Alaska Air to buy Hawaiian Airlines in a $1.9 billion deal that may attract regulator scrutiny

SEATTLE– Alaska Airlines agreed to buy Hawaiian Airlines in a $1.9 billion deal announced Sunday, potentially putting it on track for a showdown with a Biden administration wary of higher airfares.

The combined company would retain the brands of both airlines, an unusual move in an industry where waves of acquisitions have led four major brands to dominate the U.S. market. On Sunday, the companies said Alaska will pay $18 in cash for each share of Hawaiian, whose shares closed Friday at $4.86 after losing just over half their value so far this year.

Officials at both companies called the deal an opportunity to combine two airlines with few overlapping routes, which they said would create a stronger company to compete with the country’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, Alaska CEO Ben Minicucci said on 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 operators,” he said.

The deal includes $900 million in Hawaiian debt, bringing the total value of the acquisition to $1.9 billion. The combined airline would be based in Seattle, with Alaska’s Minicucci at the helm. The companies forecast the acquisition will be earnings accretive within two years of the deal closing, which is expected to happen 12 to 18 months from now.

The combined airline would participate in the oneworld alliance, which includes American Airlines, British Airways and Cathay Pacific.

Alaska and Hawaii are both smaller than the country’s dominant airlines. They said the deal would merge two complementary networks, increasing connectivity to 138 destinations for passengers traveling throughout 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 deep history within the islands, dating back to its incorporation in 1929 under the name Inter-Island Airways.

The companies said they would keep Honolulu as a key hub and are “committed to maintaining and growing the union-represented workforce” in Hawaii. They also said the combination would triple the destinations reachable within a stopover in North America for travelers from Hawaii.

For example, customers currently cannot fly to Washington, D.C., on Hawaiian, but could do so 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 continue to be an important part of our home state.”

The deal has been approved by the boards of both companies, but still needs approval from Hawaiian Holdings shareholders. It will also need the blessing of U.S. regulators, who have resisted further airline consolidation for fear it could lead to higher fares.

The Biden administration is already trying to block JetBlue’s proposal to acquire Sprit Airlines for $3.8 billion, which would include the country’s biggest budget airline. The Justice Department also won a lawsuit that ended a partnership between JetBlue and American Airlines.

The average domestic airline fare from Seattle during the spring was $409.93. That figure was up from $293.08 two years earlier, according to data from the U.S. Department of Transportation. The average domestic fare from Honolulu during the spring was $367.94, up from $329.93 two years earlier.

But given how little the Alaska and Hawaii routes overlap, his proposal may not create much angst in Washington, said Henry Harteveldt, a travel industry analyst at Atmosphere Research Group.

Just as important, he said, is that neither Alaska nor Hawaiian are ultra-low-fare airlines like Spirit. That means combining them wouldn’t eliminate the kind of downward pressure on rates that a Spirit purchase could bring.

Airlines will need to work with their unions as they try to streamline operations, and corporate officials said they have already spoken to collective bargaining leaders. The Air Line Pilots Association said Sunday they were evaluating the proposal and awaiting more details.

Historically, both airlines have paid more attention to their employees than their competitors, among other similarities in their corporate cultures, Harteveldt said. It’s another reason he believes a merger between the two could work. ___

This story has been corrected to show that the company’s boards have already approved the deal.