Alaska Air Group has announced it is acquiring Virgin America for over $2 billion, combining their presence on the West Coast and reigniting the debate over the consolidation of the airline industry.
Alaska Airlines is paying cash of $57 per share for Virgin America, which is a premium of 47% over the Friday closing price of the airline. Shares of Virgin were up over 39% in Monday trading before the opening bell.
The two companies put this transaction value at $4 billion, which includes debt as well as capitalized aircraft leases.
Virgin America started with the support of Richard Branson a minority owner and began flying during 2007. It went public during November of 2014 with a $23 a share initial public offering.
Virgin, which in 2013 turned profitable, earned over $340.5 million in 2015, which was a company record. The profits for the airline came from a slowing down of rapid growth and from help from low prices of fuel.
Virgin would have been forced to restart growth this year as it already has taken delivery of new aircraft. New routes often begin with losses.
On Monday, Alaska Air announced that this deal would expand its route network to 1,200 departures daily. The airline currently is the sixth-largest U.S.-based carrier by traffic and is serving 90 destinations in the United States, Canada as well as Mexico.