The Biden administration has given the green light for Alaska Airlines to proceed with its $1 billion acquisition of Hawaiian Airlines, subject to certain conditions agreed upon by both carriers. These conditions include commitments to maintain existing service on routes between Hawaii and the mainland U.S. where there is limited competition.
Transportation Department officials confirmed on Tuesday that all obstacles to the airlines closing the deal and commencing the merger have been cleared, with final approvals pending. Alaska Airlines anticipates finalizing the acquisition in the coming days.
Following the news, Alaska's stock experienced a 1% decline, while shares in Hawaiian Holdings surged by 4% to $18 per share, the agreed-upon purchase price by Alaska.
Notably, the decision to allow the Alaska-Hawaiian merger contrasts with the administration's previous stance against airline consolidation. The Justice Department had previously intervened to block other airline deals, such as JetBlue's attempted acquisition of Spirit Airlines for $3.8 billion.
While there is a possibility of the Justice Department challenging the Alaska-Hawaiian deal, it currently seems unlikely. The Transportation Department, which also holds authority over airline mergers, stipulated that Alaska and Hawaiian must adhere to specific conditions for a period of six years.
These conditions include maintaining subsidized flights to smaller communities in Alaska and Hawaii, as well as preserving current service levels between Hawaii and the mainland where only one other airline operates the same route. The latter requirement may be waived if the route becomes unprofitable.
Additionally, Alaska and Hawaiian have committed to various consumer protections, such as safeguarding the value of frequent-flyer rewards during the integration of their loyalty programs, ensuring families can sit together without extra fees, and offering discounted fares to military families. The airlines have also pledged to compensate passengers for cancellations and significant delays caused by the carriers.
Transportation Secretary Pete Buttigieg highlighted that these promises align with the airlines' original plans and will not impact the synergies of the deal, which are expected to enhance competition and provide more choices for consumers.
The Transportation Department granted Alaska and Hawaiian an exemption to merge their ownership structures. The department is currently reviewing the airlines' request to operate international routes under a single operating certificate, a step likely to be a formality.
The acquisition agreement, announced in December, values the deal at $1.9 billion, inclusive of Hawaiian's debt that Alaska will assume. Alaska has committed to retaining the Hawaiian brand, solidifying its position as the fifth-largest U.S. airline company by revenue and expanding its international presence through Hawaiian's extensive flights between Hawaii and Asia.
