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October 17, 2017

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Lawsuit aims to prevent Alaska Airlines-Virgin America deal

Image

Steve Marcus

A Virgin America passenger jet taxis to a runway at McCarran International Airport Tuesday, August 2, 2016.

Consumers have filed a lawsuit to block Alaska Airlines’ purchase of Virgin America.

The lawsuit was filed in San Francisco on Wednesday afternoon, according to attorney Joe Alioto, who is representing the 42 plaintiffs.

The plaintiffs argue the April 4 acquisition of Virgin America by Alaska Airlines is “substantial and foreboding,” and contributes to a growing trend of mega-airline mergers over the past decade, according to the complaint. Such mergers increase costs for airline consumers while eliminating expansion, the number of available seats and variety of travel destinations, Alioto said.

“Lesser competition can lead to monopolies, and the consumer really loses out in that situation,” Alioto said. “The existence of Virgin America for the free enterprise system is crucial.”

The plaintiffs are seeking a court order prohibiting the $4 billion ongoing acquisition, which includes Alaska Airlines paying $2.6 billion in cash and assuming $1.4 billion in current debt and leases. The deal was announced April 4 and is scheduled to be completed by December.

Eliminating competition between Alaska Airlines and Virgin America would cause ticket prices to rise, the complaint argues. Airline service would worsen and traveler capacity would also be lessened.

The new potential owners announced last week their intention to cut approximately 225 Virgin America management positions as part of the merger, a move Alioto called a deliberate attempt to squash the low-cost airlines.

“The airline stood for new ideas, expansion, nice airplanes, wonderful service and low prices, and innovative ideas.,” Alioto said. “It’s the exact opposite of what these other guys are doing.”

The 63-aircraft Virgin America, founded in San Francisco in 2007, has about 200 daily flights covering 57 routes to 24 different destinations across the United States. Through August 2016, it averages 13 flights daily into McCarran International Airport, according to airport figures.

Alaska Airlines has 157 aircrafts and 880 average daily flights covering 288 routes to over 100 destinations in the U.S., Canada, Mexico and Costa Rica.

Comparatively speaking, American Airlines, the world’s largest airline company, has a fleet of over 1,550 planes and 6,700 daily flights to 350 destinations in 50 countries.

“We’re making good progress toward fulfilling the DOJ’s second request for information and are working under our existing timing agreement, which states that we will close sometime in early Q4 and not before Sept. 30,” said Alaska Airlines spokeswoman Ann Zaninovich. “We fully expected various litigation following our April 4th announcement and are not surprised by this particular firm, who has a history of making these types of filings.”

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