SEATTLE (AP) — Alaska Airlines agreed to buy Hawaiian Airlines in a USD1.9 billion deal announced Sunday, potentially putting it on track for a clash with a Biden administration wary of higher airfares.
The combined company would maintain both airlines’ brands, an unusual move in an industry where waves of acquisitions have led to four big brands dominating the US market. On Sunday, the companies said Alaska will pay USD18 in cash for each share of Hawaiian, whose stock closed Friday at USD4.86 after losing just over half its value in the year so far.
Officials from both companies called the deal a chance to combine two carriers with few overlapping routes, which they said would create a stronger company 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, USD8 billion Hawaiian market, Alaska CEO Ben Minicucci said in a conference call with investors.
“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 said.
The deal includes USD900 million in Hawaiian debt, bringing the acquisition’s total value to USD1.9 billion. The combined airline would be based in Seattle, with Alaska’s Minicucci at its head. The companies forecast the acquisition will add to profits within two years of the deal closing, which is forecast to happen between 12 and 18 months from now.
The combined airline would participate in the oneworld Alliance, which includes American Airlines, British Airways and Cathay Pacific.
Alaska and Hawaiian are both smaller than the nation’s dominant carriers. They said the deal would meld two complementary networks, increasing connectivity to 138 destinations for passengers traveling through 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 deep and long history within the islands, stretching back to its incorporation in 1929 under the name Inter-Island Airways.
The companies said they would keep Honolulu as a key hub and that they’re “committed to maintaining and growing union-represented workforce” in Hawaii. They also said the combination would triple the destinations that can be reached within one stop in North America for travellers from Hawaii.
For example, customers can not currently fly to Washington, DC, on Hawaiian, but they would be able to through the combined company.
“Aloha, everyone,” Hawaiian Airlines CEO Peter Ingram said on a call with investors.
He said Alaska approached his company about a deal and that “the Hawaiian brand will remain an important part of our home state.”
The deal has been approved by the boards of both companies, but it still needs an OK from the shareholders of Hawaiian Holdings. It will also need the blessing of US regulators, which have resisted more airline consolidation out of fear it could lead to higher fares.
The Biden administration is already trying to block JetBlue’s proposed USD3.8 billion acquisition of Sprit Airlines, which would subsume the nation’s biggest budget carrier. The Justice Department also won a lawsuit that killed a partnership between JetBlue and American Airlines.
The average domestic airline fare out of Seattle during the spring was USD409.93. That was up from USD293.08 two years earlier, according to data from the US Department of Transportation. The average domestic fare out of Honolulu during the spring was USD367.94, up from USD329.93 two years earlier.
But given how little Alaska and Hawaiian’s routes overlap, their proposal may not create much angst in Washington, said Henry Harteveldt, a travel industry analyst at Atmosphere Research Group.
Just as importantly, he said, neither Alaska nor Hawaiian is an ultra-low fare airline like Spirit. That means combining them would not eliminate the kind of downward pressure on fares that a Spirit buyout might.
The airlines will need to work with their unions as they try to streamline operations, and corporate officials said they have spoken with collective bargaining leaders already. The Air Line Pilots Association said Sunday they were evaluating the proposal and awaiting more details.
Both airlines have historically paid more attention to their employees than competitors, among other similarities in their corporate cultures, Harteveldt said. It’s another reason he said he thinks a merger between the two could work.