What Acquisition Would Mean for Virgin America Hawaii Deals

With wide-spread rumors this morning that they may be acquired, our thoughts go to what this would mean for Virgin America Hawaii deals. This news first appeared in Bloomberg earlier today, causing the company’s stock price to surge. Bloomberg said that Virgin America “is reaching out to potential buyers about a sale of part or all of the company.” Airlines mentioned by others as possible suitors started with United, followed by Delta Airlines, JetBlue and lastly Southwest Airlines. Virgin America is said to be working with financial advisers to assist in the process. They have declined to confirm or deny any of this.

So how can we interpret this in relation to those seeking Hawaii travel deals? At Beat of Hawaii, we’re clear that any reduction in capacity to our markets will almost certainly result in higher prices on flights to Hawaii. So let’s look at the related markets and the potential suitors.

Flights to Hawaii from San Francisco

Virgin America’s entry into the San Francisco market has reduced prices from a typical $600 to as low as $400 or below. If either Delta, JetBlue or Southwest Airlines were to acquire Virgin America, there is no overlap in routes. None of these companies fly from San Francisco to either Honolulu or Maui (the current Virgin America routes). Thus, it appears that San Francisco could continue to have better pricing in either of these scenarios.

Flights to Hawaii from Los Angeles

Virgin will begin flights from LA to Honolulu in May and from LA to Maui in June. These long anticipated flights have already resulted in reduced fares in these markets, even before the flights get into the air. The introductory price offered by Virgin America, which was quickly matched by others including Hawaiian Airlines, was $398RT. We are anticipating yet more sales and better pricing ahead for Los Angeles.

Of Delta, JetBlue and Southwest, only Delta flights would compete directly with Virgin America from Los Angeles to Honolulu and Maui. That acquisition, if it occurred, could mean that any extra capacity would be removed by such a deal, and with that might go the likelihood of better long term pricing in the LA markets.

In Summary

It will be some time before we’ll know what is going to happen here, if anything. In the end there is more positive than negative outcome likely for Hawaii visitors should such a merger occur. That given that capacity would not be reduced as only Delta has overlapping routes with Virgin America.

Lastly, Southwest is an interesting suitor in relation to flights to Hawaii. They have expressed long-standing interest Hawaii service yet have thus far failed to come up with a plan to deliver them. Read our latest update on Southwest Airlines Hawaii.