Alaska Air Group Inc. (NYSE: ALK) agreed to buy  Virgin America Inc. (Nasdaq: VA) for $2.6 billion, overcoming interest in the  Richard Branson-backed carrier from JetBlue Airways Corp. to secure a deal that bolsters its main West Coast business while opening up key airports in New York and Washington.

Alaska Air will pay $57 a share for Virgin America stock, with the deal worth about $4 billion including debt and capitalized aircraft operating leases, the Seattle-based company said Monday.

“We’ve been thinking about an acquisition for a couple of years,” Alaska Chief Executive Officer Brad Tilden said on a conference call. “We’re confident in our ability to do well with this.” The company secured the deal after a “hard fought competition,” he added.

Alaska Air said buying Virgin America -- which had a market value of $1.37 billion on March 22, the day before Bloomberg reported it was reaching out to potential buyers -- will help it compete with  Delta Air Lines Inc., American Airlines Group Inc., United Continental Holdings Inc. and  Southwest Airlines Co.

“We certainly will not be at the size of the largest four, but the smaller guys are still doing quite well in this industry,” Tilden said. “This acquisition does give us additional mass.”

The deal will boost Alaska Air’s revenue 27 percent to more than $7 billion and should produce $225 million of annual savings following integration costs of as much as $350 million, the carrier said in a statement. It’s forecast to be earnings enhancing in the first full year, excluding those costs.

Alaska Air reported adjusted net income of $842 million for 2015, an increase of 47 percent from the prior year, while Virgin America, which had an initial public offering in 2014, posted a profit of $201 million.

Alaska’s fleet will swell to 280 aircraft with Burlingame, California-based Virgin America’s 60 Airbus Group SE A319s and A320s, and the combined entity will have 1,200 daily departures. The business will have hubs in San Francisco and Los Angeles, where Virgin adds east-west routes to Alaska’s north-south strength, as well as in Seattle, Anchorage and Portland, Oregon.

“They complement our geography very well,” Tilden said, adding that the goal is to be “the premier airline for people living on the West Coast.”

Virgin America will also enhance Alaska’s access to slot-constrained East Coast hubs including John F. Kennedy International Airport and LaGuardia in New York, and Ronald Reagan Washington National serving the U.S. capital.

Alaska Air had been competing with New York-based JetBlue Airways for Virgin America, people familiar with the matter have said.

Virgin America CEO David Cush said in an e-mail to employees Monday that tying up with Alaska provides the combined business with a better chance of success against the backdrop of a changing industry, adding that his airline did not seek out a merger.

A wave of consolidation that began in 2005 swept up five of the 10 biggest U.S. carriers, leaving the top four operators controlling 80 percent of the market. For example, in 2013, US Airways merged with American Airlines.

While Cush said he sees the sale closing in the “next several months,” Tilden, who will lead the enlarged group, said it could be 18 months to two years before the Federal Aviation Administration grants a single operating certificate.

The Alaska Air brand will be retained, and the Alaska name will be applied to the group, based in Seattle. At the same time the company said it will explore with Branson’s Virgin Group how the Virgin America brand “could continue to serve a role in driving customer acquisition and loyalty.”

-- Additional reporting by Mary Schlangenstein and Benjamin Katz

Aerospace