Update: The deal went through! Big travel news regarding flights to Hawaii today. It is being reported that Alaska Airlines is the likely winner in the bidding war to acquire Hawaii competitor Virgin America. As reported earlier, Jet Blue and Alaska Airlines have been vying to buy Virgin America since the company put itself up for sale recently.
This brings up the larger issue of issue of regional (think Hawaii) and low cost airlines remaining competitive and how long they can do so independently. Read on for our take on this.
According to the Wall Street Journal, “Alaska Air Group Inc. has emerged as the likely winner of a bidding war for Virgin America Inc.” If it comes to fruition, a deal with a value of about $2.6 Billion could be announced as soon as Monday.
What does this mean for Hawaii travel deals
An Alaska buyout of Virgin may be the least helpful development in terms of Hawaii travel deals from the San Francisco Bay Area. With Alaska controlling significantly more inventory there, somewhat better ability to control pricing could result. In the Los Angeles market, however, we see benefits for Hawaii deals should this deal go through. That’s true because whether it is Alaska Airlines or Virgin America, it will be a new entrant shaking up the market’s competitive balance.
As we’ve just seen, having another player in the Bay Area helped reduce prices to some of the lowest we’ve seen in many years. This week alone, a Hawaii airfare war broke out with prices as low as $140 between San Francisco and Maui and nearly as low between San Francisco and Maui. That was a reduction of 50% over prior pricing. Even upcoming peak summer fares for flights to Hawaii from the Bay Area have been running up to 20% below normal.
Alaska, which has been flying since 1932 would definitely benefit by adding Virgin America’s San Francisco and upcoming Los Angeles to flights to Hawaii to its stable. Although Alaska Airlines only began Flights to Hawaii in 2010, it now represent 20% of the company’s total business.
An unlikely marriage of fleets
This would be the first time that Alaska Airlines has had anything but Boeing 737 aircraft. The company has an fleet consisting of 151 planes and is set to acquire more 737 next generation planes soon. Virgin America, on the other hand, has an all Airbus fleet consisting of 50 A320’s. They are set to acquire 40 next generation Airbus planes in the near future.
And the big looming question of what comes next?
We are wondering if this isn’t just the beginning of the much awaited next phase of US airline mergers. It has been rumored that regional and low cost carriers would need to merge or be acquired in order to remain competitive. Thus it would not be surprising for us to see Alaska Airlines and Jet Blue join together at some point down the road, and perhaps sooner than later. The playing field in flights to Hawaii would be very different with the combined capabilities resulting from such a merger.
Hawaiian Airlines
That leaves the final question of how long can Hawaiian Airlines remain independent. Last year we wrote about the prospect of Southwest Airlines buying Hawaiian Airlines.
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Could this be affecting Alaska’s existing HI routes? I’ve started looking for our usual winter flight with AA direct from Bellingham, WA but they have ZERO direct fights listed to HNL (everything routed with a stopover in Seattle). Based on my experience over the past 4-5 years, this seems extremely unusual.
Hi Gale,
That’s probably unrelated. We do see it going off schedule in another month or so. The issue may be that there are such cheap fares between B.C. and Hawaii. That has sucked much of the life out of BLI flights. They could decide to bring it back as seasonal service.
Aloha.
Hi – Thanks for all of you information! Any ideas/thoughts on when or if fares will come down for the Bay Area/Sacramento to Maui? Please & thank you. Planning for mid-July trip. 🙂
Hi Emily,
Mid-July already has $598 RT fares from SJC and $635 from SMF. That’s about as good as you’re going to find and there’s little chance of going lower. That’s already at least $100 less than normal.
Aloha.