Alaska Air: The Acquisition Of Virgin America Finally Starts To Pay Off

Feb. 25, 2020 1:27 PM ETAlaska Air Group, Inc. (ALK)AAL, DAL, JBLU, LUV, UAL9 Comments
Aleksey Razdolgin profile picture
Aleksey Razdolgin
1.73K Followers

Summary

  • Alaska Air has finally fully completed the integration of Virgin America into its own business structure.
  • The company has all the chances to deliver growth in 2020 and beyond thanks to the top-notch performance in FY19.
  • I continue to have a long position in the company and believe that purchasing its stock at the current price is a bargain.

Alaska Air (ALK) has been one of the most consistent US airlines when it comes to customer satisfaction. In 2019, J.D. Power gave Alaska Air 801 points in its customer-satisfaction study out of 1000 points available, making it one of the best legacy carriers to travel with. Despite this, the company’s stock has not been performing well since March 2017, after the management failed to quickly integrate Virgin America, which it acquired in 2016 for $2.6 billion, inside its own business structure. Nevertheless, last year the management has finally made all the necessary steps to ensure that the acquisition finally starts to payoff and since September 2019 the stock has started to appreciate in value.

By successfully integrating Virgin America, Alaska Air was able to establish a stronger presence on the West Coast, primarily in the Pacific North West region. At the same time, the company gained a number of competitive advantages that will help it create additional shareholder value in the foreseeable future. I opened a long position in Alaska Air back in November 2018 and my investment currently made me a tiny return in comparison to the S&P 500 return of 22%. However, I expect the growth to accelerate in the upcoming months and believe that now is a good time to acquire the company’s stock as it has a great upside at the current market price.

Source: Seeking Alpha

Without a doubt, the acquisition and later the integration of Virgin America has been at the top of the management’s agenda since late 2016. While the purchase helped the company to become the fifth-largest carrier inside the United States, its revenue per seat started to decline and the management didn’t have a clear understanding of what to do next. However, Alaska Air was able to achieve a strategic goal, which was even more important

This article was written by

Aleksey Razdolgin profile picture
1.73K Followers
Aleksey is CEO of the proprietary trading company Arbitrage Trades. Aleksey is in charge of creating new opportunities in this rapidly growing investments field. He is personally investing his own money into stocks, cryptocurrencies and other emerging trends of the financial industry.

Disclosure: I am/we are long ALK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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