JetBlue Ditches Virgin America, Now What?
Updates With Hawaiian Airlines comment.
JetBlue Airways (NASDAQ:JBLU) ditched paying $2.7 billion, or a 47% premium, for Virgin America (NASDAQ:VA) because the price tag outweighed the benefits of a deal. A JetBlue spokesperson tells FOXBusiness.com;
“In context of our current strategic plan, we performed a disciplined evaluation of an acquisition's actual value to JetBlue. The price reached a level that made clear our plan for organic growth offered a better path to create value for JetBlue, our shareholders and our crewmembers.”
But does that mean the airline is out of the takeover game? Maybe not. Stifel Nicholas analyst Joseph DeNardi told clients on Monday that the carrier could pursue a deal with Hawaiian Airlines (NASDAQ:HA), if management views an acquisition as necessary to remain competitive.
Hawaiian Airlines, similar to Virgin America, has a strong West Coast presence offering non-stop service to Hawaii from more than 11 U.S. cities, along with several global hubs including China, Japan and Australia. Hawaiian Airlines shares rose more than 3% in late trading on Monday.
Despite the speculation, JetBlue’s spokesperson also stated the airline remains committed to growing on its own; “We plan to bring more competition to the west coast, grow transcontinental Mint service, add aircraft to our fleet and invest in our culture and customer experience,” the statement added.
Alaska Air (NYSE:ALK) and JetBlue were one-upping each other in a bidding war for Richard Branson’s Virgin America as FOX Business Network’s Charlie Gasparino reported late Friday. Alaska Air ultimately emerged as the victor; Analysts including DeNardi say it may have overpaid. Virgin shares jumped over 40% on Monday, while shares of Alaska Air and JetBlue declined in trading.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| VA | n.a. | n.a. | n.a. | n.a. |
| ALK | ALASKA AIR GROUP INC. | 40.98 | -0.32 | -0.77% |
| JBLU | JETBLUE AIRWAYS CORP. | 6.79 | +0.04 | +0.59% |
Virgin America CEO David Cush told a rival news organization on Monday, “price was the primary thing; Ultimately it came down to price.” As for Alaska Air, management got what they wanted; a bigger footprint in California.
“Combining Alaska Airlines' well-established core markets in the Pacific Northwest and the state of Alaska with Virgin America's strong foundation in California will make Alaska Airlines the go-to airline for the more than 175,000 daily fliers in and out of Golden State airports, including San Francisco and Los Angeles,” according to a company statement.
In response to an inquiry from FOXBusiness.com, Hawaiian Air parent, Hawaiian Holdings, declined to comment on merger speculation.