Alaska and Hawaiian Airlines still have to convince several regulators to approve their merger and now appear to have overcome their biggest hurdle.
In the decade following 9/11, several airlines in the United States merged or acquired each other. This industry consolidation continued at a slower pace into the 2010s, the latest of which involved Alaska Airlines, which acquired Virgin America in 2018.
However, the prelude to the Alaska-Hawaiian merger looks very different. This was made clear by the announcement of merger talks last December. We saw that JetBlue failed to convince regulators to allow it to acquire Spirit Airlines.
JetBlue had previously sought a code-sharing and network partnership with American Airlines, the so-called Northeast Alliance. This plan was also stopped by regulators. In both cases, it was the US Department of Justice that intervened.
Well, this week, Alaska and Hawaiian announced that the Department of Justice had approved their acquisition agreement after completing its review. The news sent shares of both airlines soaring, with Alaska stressing that it was “…a significant milestone“.
Alaska and Hawaii – Department of Transportation still has work to do
The process is not yet complete. The takeover is now being examined by the Ministry of Transport. This authority announced that it would only approve the step “…if it is in the public interest“.
For Alaska Airlines, the cost of acquiring Hawaiian in this deal is $1.9 billion, including Hawaiian’s debt. Even with regulatory approval, such mergers are always challenging because airlines must also merge various corporate policies, procedures, seniority lists, salaries and more.
Just days before the Justice Department gave the green light, Alaska and Hawaiian managed to avoid another potential legal hurdle. A consumer group had sued Alaska Airlines to block the acquisition, arguing that it would harm consumers.
A judge dismissed the lawsuit on the grounds that the consumer group had not proven that it had any affiliation with either airline and could therefore provide concrete evidence that the deal would harm them.
Previous mergers and acquisitions have failed on similar competition grounds after the Justice Department filed lawsuits, so the Justice Department’s approval is a big deal, even though the Transportation Department could theoretically make a similar argument.
From an operational perspective, integrating Hawaiian’s fleet, employees and network will not be a walk in the park for Alaskan. Nor will the airline’s “proud all-Boeing” fleet be if the deal goes through.
Alaska recently transferred its entire Virgin America Airbus fleet to lessors, while Hawaiian has both narrow-body A321neo aircraft (18) and wide-body A330 aircraft (25). The larger jets are necessary given Hawaiian’s existing route network. Alaska Airlines has never operated wide-body aircraft.
source
