In a $1.9 billion transaction announced Sunday, Alaska Airlines agreed to buy Hawaiian Airlines, potentially setting up a fight with a Biden administration fearful of increasing airfares.
The combined business would keep both airlines’ brands, which is an unusual move in an industry where waves of mergers have resulted in four major companies dominating the US market. The firms said on Sunday that Alaska will pay $18 in cash for each share of Hawaiian stock, which ended Friday at $4.86 after losing nearly half its value this year.
Officials from both firms described the transaction as an opportunity to unite two carriers with few overlapping routes, creating a stronger entity to compete with the nation’s Big Four: American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines. It would also create a “clear leader” in the lucrative $8 billion Hawaiian market, according to Alaska CEO Ben Minicucci during an investor conference call.
“We combine two companies with shared values that have competed and survived longer than most through many industry cycles, enhancing our differentiated business model and creating a stronger competitor to network carriers,” he went on to say.
The acquisition includes $900 million in Hawaiian debt, raising the total value to $1.9 billion. Alaska’s Minicucci would lead United Airlines, which would be based in Seattle. The firms anticipate that the acquisition will increase profits within two years of the deal’s conclusion, which is expected to occur between 12 and 18 months from now. The United Airlines would be a member of the OneWorld Alliance, along with American Airlines, British Airways, and Cathay Pacific.
Both Alaska and Hawaiian are smaller than the country’s leading airlines. They stated that the merger would bring together two complementary networks, increasing connectivity to 138 destinations for passengers traveling across the continental United States and across the Pacific, including nonstop service to 29 international destinations in the Americas, Asia, Australia, and the South Pacific. Hawaiian has a long and illustrious history in the islands, dating back to its inception in 1929 as Inter-Island Airways.
The corporations stated that Honolulu would remain a critical center and that they are “committed to maintaining and growing a union-represented workforce” in Hawaii. Minicucci told reporters at a press conference on Sunday that it is “too soon to tell” how many non-union jobs will be cut once the merger is completed.
“I can’t tell you what that number is, but I’m hopeful that it’s not large,” he added of the possible layoffs.
The firms also stated that the merger would treble the number of destinations in North America that can be accessed from Hawaii in a single stop. Customers, for example, cannot now fly to Washington, D.C., on Hawaiian, but they will be able to do so through the combined firm. “Aloha, everyone,” Hawaiian Airlines CEO Peter Ingram remarked during an investor call.
According to him, Alaska approached his company about a transaction, and “the Hawaiian brand will remain an important part of our home state.” The merger has been accepted by the boards of both firms, but Hawaiian Holdings shareholders must still approve it. It will also require the approval of US authorities, who have been opposed to more airline consolidation for fear of increased fares.
The Biden administration is already attempting to stymie JetBlue’s proposed $3.8 billion acquisition of Sprit Airlines, which would effectively eliminate the nation’s largest low-cost carrier. The Justice Department also prevailed in a lawsuit that ended a joint venture between JetBlue and American Airlines.
The average domestic airline fare out of Seattle during the spring was $409.93. That was up from $293.08 two years earlier, according to data from the U.S. Department of Transportation. The average domestic fare out of Honolulu during the spring was $367.94, up from $329.93 two years earlier.
However, given how little Alaska and Hawaii’s itineraries overlap, their proposal may not cause too much concern in Washington, according to Henry Harteveldt, an Atmosphere Research Group travel industry researcher. Moreover, he claims that neither Alaska nor Hawaii are ultra-low-cost carriers like Spirit. As a result, uniting them would not reduce the downward pressure on fares that a Spirit buyout would.
As they aim to streamline operations, the airlines will need to deal with their unions, and business officials have already spoken with collective bargaining leaders. The Air Line Pilots Association said on Sunday that it was reviewing the plan and waiting for additional information.According to Harteveldt, both airlines have historically devoted greater attention to their personnel than their competitors, among other parallels in their corporate cultures. It’s another reason he believes the two companies should unite.
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