15.5 C
Washington
Friday, June 21, 2024

Alaska Airlines to Acquire Hawaiian Airlines in a $1.9 Billion Deal

Alaska Airlines announced its intent to acquire Hawaiian Airlines for $1.9 billion, a move poised to reshape the airline industry and likely draw regulatory scrutiny. This strategic acquisition aims to enhance Alaska’s robust West Coast network, expand its footprint in a major tourist destination, gain access to Asian markets, and bolster its resources with additional aircraft, pilots, and employees.

Alaska’s CEO, Ben Minicucci, expressed the airline’s growth ambitions, stating, “We’ve always been a growth airline, and with this combination, we intend to grow more, both domestically and internationally.” The plan involves retaining the Hawaiian brand, a departure from Alaska’s absorption approach with Virgin America, which it acquired in 2016. The combined entity would serve 138 destinations, providing nonstop flights from the U.S. to Central America, Mexico, Asia, Australia, and the South Pacific.

While the deal offers synergies and opportunities for expanding services to and from Hawaii, it also raises concerns about reduced competition in the region. Both Alaska and Hawaiian operate in Hawaii, and the merger would significantly increase their combined market share, potentially impacting competition. Hawaiian Airlines alone accounted for about 22% of all flights into Hawaii in the past year. With Alaska’s acquisition, this share would grow to 38%, more than double that of the next competitor, United Airlines.

Anticipating potential regulatory scrutiny, Alaska’s acquisition of Hawaiian Airlines aligns with the Biden administration’s robust enforcement of antitrust laws. Federal regulators have actively intervened to prevent mergers and partnerships that could impede competition across various industries, including aviation. Last year, the Department of Justice successfully blocked a partnership between American Airlines and JetBlue, and it is currently contesting JetBlue’s attempt to acquire Spirit Airlines.

Ben Minicucci clarified that the sale of Spirit to JetBlue did not influence Alaska’s decision to pursue Hawaiian Airlines. Instead, he highlighted Alaska’s focus on profitably restoring its business during the early stages of the pandemic recovery. As travel rebounded, the airline explored opportunities for expansion, leading to the identification of the Hawaiian deal.

Despite increasing its share of the domestic market by over 25%, Alaska’s rank as the fifth-largest airline in the U.S. remains unchanged. The airline industry in the U.S. is dominated by four major carriers – Delta Air Lines, American Airlines, Southwest Airlines, and United Airlines – all of which achieved their current size through mergers.

In contrast to the JetBlue-Spirit deal, Alaska and Hawaiian exhibit minimal route overlap, competing on only about 3% of the routes they collectively offer. This lack of direct competition on a significant scale differentiates the Alaska-Hawaiian merger from other recent airline acquisitions.

Unions representing thousands of workers at both airlines refrained from taking a stance on the deal. They emphasized working collaboratively with Alaska and Hawaiian to ensure that employees benefit from the acquisition. The Association of Flight Attendants, representing 9,000 workers at both airlines, stated that their support for the merger would hinge on improvements to flight attendants’ conditions.

The deal is subject to approval by Hawaiian investors, expected to be put to a vote in the first three months of the coming year. If approved, the transaction is anticipated to take 12 to 18 months to close. Alaska will maintain its headquarters in Seattle, with Ben Minicucci continuing as CEO.

Alaska’s acquisition of Hawaiian Airlines marks a significant development in the airline industry, combining resources to navigate the post-pandemic landscape and offering new growth prospects, albeit with potential regulatory scrutiny.

David Faber
David Faber
I am a Business Journalist of The National Era
Latest news
Related news

LEAVE A REPLY

Please enter your comment!
Please enter your name here