US clears Alaska Air takeover of Virgin America

[NEW YORK] US antitrust regulators approved Alaska Airlines' US$4 billion acquisition of Virgin America on Tuesday, but will require it to scale back a route-sharing alliance with American Airlines.

Under the codeshare agreement, Alaska currently markets American flights on over 250 routes, an arrangement in which the companies "often behave more like partners than competitors," the Justice Department said.

Under Tuesday's agreement, the Justice Department prohibits sharing between Alaska and American on routes where Virgin and American now compete and where Alaska is likely to introduce service after the merger.

"Smaller airlines, such as Alaska and Virgin, provide a critical competitive check on the larger carriers," said Renata Hesse, acting assistant attorney general for the antitrust division.

"Today's settlement ensures that Alaska has the incentive to take the fight to American and use Virgin's assets to grow its network in ways that benefit competition and consumers."

Alaska Airlines said the Justice Department's action will not affect the majority of the codeshare flights with American.

The acquisition of Virgin America is expected to close "in the very near future," Alaska said in a news release.

The addition of San Francisco-based Virgin America's main routes, which connect the US west and east coasts, will strengthen Alaska's coverage, which has built up from its roots connecting the huge, remote northwest state to the west coast.

Alaska Airlines will be the fifth biggest US carrier after the takeover.

Shares of Alaska Air Group rose 1.3 per cent and Virgin American 0.6 per cent.

AFP