Alaska Airlines has overcome a major hurdle in its plans to take over Hawaiian Airlines.
The US Department of Justice has decided not to challenge the $1 billion deal. The airlines are convinced that the deal will create a company that can offer better service to travelers.
Alaska Air announced in December that it would pay $18 in cash for each share of Hawaiian Airlines, including Hawaiian Airlines’ $900 million in debt.
Ted S. Warren/AP
If the merger goes ahead, the brands of both airlines would be retained – a rare move in an industry where, after decades of numerous takeovers, only four major airlines dominate the US market.
Alaska and Hawaiian have some overlapping routes. The goal of the merger is to enable the new company to compete more effectively with the country’s four largest airlines: American Airlines, Delta Air Lines, Southwest Airlines and United Airlines.
Alaska Air and Hawaiian Holdings, the parent company of Hawaiian Airlines, said in regulatory filings with the U.S. Securities and Exchange Commission (SEC) on Tuesday that the Justice Department’s review deadline, which had already been extended several times, expired shortly after midnight.
However, the deal still needs approval from the Department of Transportation. Alaska and Hawaiian are working with the Department of Transportation on a number of ongoing issues, according to the SEC filing.
The Justice Department’s decision not to challenge the deal contradicts the Biden administration’s opposition to two recent attempts at further consolidation in the airline industry.
With its lawsuit, the Justice Department was able to prevent JetBlue Airways from buying the low-cost airline Spirit Airlines and entering into a partnership with American Airlines in the Northeast.
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In both cases, the government argued that allowing these deals would have reduced choice and increased prices for consumers.
If Alaska and Hawaiian complete their agreement, it would be the first merger of major U.S. airlines since 2016, when Alaska outbid JetBlue and bought Virgin America.
Shares of Hawaiian Holdings Inc. rose more than 12 percent following the announcement. Shares of Alaska Air Group Inc. were unchanged
Hawaiian has not recovered from the COVID-19 pandemic in the same way as larger airlines, including Alaska.
Hawaii is heavily dependent on tourism from Japan, which has declined sharply following the coronavirus outbreak and is now suffering from a weakened yen, which has fallen about 40 percent against the dollar since the start of 2021.
In addition, Hawaiian faces increased competition from Southwest on flights between the islands and the U.S. mainland, as well as on flights within the islands.
