More Details Emerge From the Alaska and Virgin America Merger

Alaska Airlines recently received permission from the Department of Justice to purchase Virgin America, meaning the takeover is officially happening. Now that Alaska is sure the deal will go through, they have announced more details on how the two airlines will operate going forward, what changes will be made to elite benefits, and how the mileage accrual and award tickets will work.

The first thing to make clear is that Alaska is taking over Virgin and long-term it will be Alaska’s Mileage Plan program that survives, not Virgin’s Elevate program. Alaska may or may not choose to adopt certain elements of Virgin’s program as the combined airline evolves.

Transferring Points and Miles

Beginning on January 9^th, 2017 members with Elevate points will be able to convert them into Mileage Plan miles at a ratio 1.3 miles per point. Alaska will be encouraging this by sending out invitations to all Virgin Elevate members to join Alaska’s Mileage Plan on the same day.

Elevate members will not be forced to convert their points into miles and can still utilize Virgin’s award program for the time being. A key distinction is that transfers are only allowed one way – Alaska miles cannot be converted into Elevate points.

The 1 to 1.3 transfer ratio is good for Elevate members. Alaska has an amazing award chart, known for its below market award prices for certain international premium cabin tickets. A great example of this is Cathay Pacific business class awards for 50,000 one way or 100,000 roundtrip to Asia.

In addition, Alaska recently announced an improved award chart for domestic economy awards. The new chart is distance based with flights shorter than 700 miles starting at only 5,000 miles each way. These new award flights will be amazing deals if you can find them.

Alaska’s New Domestic Economy Award Chart:

Elevate members should be pleased with the value that they will be able to extract from their points once they have converted them to miles. Some may feel that this ratio is not generous enough because points earning is revenue based in Virgin’s program. However, it’s not Alaska’s fault how Virgin has chosen to award points in the past.

In order to do right by their new customers, Alaska should at the very least not devalue their points, which they certainly have not done. In fact, the carrier has increased their value. Flexibility is a key determinant of value in the points and miles game, and Elevate members who prefer to redeem their current points rather than convert them to Alaska miles are free to do so.

Earning Points and Miles

Members in the two award programs can now earn points or miles by flying on the other airline. Elevate members will earn Elevate points when flying on Alaska, and Mileage Plan members will earn Alaska miles when flying on Virgin. This opens up new earning opportunities and allows members to choose the program in which they would like to earn rewards.

Elite Status

There will be some reciprocal benefits available immediately, while others will become clear in future announcements. Elevate Gold and Silver members are now able to access priority check-in and boarding on Alaska flights. After January 9^th, Elevate elite members will also be status matched into Alaska’s Mileage Plan.

However, the details of the status match are currently unknown, but we’ll compare elite qualification criteria for the two airlines and venture a guess.

Alaska has three levels of elite status – MVP, MVP Gold, and MVP Gold 75K. It’s difficult to compare the elite status qualification criteria because Elevate is a spending-based program and Alaska is a mileage-based program.

You earn 5 elite qualifying points per dollar spent on Virgin flights. In addition, you can earn up to 15,000 status points per year by hitting spending thresholds on Virgin’s co-branded credit card (5,000 points for every $10,000 spent).

The thresholds for Elevate status are:

• Silver: 20,000 points
• Gold: 50,000 points

So, if you maxed out the credit card spending bonuses, it would require only $7,000 in actual flight purchases to earn top tier status. Translating that into cents per mile to achieve Alaska’s top tier status results in a figure of 9.3 cents/mile, which is low compared to the rest of the industry.

A more direct comparison could be made between elite qualifying segments (EQS), since both programs have this as a qualification option:

Based on this, our opinion is that Elevate elites will not be status matched to top tier status in Alaska’s program. The more likely scenario is that Elevate Silver elites will be matched to MVP status, and Elevate Gold elites will be matched to MVP Gold. Given the superiority of benefits in Alaska’s program and the higher EQS thresholds, this seems more than fair to Elevate elites.

Expanded Route Networks and a Bigger Airline

The new combined airline will be the fifth biggest in the United States. This is good news for travel enthusiasts because it makes Alaska a more difficult takeover target in the future. If a legacy airline attempted to buy them, it would likely be blocked by regulators. Therefore, Alaska’s generous award program should remain intact for the foreseeable future.

Alaska is a bigger airline than Virgin. Virgin members will see six-fold increase in daily flights domestically and to the Caribbean, while Alaska members will only see a 20 percent increase.

However, Alaska members will enjoy five-fold increase in flights from the west coast to NYC. These transcontinental flights are one of the big benefits for Alaska lovers. Alaska has been slow expanding its route network across the country to the Midwest and Eastern U.S., but this merger will significantly expedite that process.