The recent extension granted by the U.S. Department of Justice (DOJ) to review Alaska Airlines’ $1.9 billion acquisition of Hawaiian Airlines is more than just a procedural delay. Rather, it offers a glimpse into the complicated and ongoing negotiations that could determine the future of this merger. The extension, which pushes the decision deadline to August 20, 2024, 12:01 a.m. ET (Monday, 6:01 p.m. Hawaii time), raises important questions about what is really going on behind the closed doors of the airlines and the government.
If the Justice Department were to flatly reject the merger, citing antitrust concerns, that decision would likely have been made and announced already. The fact that we’re seeing repeated extensions and not a clear “no” or the filing of a lawsuit against the acquisition suggests there’s more at play. Both Alaska and Hawaiian Airlines, along with Justice Department officials, appear to be engaged in nuanced talks aimed at addressing specific regulatory concerns. We’ll hear more about that at the end of those negotiations, and we’ve said before that these could be related to routes, including those from Seattle, assurances about the continuation of interisland flights, or other factors.
This extensive dialogue suggests that the Department of Justice has significant reservations about concluding the Hawaii Agreement.
At the same time, however, it also says that the government is not completely opposed to the idea. Intriguing. If the merger were free of major flaws, it would likely have been approved by now. On the other hand, the repeated delays suggest that the Justice Department, together with the airlines, is continuing to explore possible ways to address the department’s concerns – assuming the parties can agree on sufficient remedies.
These remedies would include concessions from Alaska Airlines and Hawaiian Airlines to address the U.S. Department of Justice’s antitrust concerns, including measures designed to ensure that the merger does not reduce competition in a way that significantly harms consumers, particularly in our important Hawaii market.
The background to these negotiations between Hawaii and Alaska is the vigilant attitude towards airline mergers.
This was already evident earlier this year when the Justice Department successfully blocked JetBlue’s acquisition of Spirit Airlines for $3.8 billion. This case set another precedent and indicated that the Justice Department will step in to prevent deals it sees as anti-competitive and not consumer-friendly.
For Alaska and Hawaii, the stakes couldn’t be higher.
The merger promises a stronger, unified platform that could increase competition with the major airlines and potentially lead to lower fares and better service for customers. There are comments both in favor and against this premise.
For Alaska and Hawaiian Airlines, this merger also offers the prospect of greater stability as they can pool all resources, expand their routes and invest more in operations in Hawaii.
But these potential benefits must be weighed against the risks. Critics here and elsewhere argue that the merger could reduce competition, particularly in the Hawaiian market where the two airlines already have a combined dominant position. This consolidation, therefore, if not managed properly, could result in higher prices and less choice for travelers. In addition, integrating the two airlines’ operations and cultures brings its own challenges that could lead to potential problems, at least during the transition period.
As the clock counts down again today, the focus remains on whether these negotiations will result in a compromise that addresses the Justice Department’s concerns – or whether the deal will ultimately be overturned. What is clear is that the outcome of this extensive review process will have significant implications for the future of both airlines and the Hawaii travel industry as a whole.
For more details on ongoing developments, please see our previous coverage.
BOH photo at the event announcing Alaska Airlines’ planned acquisition of Hawaiian Airlines.
