considering a sale just now -- timing might very well have something to do with it. Some airlines are notching new highs in profitability thanks to persistently low fuel prices, usually their no. 2 cost item next to salaries. Virgin America has been part of this upward trend, posting a bottom line of almost $191 million in its most recently reported quarter, a vast improvement over the $3.9 million it posted in the same period the previous year. These strong results could help management win a higher asking price if the company ultimately pursues a deal.