The US Department of Transportation (DOT) has granted an exemption allowing Alaska Airlines to proceed with its proposed acquisition of Hawaiian Airlines, and the carriers expect to close the deal as soon as 18 September.
The DOT’s approval clears the way for the first major US airline tie-up since Alaska’s 2016 purchase of Virgin America.
The airlines were notified in 17 September DOT filings that they have been approved to operate under common ownership by Alaska Air Group, though the deal is ”subject to certain conditions” to protect air travel consumers from potential anti-competitive harms.
”These commitments align with the plans Alaska announced at the time it signed the transaction and are consistent with its longstanding commitment to exceptional customer service, serving air-service-dependent communities and an industry-leading loyalty programme,” Alaska says.
“Subject to the satisfaction or waiver of the remaining conditions to closing, Alaska and Hawaiian expect to consummate the merger on or about September 18, 2024,” both airlines say in 17 September regulatory filings.
Alaska and Hawaiian announced in December 2023 their intention to combine via a $1.9 billion deal, with Alaska Air Group to acquire all of the capital stock of Hawaiian Holdings.
The deal cleared a major hurdle on 20 August when the US Department of Justice’s deadline for antitrust review expired without legal challenge.
In its 17 September filing, the DOT says it “determined that a stock acquisition resulting in common control and ownership of two or more air carriers having international route authority constitutes a de facto certificate transfer”.
The exemption granted by the DOT allows Alaska and Hawaiian to proceed, pending approval of a route-transfer application. They will remain independently operated companies until the DOT makes a ruling on the transfer request.
Alaska expects that request to be approved in coming weeks.
“We look forward to formally welcoming Hawaiian Airlines’ guests and employees into Alaska Air Group,” says Ben Minicucci, Alaska’s chief executive. ”We sincerely appreciate the exceptional care and service that employees of both companies have continued to show for one another and our guests throughout this process.”
CONDITIONS APPLY
US President Joe Biden’s administration has prioritised consumer protections in its oversight of the US airline industry, and has taken a hard stance on other tie-up proposals. Earlier this year, a federal antitrust lawsuit successfully blocked JetBlue Airways’ attempt to acquire Spirit Airlines for $3.8 billion.
But some industry observers say the Alaska-Hawaiian proposal makes more sense on paper than the JetBlue-Spirit tie-up because it does not eliminate a low-cost carrier and because the airlines’ networks have highly complementary networks with minimal overlap.
Alaska and Hawaiian have agreed to consumer-oriented terms to appease the DOT. The carriers pledge to continue operating, for a period of six years, routes “where Alaska and Hawaiian are the only nonstop , or [where they are] two of the three nonstop competitors”.
Additionally, the airlines will “maintain existing interline agreements with other US carriers on terms and conditions no less favourable to the other carrier than the terms contained in Hawaiian’s interline agreements,” says an agreement between the airlines and DOT.
Hawaiian has agreed to modify its customer service plan to align with Alaska’s, with policies such as adjacent seats for adults and children travelling together, providing a choice of travel credits or frequent flyer miles as compensation for flights delayed three hours or more, and offering no-cost rebooking with partner airlines in the event of significant delays.
Alaska and Hawaiian will launch a new combined loyalty programme. Per the deal’s terms, outstanding will be converted to the Alaska Mileage Plan on a one-to-one ratio and will remain valid without expiration.
The DOT also seeks to shield smaller carriers from anti-competitive practices, specifically those affecting Hawaiian’s operational base in Honolulu.
As part of the deal, Alaska and Hawaiian have agreed not to structure a deal with the Honolulu airport authority that contains ”any terms or conditions that would directly or indirectly exclude or unjustly discriminate against a carrier that is a new entrant or smaller competitor”.
The combined company will also continue operating to rural and underserved communities, the DOT says. “Specifically, maintaining robust passenger service and air cargo capacity among the Hawaiian islands at a baseline level similar to that provided by Hawaiian Airlines” in December 2023.
Hawaiian will also maintain its interline agreement with island-hopping commuter carrier Mokulele Airlines, a subsidiary of Southern Airways Express.
Alaska Air Group is to submit a report detailing the combined companies’ compliance with the DOT’s conditions 90 days after the deal’s closure.
Seattle-based Alaska operates an all-Boeing 737 fleet, flying primarily in the western USA. It also flies to Hawaii, across the USA and to a handful of international destinations.
Hawaiian operates 717s, 787s, Airbus A330s and A321neos. Its network includes intra-island flights, flights between Hawaii and the US mainland, and flights to six countries in the Asia-Pacific region.
