Alaska Airlines has announced a significant move in the airline industry by acquiring Hawaiian Airlines for $1.9 billion.
This strategic acquisition aims to expand Alaska Airlines' reach, positioning it as the fifth-largest airline in the United States. However, the deal may face scrutiny from the Biden administration and regulators, as per USA Today.
Alaska Airlines Buys Hawaiian Airlines, Expands Network
NEW YORK - AUGUST 24 : A Boeing 737-990 (ER) operated by Alaska Airlines takes off from JFK Airport on August 24, 2019 in the Queens borough of New York City.
Under the terms of the agreement, both Alaska Airlines and Hawaiian Airlines will maintain their respective brands while integrating into a single operating platform. This integration is expected to provide passengers with increased access to a broader range of flights and destinations, spanning across the Americas, Asia, Australia, and the South Pacific.
Alaska Airlines will pay $18 in cash for each share of Hawaiian Airlines, with the latter's stock closing at $4.86 on Friday. Additionally, the deal encompasses assuming $900 million in Hawaiian Airlines debt, resulting in a total acquisition value of $1.9 billion.
The combined airline will be headquartered in Seattle, with Ben Minicucci, CEO of Alaska Airlines, leading the new entity. The companies anticipate that the acquisition will contribute to profits within two years of closing.
Furthermore, the merged airline will join the OneWorld alliance, aligning itself with major carriers such as American Airlines, British Airways, and Cathay Pacific.
While Alaska Airlines and Hawaiian Airlines are smaller than dominant carriers in the US, they believe their merger will create a synergistic network, offering enhanced connectivity to 138 destinations for passengers traveling between the continental US and the Pacific region. This includes non-stop service to 29 international destinations in the Americas, Asia, Australia, and the South Pacific.
Hawaiian Airlines holds a deep-rooted history within the Hawaiian islands, dating back to its incorporation in 1929 as Inter-Island Airways. Both companies have committed to retaining Honolulu as a key hub and are dedicated to preserving and expanding their union-represented workforce in Hawaii.
The merger is expected to triple the number of destinations accessible within one stop in North America for travelers originating in Hawaii, according to The Guardian.
Alaska-Hawaiian Merger Faces Regulatory Hurdles
The acquisition has received approval from the boards of both Alaska Airlines and Hawaiian Airlines. However, it still requires the consent of Hawaiian Holdings shareholders and regulatory approval from US authorities, including the Department of Justice, which has been cautious about further airline consolidation due to concerns about potential fare increases.
This move comes as the Biden administration is already seeking to block JetBlue's proposed $3.8 billion acquisition of Spirit Airlines, a deal involving the largest budget carrier in the nation. The Justice Department recently succeeded in preventing a partnership between JetBlue and American Airlines.
The average domestic airline fare out of Seattle during the spring has risen significantly in recent years, reaching $409.93, up from $293.08 two years prior. A similar trend is observed in Honolulu, where the average domestic fare during the spring increased to $367.94, up from $329.93 two years earlier.
The Alaska-Hawaiian merger could potentially raise questions about competition, particularly concerning flights between Hawaii and the US mainland. However, the airlines' limited route overlap and their non-ultra-low fare model may mitigate regulatory concerns.
As the airlines proceed with their merger plans, collaboration with their unions will be a key aspect of streamlining operations. Both companies have already engaged with collective bargaining leaders, and the Air Line Pilots Association is evaluating the proposal while awaiting further details.
This acquisition marks a significant development in the airline industry, with Alaska Airlines and Hawaiian Airlines aiming to create a more robust and competitive entity while navigating regulatory challenges, The Associated Press reported.
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