Adding Virgin America (the red lines) substantially boosts Alaska Airlines' presence in California.

Adding Virgin America (the red lines) substantially boosts Alaska Airlines’ presence in California.

The big business news of the week was Alaska Airlines’ purchase of Virgin America for $2.6 billion. The deal has been getting mixed reviews — Richard Branson certainly wasn’t a fan of the merger — but most early opinions were that the deal would be a win for Boeing. Alaska’s entire fleet is 737s, and most of Virgin America’s fleet consists of leased Airbus A320s. When those leases are up, most have argued, Alaska will buy new 737s to replace those planes. Virgin America’s agreement to buy 30 A320s is still in place, but the penalty for Alaska to renege on the deal is a platry $25 million.

But this argument fails to consider one possibility: What if Alaska likes the Airbus planes? Boeing planes are all Alaska has ever known, and the company now is getting direct exposure to the plane that’s selling so well Boeing is blaming it for its latest round of layoffs.

On the surface, it’s in Alaska’s best interest to have a one-plane fleet — maintenance is cheaper — but if both Boeing and Airbus jets are in play in the future, the now-bigger carrier can force the two companies to compete for its business.

Alaska will likely remain a loyal Boeing customer, but the fact that Airbus just encroached on Boeing turf can’t be seen as entirely good news for folks building 737s.


Costco helping farmers

Costco sells a tremendous amount of produce, and some analysts believe it has surpassed Whole Foods as the world’s largest purveyor of organic food. Shuffling $4 billion worth of organics a year requires a good relationship with farmers, and Costco is bolstering its relationship with partners by financing the purchase of farmland.

Per U.S. Department of Agriculture rules, converting a standard farm to certified-organic is a three-year process, which means that new organic farmers have to undergo three years of more intensive, more expensive farming before they can reap the price premium. Thus, organic farmers are constantly looking for financing to tide them over during the three-year period, or to buy virgin land that can be prohibitively expensive.

It’s the latter that Costco is dabbling in. It recently loaned money to a San Diego farmer to buy land in Mexico that has lain fallow for years, allowing them to start organic farming immediately.

Other retailers, Whole Foods included, have also helped finance farmers in an effort to build up the supply of organics to meet demand. The move not only helps farmers, but it ensures years of supply for the retailers while injecting capital into a fast-growing agriculture segment.


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