Alaska Air Group, parent company of Alaska Airlines, announced plans Monday to acquire Virgin America in a deal the company valued at $57 a share in cash. Including debt, Alaska Air valued the deal at about $4 billion.

Alaska Air said the merged airline will become the fifth largest in the United States and will help it compete against larger rivals for lucrative business and international travelers visiting San Francisco and Los Angeles as well as Seattle, where the company is based.

"Their network perfectly complements Alaska. We're very strong in Seattle, Portland, Anchorage. We have good strength in California, but they're extraordinarily strong in California," Alaska Airlines CEO Brad Tilden told CNBC's "Squawk Box."



"We think together … we will be the airline on the West Coast with the largest market share, and so we think the deal just makes all the sense in the world."

The acquisition will herald the first U.S. commercial airline merger since US Airways and American Airlines combined in 2013 to form the world's largest carrier.