Hawaiian Airlines is in the midst of a dramatic saga as Hawaii travelers, the state and the travel industry anxiously await the impending decision by the Department of Justice (DOJ) regarding its potential merger with Alaska Airlines, expected to be announced next week. In the meantime, with the airline’s future hanging in the balance, its share price has experienced significant fluctuations in recent weeks. After a sharp drop of nearly 20%, the stock has rebounded with an equally dramatic surge, rising over 20% in the past five days, reflecting the rapidly changing sentiment in the market.
The Justice Department’s decision: What’s at stake?
The impending decision by the U.S. Department of Justice on the Hawaiian/Alaska merger has everyone on tenterhooks. Whether approved or not, this will change the landscape of air travel to and from Hawaii. Proponents argue that the merger could lead to expanded route networks, more competitive pricing and improved service offerings, especially for travelers between the U.S. mainland and the islands.
But there are also significant concerns. Critics have raised alarms about potential monopoly behavior in the airline industry, as this deal could limit competition on some routes and negatively impact consumers. With Southwest Airlines continuing to face challenges of its own, as detailed in our previous coverage, the Justice Department’s decision could either help stabilize or further destabilize the dynamics of the airline market here in Hawaii.
What this means for travelers and investors.
For travelers, the outcome of this deal will have a direct and profound impact on future Hawaii travel plans. On one hand, a successful merger could bring interesting new route options and potentially lower prices in some markets as the merged duo streamlines its operations. On the other hand, however, a rejection could lead to uncertainty, with potential impacts on flight availability and prices, as airlines flying to Hawaii must adjust to the Justice Department’s decision.
For investors, the next few days will be crucial. The sharp rise in Hawaiian Airlines stock suggests that many are now betting on a positive outcome from the Justice Department. However, risks remain high and any unfavorable news could send the stock plummeting again, and continued volatility is all but guaranteed as the Justice Department’s decision draws closer.
Also interesting is that Hawaiian just swapped over a billion dollars in debt. The previously maturing 5.75% senior secured notes due 2026 are now maturing at 11% in 2029. Hawaiian Airlines’ ability to continue as a standalone airline without the Alaska Airlines deal remains in question.
There is a possibility that the Justice Department will demand changes as a condition of the deal.
Because there are a dozen overlapping routes, it is not clear whether the Justice Department could require changes to the routes both airlines serve as a condition of a merger. This has been the case in a number of previous mergers that were ultimately approved by the Justice Department. The overlapping routes in this case are those from the Pacific Northwest and from California to Hawaii.
Fleet utilization in a combined airline.
One might wonder how Alaska would use its suddenly larger and different fleet in the future. This would include Alaska’s 200-odd Boeing 737s, plus Hawaiian’s 44 narrow-body and wide-body aircraft from the mainland. It is likely that fleet utilization will change significantly over time, although perhaps slowly at first.
Looking ahead: All eyes are on the coming week.
As we approach the expected announcement from the Department of Justice, tensions are palpable in Hawaii, among travelers, the stock market and the airline industry. Hawaiian Airlines, the 95-year-old cornerstone of Hawaii’s airline industry, is at a pivotal moment. The impending decision will not only determine the airline’s immediate future, but will have long-term implications for the entire travel landscape in Hawaii.
Next week promises to be crucial and fascinating as the drumroll reaches its climax. Please share your thoughts and stay tuned as we report on the outcome and the implications for Hawaii travelers.
Photo above from the end of the Hawaiian Boeing 767 era.
