Alaska Air CEO Expects Challenge Keeping Virgin Customers After Merger

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This story originally appeared on Reuters

Alaska Air Group Inc. expects it will be challenging to keep customers who are loyal to Virgin America Inc. after the two companies merge, Alaska Air's chief executive said on an analyst call on Thursday.

Alaska Air said earlier this month that it would buy Virgin America, a carrier with cult status among leisure and business travelers on the U.S. West Coast, for $2.6 billion.

Chief Executive Brad Tilden said "the biggest challenge" ahead will be appealing to its own customers as well as Virgin America's passengers, after that airline is merged into the Alaska brand. Virgin America has a distinctive style, with in-flight mood-lighting and media-rich entertainment.

Shares of Alaska Air were down about 3 percent in afternoon trade.

JPMorgan analyst Jamie Baker said on the same call that he had underestimated Virgin America's following, and asked if Alaska Air expected a spillover from the deal.

"We are aware of the value that that company has brought to its customers. Our goal isn't to lose that," Tilden said. "Our goal is to gain that as a foothold in the state of California as something that we grow in the decade or two ahead."

Alaska Air has said it might keep using the Virgin America brand in some form.

Executives said they still expect regulatory approval of the deal this year, and that they are answering the U.S. Justice Department's questions about the merger.

The company also said it grew adjusted profit 23 percent to $183 million in the first quarter, or $1.45 per share, not including Virgin America's results. Analysts on average had expected $1.42, according to Thomson Reuters I/B/E/S.

(Reporting By Jeffrey Dastin in New York, Editing by Franklin Paul and David Gregorio)

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