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Award Winning Case - 3rd place at the 2017 John Molson MBA International Case Competition,” held by John Molson School of Business, Concordia University, Canada

Bradley Tilden's Dilemma Following the Alaska Airlines-Virgin America Deal

Bradley Tilden's Dilemma Following the Alaska Airlines-Virgin America Deal
Case Code: BSTR510
Case Length: 18 Pages
Period: 2015-2016
Pub Date: 2017
Teaching Note: Available
Price: Rs.600
Organization : Alaska Airlines/Virgin America
Industry :Aviation
Countries : US
Themes: Business Strategy/ Merger and Acquisitions/Strategic Alliances
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Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

This award winning case discusses the merger of Alaska Airlines and Virgin America, two leading airlines in the US. In April 2016, Alaska Air Group acquired Virgin America for US$ 2.6 billion, bringing together two airlines known for their distinct customer service, low fares, and operational consistency. The case describes the consolidation in the US aviation industry and the rationale behind the merger. The objective of the merger is to expand Alaska Airlines’ footprint in California and to strengthen its competitiveness against some of the major carriers in the US. The case discusses the perceived synergies from the merger for both airlines and how the combination will create a bigger, stronger airline offering a premium product with an expanded presence across the West Coast. The merger would also propel Alaska Airlines into the ranks of the top five air carriers in the US.

The case discusses the challenges Bradley Tilden (Tilden), CEO of the Alaska Air Group, faced in taking the merger forward. These included the cultural differences between the two airlines, diverse customer bases, integration issues, and concerns over short-term profitability. For some analysts, the merger seemed to be an odd fit as Virgin America was known for its trendy and flashy image while Alaska Airlines was seen as more traditional. The loyal customers of both the airlines expressed fears that the combination would kill off what they loved about their respective airline. According to Tilden, retaining customers who were loyal to Virgin America would be one of the major challenges for him. While the merger was awaiting regulatory approval, the dilemma before Tilden was whether to retain the Virgin America brand or absorb it into Alaska Airlines. How will Tilden respond to the needs of the loyal customers of Virgin America? Will he adopt or dissolve the Virgin America brand? Which parts of the Virgin experience should Tilden adopt for the combined airline?

Issues

The case is structured to achieve the following teaching objectives:

  • Understand the rationale behind the Alaska Airlines and Virgin America merger and its potential synergies and evaluate the benefits of the deal to Alaska Airlines and Virgin America
  • Understand the need for consolidation in the US aviation industry and evaluate the impact of the Alaska Airlines-Virgin America merger on the industry
  • Understand the importance and challenges in post-merger integration
  • Understand the importance of cultural compatibility in making mergers successful
  • Understand the importance of brand image and brand dilution in the aviation sector
  • Identify the issues and challenges faced by Tilden following the merger and explore strategies he may adopt to overcome these challenges

Contents

Keywords

Alaska Airlines-Virgin America merger, Merger and Acquisitions, Strategic Alliances, Post-merger integration, Brand dilution, US Aviation Industry, Cultural Compatibility, Synergies

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