Alaska Air Group has disputed claims by Richard Branson that the firm is required to pay Virgin Group royalties for the use of the Virgin America (San Francisco) brand despite a recent announcement that it will discontinue its use in 2019.
The founder and CEO of the British multinational, Richard Branson, told The Puget Sound Business Journal this week that Alaska Airlines is obligated to pay the fees until 2040 — whether it uses the Virgin brand or not.
"When I sat down with Alaska, I genuinely believed that they would treasure the brand, that they would treasure the people, that they would treasure the product and that they knew what they were buying," he said. "They spent USD2.6 billion buying it. And that the last thing they would do would be to rip the heart out of it, which seems effectively like what they decided to do. It just seems such a waste."
A review of Virgin America's SEC filings indicates that it paid a licencing fee equal to about 0.7% of its total annual revenue. In 2016, that amounted to around USD10 million.
However, AAG's general counsel, Kyle Levine, disputed Branson's claim in a comment to the Associated Press: "No, we do not need to keep paying for a brand that we are not using," he said. "What he didn't mention is there are lots of ways out of the contract."
In a development connected to the two carriers' impending merger, Alaska Airlines Chief Financial Officer (CFO) Brandon S. Pedersen said in an investor's day presentation on Wednesday, March 29, that a decision on fleet-type mix will be made by the end of 2017. This includes a decision on the future of Virgin America's order for thirty A320neo with Airbus wherein deliveries are to arrive from 2020 onwards.
While Alaska Airlines (AS, Seattle Tacoma International) is an all-Boeing operation, Virgin America's fleet currently consists of ten A319-100s and fifty-three A320-200s of which ten A320s are wholly-owned with the rest leased. A presentation indicates that notwithstanding renewals, Virgin America's leased fleet will dwindle to just thirteen aircraft by 2024.
Last month, Pedersen noted that Alaska Airlines was in talks with GECAS over plans to drop an unspecified number of A321neo from Virgin America's A321neo order - the first of which are due in the next quarter.
