David Casey Christine Boynton August 20, 2024
Credit: Jim West/Alamy Stock Photo
Alaska Airlines’ planned $1.9 billion acquisition of Hawaiian Airlines has cleared an important regulatory hurdle after the antitrust review period for the U.S. Department of Justice (DOJ) ended without a lawsuit to block the deal.
The two carriers, which announced their merger agreement last December, now await approval from the U.S. Transportation Department (DOT) before the deal can be finalized. New analysis expects that will likely follow.
“This is a significant milestone in the process to join our airlines,” Alaska said late Aug. 19 in a statement. “The proposed combination remains subject to other customary closing conditions, including approval from the [DOT] of an interim exemption application.”
Alaska and Hawaiian first announced an agreement to merge on Dec. 3, 2023, expressing intent to retain both brands, with Hawaiian surviving as a wholly owned subsidiary of Alaska. The merger process kicked off in January, and the timeline for approval has been extended several times since as DOJ examined potential competitive effects and weighed its options: to either let the deal proceed unchallenged; enter into a negotiated consent agreement with competition-related provisions; or file for a preliminary injunction to stop the transaction.
The airlines complied with the DOJ’s request for more detail on May 7, starting a 90-day waiting period for the review to conclude. They then agreed to two further requests from the DOJ to extend the deadline, the last of which has now expired without regulatory issues being raised, or any provisions proposed.
Should it receive remaining approvals, the acquisition would be Alaska’s second in less than a decade, as well as being the first major U.S. airline merger since that 2016 transaction.
“We expect the DOT to follow the DOJ’s lead,” states analysis from Raymond James analyst Savanthi Syth. “As a point of reference regarding timing, we note in 2016 the Virgin/Alaska deal cleared the DOJ on December 6 and closed on December 14. That said, more dovish language in the Virgin/Alaska case likely implies FAA and DOT consents were already secured, accelerating the time to close.”
In announcing the antitrust clearance on Aug. 20, Alaska also committed to “continue providing strong service between, to, and from the Islands,” where Hawaiian has faced increased competition from Southwest Airlines.
Hawaii Gov. Josh Green welcomed the latest step in the process, saying that his administration has worked with Alaska to ensure the consolidation plan expands travel options, preserves union jobs and maintains the Hawaiian brand.
“The merger will vastly expand the number of destinations throughout North America for Hawaii residents that can be reached nonstop or one-stop from the islands,” Green says. “I am confident that by the joining of these two airlines, a stronger company will emerge and offer more travel options for Hawaii residents and local businesses – and will enhance competition across the U.S. airline industry.”
Alaska and Hawaiian say the combined entity will serve 54.7 million passengers annually and operate to 138 destinations, as well as providing access “to more than 1,200 destinations” through Alaska’s membership in the Oneworld alliance.
Analysis of data from OAG Schedules Analyser shows that Alaska is the fifth-largest airline in the U.S. domestic market during August 2024, accounting for 5.5% of all departure seats within the country. Hawaiian is the 10th-largest with a 1.2% capacity share. A combination will therefore create a group with about 6.7% of the market, maintaining Alaska’s position as the fifth-largest provider. In an application filed with DOT in mid-July, the carriers said a combined airline would “be better positioned to provide stronger competition against the Big Four U.S. passenger airlines (American Airlines, Delta Air Lines, United Airlines, and Southwest Airlines), which collectively account for approximately 80% of domestic seat share.”
OAG data shows that Alaska and Hawaiian are offering a combined 317 domestic and international routes during August 2024. Direct competition exists in 12 markets.
“Alaska will gain access to a fleet of widebody aircraft that can serve not only international destinations, but other long-haul domestic routes,” the carriers added in their DOT filing. “These widebodies will give Alaska new assets to deploy strategically across a broader network, offering new competition to the U.S. global carriers.”
The DOJ’s decision not to block the proposed deal comes amidst heightened U.S. government scrutiny on corporate mergers and industry consolidation and follows the agency’s successful suit to bar JetBlue Airways’ acquisition of Spirit Airlines, a deal officially terminated in March. The DOJ also won an antitrust suit against American Airlines and JetBlue in 2023 that resulted in the breakup of their Northeast Alliance.
Alaska Air Group is paying $18 per share in cash for each share of Hawaiian, whose stock closed Dec. 1, 2023, at $4.86. The proposed transaction has been approved by both airline boards.
David Casey is Editor in Chief of Routes, the global route development community’s trusted source for news and information.
Christine Boynton is a Senior Editor covering air transport in the Americas for Aviation Week Network.