Diving certificate:
- The Ministry of Justice will not contest Purchase of Hawaiian Airlines by Alaska Air Group after the Hart-Scott-Rodino review period ended on Monday without a response from the government.
- The deal still needs to be approved by the Department of Transportation, but the Justice Department’s antitrust review was seen as the biggest hurdle for the proposal, especially after the Justice Department blocked the purchase of JetBlue Airways of Spirit Airlines and the regional corporate alliance of American Airlines and JetBlue, which was established at several airports.
- THe The deal, announced in December, includes $1 billion for Hawaiian and the assumption of $900 million in debt. Hawaiian will operate under its existing brand but will become part of Alaska Air.
Diving insight:
Alaska, the fifth-largest U.S. airline, had argued that the merger would create a far stronger competitor to the country’s four giant airlines, which control more than three-quarters of U.S. air traffic.
Outside of the California-Hawaii routes, there is little overlap in existing markets between Alaska and Hawaii, and the latter airline offers few connections on the US mainland.
The airlines had also argued that their merger would also increase competition by allowing more seamless travel to and from Hawaii. Many Hawaiian customers in their home state now have to buy tickets on different airlines if they want to fly beyond the U.S. West Coast, for example for a trip from Honolulu to Columbus, Ohio.
“Even the skeptics of all consolidation efforts in the aviation industry, who currently hold the upper hand in the Justice Department, could not find fault with this deal,” said Howard Kass, former vice president of legal and government affairs at US Airways and former government affairs representative at American Airlines.
If Hawaiian’s merger with Seattle-based carrier Alaska is completed, it would be the first major U.S. airline deal approved by regulators since 2016, when Alaska Acquisition of Virgin America for $2.6 billion and debt.
The sale of Hawaiian differs from the two recent deals with JetBlue in several ways, Kass told Legal Dive on Tuesday.
A federal judge ruled in January that JetBlue’s acquisition of Spirit would eliminate a unique competitor that offered low-cost airlines and made air travel possible for many people who otherwise could not afford to fly.
American and JetBlue were seeking the Northeast Alliance, which would allow them to coordinate their flight schedules in Boston and New York. The Justice Department and six states filed suit to block the alliance, and in May 2023, a federal court found that the two airlines’ collusion was anticompetitive and ordered them to dissolve the agreement.
“In each of these cases, the government was able to demonstrate to the courts that there was identifiable harm to consumers,” Kass said, and those arguments in the court decisions “outweighed any benefits the defendants had put forward.”
The government’s antitrust lawyers probably did not conclude that Hawaiian was a competitor of the same kind as Spirit or that they could not prove their position in court, says Rebecca Haw Allensworth, an antitrust professor at Vanderbilt Law School.
“Their position was that Spirit was a very disruptive competitor,” she said. “Spirit would enter the market and when that happened, all airlines, including JetBlue, would have to lower their prices.”
“We can assume that the Justice Department did not see Alaska or Hawaiian as such disruptive competitors, or that they felt they could not prove it,” Allensworth said. “Not challenging a merger is not the same as approving the merger.”
The airline unions and Governor of Hawaii supported the deal because Alaska had promised to preserve jobs and maintain a solid airline schedule in the state. “They’ve done a really good job of coordinating policy here,” Kass said. “As far as I know, no one was against this deal.”
Shares of Hawaiian Holdings, the airline’s parent company, rose 11.3 percent on Tuesday following news of the Justice Department’s decision.
