Per some media reports, the companies presented their merger proposal to the Justice Department officials last week. The companies’ representatives are also reported to have had a meeting with the chief of antitrust division as well as other officials reviewing the merger. The main purpose of the review is to alleviate government concerns that the combined entity could hamper competition. Per reports, the companies have agreed not to close up till Sep 30 by which they possibly expect a response from the Justice Department.
Another major setback for Virgin America, which carries a Zacks Rank #5 (Strong Sell), was the rejection of a tentative agreement by flight attendants earlier this week. This contract was expected to become effective once the merger deal closed by the end of this year. Further discussions on the vote are expected to be held between the union representing flight attendants and Virgin America’s management. It remains to be seen if the involved parties iron out their differences and the merger plans proceed as expected.
Alaska Air and Virgin America have been in talks regarding the merger over the past several months. The acquisition was first proposed around April this year. In July, Alaska Air mentioned that it expected the takeover to be completed in the fourth quarter of 2016. However, the deal is shrouded in uncertainty at present and the possibility of it being completed by this year looks a bit unlikely. However, per media reports, a Virgin America spokesman reiterated that the company expects the deal to be closed in the fourth quarter of this year as planned initially. There has been no comment from Alaska Air or Department of Justice on this.
Past Consolidations in the Airline Industry
There have been several consolidations in the past few years in the U.S. airlines industry. Some of the most significant ones were the merger between United Airlines and Continental Airlines, which created the combined entity United Continental Holdings Inc. UAL. Another notable merger was that of American Airlines with US Airways, which is now part of American Airlines Group Inc. AAL. Both United Continental and American Airlines carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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