Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Airline passengers seek to block Alaska Airlines’ acquisition of Virgin America, (Sep 8, 2016)

By Linda O’Brien, J.D., LL.M.

The potential elimination of Virgin America by Alaska Airlines constitutes a substantial threat of injury to consumers because the acquisition may have the effect of substantially lessening competition and tend to create a monopoly in certain passenger airline service markets, according to a complaint filed by a group of 42 airline passengers in the federal district court in San Francisco (Grace v. Alaska Air Group, Inc., September 7, 2016).

Based in Burlingame, California, Virgin America is an innovative, passenger-friendly, and premium low-cost airline. Alaska Airlines, headquartered in Seattle, Washington, is the sixth largest airline in the United States, with its principal operations emanating from the West Coast.

According to the complaint, in April 2016, Alaska Airlines announced an agreement to acquire Virgin America for $2.6 billion. The proposed merger would create the nation’s fifth largest airline, with six percent of the national market, and Alaska Airlines will have the largest seat share of any airline on the West Coast.

If the proposed acquisition of Virgin America is consummated, competition among other airlines may be substantially lessened, airline ticket prices and ancillary fees will likely increase, and industry capacity may be lower than it otherwise would have, the complaint alleges. Specifically, consumers will be threatened with the loss of distinctive services by Virgin America, a reduction in customer choice, a reduction in capacity, and the curtailment of flights thereby creating higher prices.

Additionally, if competition from Virgin America is eliminated, the complaint states, Alaska Airlines will operate in a highly concentrated market. Consequently, the potential for effective collusion among the remaining airlines may substantially increase, capacity and services may be cut, and fares may rise. As a competitor, Virgin America had openly challenged the traditional "network carriers’ mantra" of higher prices and lower capacity by offering lower prices as well as excellent service.

The plaintiffs assert claims for violations of Section 1 of the Sherman Act and Section 7 of the Clayton Act. The action seeks declaratory and injunctive relief, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 3:16-cv-05165.

Attorneys: Joseph J. Alioto and Jamie L. Miller (Alioto Law Firm), Lawrence G. Papale (Law Offices of Lawrence G. Papale), and Christopher A. Nedeau (Nedeau Law Firm) for Daniel Grace.

Companies: Alaska Air Group, Inc.; Alaska Airlines, Inc.

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