What will become of the best airline in America?

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By The Economist

THE best airline in America is about to lose its independence. And if the past year is any indication, that could spell bad news for flyers. The 26th annual Airline Quality Rating of American carriers was released on Monday, and for the fourth straight year Virgin America came out on top. That same day, it announced that it had agreed to a takeover by Alaska Airlines, to form the country's fifth biggest carrier.

The California-based carrier, which is partly owned by Richard Branson’s Virgin Group (to which it pays an annual fee to use the name), has won consistent plaudits from flyers since its launch in 2007, and not just for the hypnotic purple cabin lights (see picture). It was the only airline with less than one mishandled bag per 1,000 passengers in 2015; less than half that of the second-place airline, JetBlue. It had fewer delayed flights and customer complaints than most of the 13 airlines ranked, and it had the third-fewest involuntarily denied boardings (bumped passengers to you or me): 0.12 per 10,000, versus an industry average of 0.76.

Virgin America’s loyal fans (if not its shareholders) mourned the news of the $4 billion deal. But should they? The Airline Quality Rating, compiled by two American professors, has good and bad news.

First the good. Alaska fares quite well among the country’s airlines. Overall, it came fifth in the ranking. It also had the fewest complaints of any airline, just 0.5 per 100,000 passengers. Virgin America actually had the fifth-worse complaint rate, although at 1.66 complaints per 100,000 passengers it was nowhere near as bad as Frontier (7.86) or Spirit (11.73). Perhaps Alaska can impart some of its customer service to the Virgin America routes.

Don’t count on it. Virgin America’s mediocre complaint rate was half as bad as American Airlines’ (3.36). And as Forbes notes, much of the industry-wide increase in complaints from 2014 to 2015 “can be attributed to teething problems between a merging American Airlines and US Airways”. Such mergers rarely go smoothly, at least not at first. Just look at the lingering problems that resulted from the tie-up between United and Continental that took place six years ago—particularly around merging their computer systems—that prompted United’s boss to take out adverts in national newspapers to apologise. Then there is the 2013 merger between American Airlines and US Airways. Since the pair joined forces, American has dropped from the 7th highest rated airline in 2014 to 10th place last year, just ahead of dismal Frontier, Envoy and Spirit.

Aviation pundits have differing opinions on the wisdom of the takeover and what it means for flyers. Forbes’s Dan Reed argues that Virgin America had become too much of a competitor for Alaska, forcing it to lower fares, and that “the Seattle-based Alaska is buying Virgin America in order to kill it”. Fortune counters that Virgin America’s flight routes and landing slots suit Alaska’s needs well, and urges the latter airline to adopt the former’s “hip and cool” ethos for its much wider network. And although Alaska Airlines has yet to determine how it will combine its ample frequent flyer programme with Virgin America’s skimpier one, Time suggests that “Virgin customers could actually win big here” by gaining many more routes on which they can use their miles.

As Virgin America noted in its announcement of the deal, in this age of consolidation, it can be harder for small airlines to compete. The combined airline won’t be nearly as big as the Big Four (United, Delta, American, and Southwest) but, it says, “By combining with Alaska—an airline that, like us, has a strong position on the West Coast, a history of operational excellence, and a guest- and employee-focused culture—we are not only creating the best airline in North America, but one with the size and market share necessary to compete in this consolidated environment.”

Will it truly be the best airline in region? The rankings over the next couple of years should help answer that question. However, judging from other recent mergers, there is little cause for optimism.

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