SAN FRANCISCO -- In a deal expected to expand Bay Area flights, Alaska Airlines on Monday acquired San Francisco-based Virgin America for $2.6 billion.
With the acquisition, Alaska Air Group, the Seattle-based parent company of Alaska Airlines, says it intends on increasing its presence at the region's three major airports, Mineta San Jose International, San Francisco International and Oakland International, and give more flying options to consumers by expanding further beyond its West Coast base of operations.
"Certainly, with Virgin, we'll be increasing Alaska's presence in the Bay Area," said Bobbie Egan, an Alaska spokesperson. "However, right now, we have nothing new on flights or our schedule."
Alaska currently offers daily flights out of all three Bay Area airports, while Virgin America operates service out of San Francisco International.
"We are excited about Alaska Airlines pursuing the purchase of Virgin America and what this may mean for Alaska at San Jose," said Rosemary Barnes, public information manager at San Jose International.
Barnes said that in 2015, Alaska was San Jose's second-largest carrier, with 1.5 million passengers, or 15.6 percent of San Jose's 9.8 million passengers last year. Alaska trailed only Southwest Airlines, and its almost 5 million passengers and 50.7 percent passenger share. Barnes said Virgin America offered service from San Jose to Los Angeles in 2013, but withdrew from the airport a year later due to competition, and chose to concentrate its regional efforts in San Francisco.
In addition to getting a new hub at San Francisco International, the deal also gives Alaska a second California-based hub in Los Angeles. By acquiring Virgin America, Alaska will also get that airline's routes from San Francisco to the three New York-area airports -- JFK, LaGuardia and Newark, N.J. -- and Virgin America's gates at Washington, D.C.'s Reagan National Airport.
Doug Yakel, a spokesman for San Francisco International, had no comment on any impact the airport might see from the Alaska-Virgin tieup. Yakel said that in 2015, Alaska carried 734,000 passengers to make it the No. 6 airline at San Francisco.
An Oakland airport spokesperson didn't immediately get back to this newspaper with comments about how the airport could be affected by Alaska's acquistion. Alaska currently offers direct flights to and from Oakland to several West Coast cities and Hawaii.
On a conference call to discuss the acquisition, Alaska Chief Executive Brad Tilden noted that the California market, with more than 185,000 daily fliers, is three times the size of the combined markets of Alaska, Washington and Oregon, where the majority of airline's customers fly to and from.
"They (Virgin America) complement our geography really well," Tilden said. "While California is actually our second-largest state in terms of flying, we don't fly east from there really, and that affects how much customers living in California can concentrate their flying with us."
The deal, which still needs to receive federal regulatory approval, would make Alaska the fifth-largest U.S. airline behind American, Delta, United and Southwest.
In a twist of events, Virgin America's acquistion came about the same day it topped the annual Airline Quality Report authored by Brent Biddle of Embry-Riddle Aeronautical University and Dean Headley, of Wichita State University's business school. The report ranked the top 13 U.S. air carriers based on customer complaints, on-time performance, mishandled bags and boardings that were denied involuntarily.
Loizos Heracleous, a professor of strategy who researches the airline industry for the Warwick Business School at the University of Warwick in Coventry, U.K., said both Alaska and Virgin are known as airlines with strong customer-service reputations, and the acquisition will be one that the airline industry will watch with interest due to how it boosts Alaska's national presence.
"It also makes strategic sense for Alaska Air to acquire Virgin America in terms of network coverage, since the transaction will strengthen Alaska's position at San Francisco and Los Angeles airports and aid its market development," Heracleous said.
One person who didn't seem too happy about the deal was Virgin Group founder Richard Branson, who launched Virgin America in 2007.
In a letter he posted online, Branson said in the airline industry "consolidation is a trend that can't be stopped," and hinted that he wouldn't have sold Virgin America if he had the choice.
"I would be lying if I didn't admit sadness that our wonderful airline is merging with another," Branson said, adding that since he isn't a U.S. citizen, his role in Virgin America was reduced by giving him non-voting shares of the airline's stock.
"There was sadly nothing I could do to stop it," Branson said.
Contact Rex Crum at 408-278-4315. Follow him at Twitter.com/rexcrum