In Case You Missed It: There is so much that happens in the travel industry every week and only a portion of it is reported in TravelLatte or other travel blogs. Each week, we aim to capture some of the highlights from the past week in Travel News. Please let us know you like it with a comment!
Merger Mania in the Air
Not exactly news of this week, but we’ve been traveling and have missed a few installments. We felt this was worthy of mentioning still, though, just in case you’ve missed a few things also.
Two of the USA’s leading airlines are hoping to join forces as Alaska Airlines announced the planned purchase of Virgin America. These are not leading airlines in terms of fleet size or route map, but they are consistently at or near the top in customer service and on-time performance. Which leaves many wondering why the two airlines are merging.
Alaska Airlines has 151 planes and a route map that is heavy in Alaska – hence the name. Virgin America serves 21 cities in the US, plus three Mexican destinations, with a fleet of 60 aircraft. Combined, the new carrier would still lag far behind industry behemoths Delta and American Airlines, but that is probably not the end game. Even worse, all but seven of Virgin America’s Airbus aircraft are leased, though the company does have an order for 30 new, more efficient Airbus A320neos. That is an expensive proposition for Alaska to take over. Making it even more expensive still, Alaska has an all-Boeing fleet. Adding a second manufacturer means added maintenance costs.
Perhaps the answer lies in the route map. Currently, there is no city where Virgin America flies that Alaska Airlines does not. Alaska’s customers would be getting no new airports in their network, but might get additional flights on some high-demand routes. This hardly seems like a good reason to spend $2.6 billion until you consider the west coast.
Delta Airlines has been expanding in Seattle as a Pacific and Trans-Pacific hub, much to the dismay of Alaska. Further south, Virgin America focuses on their headquarter city of San Francisco, which is United Airlines’ domestic-international hub. The merger will give “the new Alaska” a stronger presence in both cities, more flights across the country, and the largest market share on the West Coast. That’s money.
“The goal is to be the premier airline on the west coast.” – Brad Tilden, Alaska Airlines CEO
We do think there may be more to it than that, though. Alaska Airlines led the campaign against Virgin America even being allowed in the U.S., taking aggressive legal action against what it called “thinly veiled foreign ownership.” $2.6 billion may seem like a lot of money to pay to settle an old grudge, but the expense can be partially covered by cancelling the Airbus order, ending the leases, and selling off gates at Dallas Love Field and New York La Guardia that would not be much (if any) use to the airline.
The biggest question is whether passengers will benefit. Both companies are customer service champs, so it’s hard to see that experience get worse. Alaska’s passengers may benefit from more flights (the two airlines have about 1200 combined daily departures) and newer planes in the Virgin fleet. On the other hand, one less airline means one less competitor on those routes, and we have yet to see less competition lead to better pricing.
The deal still needs regulatory approval, which is far from assured as the feds have begun taking a stand against the wave of mergers.
Merger Mania on the Ground
It’s finally a done deal: Marriott and Starwood, the hotel giants in courtship to become one giant-er company, have the equivalent of their parents’ blessings for the marriage. Shareholders of both companies overwhelmingly approved the deal last week following a month of back and forth between Marriott and rival suitor Anbang Insurance Group, a Chinese investment firm. The wedding will most likely take place in mid-2016. Before that happens, Starwood needs to divest itself of its timeshare business. That deal, with Interval International, is expected to close this month.
The combined company will have a portfolio of more than 5,000 hotels with more than a million rooms under 30 brands. Some of the biggest brand names in the industry are included: Westin, W, Sheraton, le Meridian, and St. Regis from Starwood; Courtyard, JW Marriott, Rennaisance, and Ritz Carlton from Marriott, among others. High caliber resorts, like Gaylord and Atlantis, and boutique hotels under the Marriott Autograph Collection and Starwood’s Luxury Collection and Tribute Portfolio, will all sit under the same new umbrella.
Under the terms of the deal, Starwood’s shareholders will receive 0.8 shares of Marriott’s stock plus $21.000 in cash for each Starwood share.
And then this happened.
Amidst all of the purchasing parties, Virgin America and Starwood Hotels and Resorts announced this week that the soon to be taken over companies are linking their loyalty programs. With the pending purchases noted above, it’s not clear what will happen with each company’s loyalty program, but we do know that, as of right now, Starpoints and Elevate points can be transferred either way at a one-to-one ratio. Keep in mind that Starwood gives you a bonus of 5,000 points or miles for every 20,000 transferred in a single transaction. Also, members of Virgin’s Elevate program will earn two points for each dollar spent on qualified stays at Starwood hotels.
The two companies have also teamed up on a sweepstakes and a special SPG Moments package. The Make Your Hawaiiscape sweepstakes promotes seasonal daily flights from Los Angeles to Honolulu beginning May 5, 2016, and to Kahului (Maui) starting June 14. Everyone who enters the promotion receives 250 Elevate points, and a chance to win a package including airfare and accommodations for two at either the Westin Moana Surfrider Hotel in Waikiki, or the Sharaton Maui, plus 50,000 Elevate points.
The SPG Moments package will include tickets on both of Virgin America’s inaugural flights to Hawaii, plus a four night stay at either the Westin Maui or Sheraton Waikiki, along with a host of extras, including Gold status with Virgin America for one year (or as long as it lasts, given the pending merger). SPG member can bid on the packages now, provided they have deep SPG pockets. Current bids are well over 100,000 Starpoints.