Alaska Airlines and Virgin battle royalties dispute at Court of Appeal

Alaska Airlines has appealed a $160m court ruling over its decision to stop paying brand royalties to Virgin Aviation and Virgin Enterprises after it bought Virgin America.

Alaska Air Group acquired Virgin America in 2016 at a cost of approximately $4bn and by 2019, Virgin America was fully integrated into Alaska Airlines, with all Virgin branding replaced.

When Alaska Airlines re-branded, it ceased all use of the Virgin brand, and as a result, Alaska Air Group stopped paying royalties to Virgin.

As a result, Virgin Aviation and Virgin Enterprises launched a claim to the English High Court. The court handed down a judgment last February, which saw the judge rule that the contract should be interpreted as requiring Alaska Airlines to continue to pay Virgin, whether or not it uses the Virgin brand.

The judge Mr Christopher Hancock KC, sitting in the Commercial Court, concluded that Alaska was obliged to use the Virgin Brand at least to some extent, and he stated that, in ceasing to do so, it had committed a breach of contract, and that the damages payable for this breach of contract was the amount of the minimum royalty.

He concluded that the wording of the agreement stated clearly that the parties agreed that Alaska should pay a continuing minimum fee, even if it stopped using the Virgin brand.

He noted that this is because the fee was a flat fee payable for Alaska’s right to use ‘Virgin’, whether or not that right was taken up or not.

Alaska Airlines appealed Mr Christopher Hancock KC’s decision to the Court of Appeal, both parties were at a hearing on Wednesday.