A proposed $1.9 billion merger between rivals Alaska Airlines and Hawaiian Airlines cleared its most significant regulatory hurdle on Monday after federal antitrust regulators ended their review period without blocking the deal.
The Justice Department’s formal review period for the proposed Hart-Scott-Rodino Act merger quietly ended at 12:01 a.m. Eastern Time (6:01 p.m. Monday in Hawaii). This was almost disappointing, given the heightened tensions and speculation over the past two weeks after the review period, originally set for August 5, was extended three times.
Alaska announced the news on its website, calling the development “a significant milestone on the path to joining our airlines.”
Hawaiian and Alaska needed approval from the U.S. Department of Justice to complete their proposed merger agreement, which was signed on Dec. 2 after the boards of both airlines approved the deal, which also includes $900 million in Hawaiian debt.
This merger milestone is a real sensation in Hawaii, as Hawaiian Airlines has a history dating back to 1929. Hawaiian Airlines is the state’s largest airline, with approximately 150 daily interisland flights and over 230 system-wide flights. It offers nonstop flights between Hawaii and 16 U.S. gateway cities, as well as service to American Samoa, Australia, the Cook Islands, Japan, New Zealand, South Korea and Tahiti.
Alaska Airlines and its regional partners serve over 120 destinations in the United States, Belize, Canada, Costa Rica, Mexico, the Bahamas and Guatemala.
Given the financial difficulties Hawaiian is currently facing and has been facing for the past few years, the stakes of the merger may be high. Hawaiian reported a second-quarter net loss of $1.30 per share, or $67.6 million, on July 30, compared to a net loss of $12.3 million a year earlier. Adjusted for one-time costs, the second-quarter loss was $1.37 per share.
The Justice Department enforces Section 7 of the Clayton Act, which prohibits mergers and acquisitions that could substantially lessen competition or create a monopoly, and recently the Biden administration has taken a tough stance against airline industry consolidation. In 2023, the Justice Department, along with the attorneys general of Massachusetts, New York, and the District of Columbia, filed a civil antitrust lawsuit to block the merger of JetBlue and Spirit.
To receive full regulatory approval, the Alaska-Hawaii merger is subject to other customary closing conditions, most notably approval by the U.S. Department of Transportation of a preliminary waiver application required to complete the transaction. The Department of Transportation’s waiver approval has historically followed the Justice Department’s approval by no more than 48 hours. However, the current administration has taken a less deferential approach to Justice Department procedures.
Hawaiian and Alaska must remain competitors until the regulatory process is completed.
The combined company’s first day is expected to begin once the money is transferred. When that happens, Hawaiian shareholders who approved the deal on Feb. 16 are expected to receive a premium of $18 in cash per share. Hawaiian’s stock closed Monday at $15.88.
When the deal was announced, Ben Minicucci, president and CEO of Alaska Air Group, the parent company of Alaska Airlines and Horizon Air, and Peter Ingram, president and CEO of Hawaiian Airlines, told the Honolulu Star-Advertiser that the new company would preserve and enhance the Alaska and Hawaiian Airlines brands.
The combined company will be based in Seattle and led by Minicucci.
The acquisition will affect nearly 7,300 Hawaiian Airlines employees, but Ingram told the Star-Advertiser on Dec. 3 that the commitment to preserve about 5,800 union jobs and try to find jobs for about 1,400 nonunion employees was “very important” to Hawaiian Airlines executives during negotiations on the deal.
“There will be no union jobs lost with this merger. Honolulu will be our second largest hub in the Alaska system after Seattle. We will need a lot of non-union jobs,” Minicucci told the Star-Advertiser, adding that exact headcount numbers will not be available until the deal is finalized. “We will need a significant portion of the people who already work here in the future.”
The airlines have announced that they will recognize existing miles from the Alaska Airlines Mileage Plan and HawaiianMiles frequent flyer loyalty programs, with plans to integrate these miles into a joint loyalty program.
Gov. Josh Green issued a statement Monday saying he and his administration had worked with Alaska Airlines leadership to consider the potential impact of consolidation. “We insisted that any changes expand travel options for our citizens and preserve union jobs.”
“Alaska has reaffirmed its commitment to our state and will uphold the Hawaiian Airlines brand, maintain and grow union jobs in our Hawaii, and continue to provide essential passenger and air cargo service to, from and within the islands,” Green said. “The merger will significantly increase the number of destinations across North America that Hawaiians can reach nonstop or with one stop from the islands, and HawaiianMiles members will retain the value of their miles while gaining access to more destinations around the world.”
Green said he appreciated that the Justice Department took Hawaii’s unique needs into strong consideration in its review.
“I am confident that the combination of these two airlines will create a stronger company that will provide more travel options for Hawaii residents and local businesses – and increase competition throughout the U.S. airline industry,” he said.
Both Ingram and Minicucci said their deal is significantly different from the blocked merger of JetBlue and Spirit. It is not a low-cost airline, their operations have little overlap and customers will benefit from expanded travel options and services.
But not everyone agrees. On Sunday, a request was made to U.S. Chief District Judge Derrick Watson to reconsider his lawsuit, which was dismissed on August 12. The lawsuit sought to block Alaska Airlines’ plans to acquire Hawaiian Airlines. The lawsuit was filed on the grounds that the merger would lead to higher fares, job losses and fewer flights, and would harm Hawaii’s economy.
The lawsuit was filed in April on behalf of eight passengers: Warren Yoshimoto, Kristin Barroga, Sean Kettley, Carolyn Fjord, Don Freeland, Don Fry, Bill Rubinsohn and Clyde Stensrud. The passengers, including three Hawaii residents, were represented by antitrust attorneys Joseph Alioto and Tatiana Wallace of the Alioto law firm in San Francisco and Terence O’Toole, Andy Lautenbach and Kukui Claydon of the law firm Starn, O’Toole, Marcus and Fisher in Honolulu.
Watson’s dismissal order said the passengers had no cause of action, adding: “They do not allege any personal connection with either airline that would plausibly demonstrate any specific or particular harm.”
Alioto told the Star-Advertiser that the plaintiffs have standing to sue and that “in 1914, Congress gave individuals the power to sue against takeovers and other unlawful activities if they are at risk of future harm.”
“Of course we haven’t paid higher prices yet because it hasn’t happened, and of course they haven’t restricted the availability of flights yet,” he said. “But that’s the threat that they will do, and the reason and justification for that threat is that this happens with every merger.”
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Star-Advertiser writer Peter Boylan contributed to this report.
