Virgin America (VA) didn't report great second-quarter earnings Friday. Despite fuel savings, the Burlingame, Calif.-based airliner missed analysts revenue and earnings expectations. Adjusted earnings of 93 cents per share missed by 24 cents, while revenue of $425.7 million missed by about $20 million.
But one quarter doesn't change the trajectory of the company. Putting aside the earnings, there's the more important pending $2.6 billion merger with Alaska Air (ALK) agreed upon in April. The deal, which includes debt and aircraft leases, has been approved by both boards and is expected to close by the end of 2016.
Not only is Virgin Air poised to benefit from a well-run Alaska Air under a sound management team, the expected merger synergies have already begun. Alaska has recenlty revealed the management group that will be oversea the combined company, which is poised to become the fifth-largest U.S. airline. The merger will help both Alaska Air and Virgin compete against the likes of Delta (DAL) , which have begun major expansion plans on the West Coast.
Not only was Friday's earnings disappointment a non-factor for Virgin, it should have been expected. Why? Virgin, which posted a 9% decrease in second-quarter passenger revenue per available seat mile, has likely already begun the synergy process. Given the reputation of Alaska's Brad Tilden, who will assume the role as CEO, as having a methodical financial background, I would be surprised if Virgin had not begun the cost-cutting aspect of the merger.