Shares of Virgin America (VA) sank Thursday after reports of antitrust concerns and labor unease earlier in the week suggested the airline’s acquisition by Alaska Air Group (ALK) could get complicated.
The two carriers met last week with a top U.S. antitrust official and others in an attempt to respond to worries about the threat the merger might pose to competition, Bloomberg reported. It cited a source with knowledge of the situation. The meeting may have indicated that regulators were concerned about the deal and could try to halt it, Bloomberg said.
On Monday, the Transport Workers Union of America said Virgin’s flight attendants rejected a tentative contract agreement between their union and Virgin. The contract was set to take hold at the merger deal’s closing, which Alaska in July said it expects to happen in this year’s fourth quarter.
The flight attendants in the combined company would eventually be represented by the Association of Flight Attendants, the representative for Alaska, according to the Seattle Times.
AFA Alaska on its website said Monday that the vote “raises questions about what happens next” but that they “stand in unity with our Virgin America sisters and brothers as they fight for improvements to their wages and working conditions.”
The union representing Virgin’s flight attendants said it would discuss the vote with Virgin’s management.
“Our in-flight teammates have spoken,” a Virgin America spokesman said, the Puget Sound Business Journal reported late Tuesday. He added: “We are now turning our attention to our anticipated merger with Alaska Airlines, and we will be discussing next steps connected to the merger with the TWU.”
Virgin America shares closed down 4.4% at 53.20 in the stock market today, but had fallen as low as 50.66 earlier in the day, marking the biggest movement in its shares since agreeing in April to be taken over for $57 a share, or $2.6 billion. Alaska shares slipped 1%.
IBD’S TAKE: Virgin’s labor negotiations come as other U.S. carriers have more recently worked out deals with workers after cheap oil created an industry profit windfall through 2015. Analysts, however, warn such deals could hurt profits.
Shares of rival JetBlue (JBLU) rose 0.6%, and discount carrier Southwest (LUV) gained 1.1%. Ultra-low-cost carrier Spirit Airlines (SAVE) added 0.65%.
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