DALLAS — Today, Alaska Air Group, owner of Alaska Airlines (AS) announced in a press release its plans to buy Hawaiian Airlines (HA) in the most recent instance of consolidation among US airlines. The Settle-based group will purchase HA for US$18 per share in a deal valued at US$1.9 billion, including Hawaiin’s debt.
Alaska Air Group, the holding company that owns Alaska Airlines and regional carrier Horizon Air (QX), will continue to operate Hawaiian as an independent brand within the group but with a single operating platform. The combined airline would serve 138 destinations across North and South America, Australia, Asia, and the South Pacific. They would also be part of the Oneworld alliance, joining fellow US legacy carrier American Airlines (AA) and twelve others.
Alaska Airlines operates flights to Hawaii from Anchorage, Portland, Seattle, Everett, Los Angeles, San Francisco, San Diego, and San Jose. On the other hand, HA has been operating since 1929 and is the flag carrier for the Hawaiian Islands, offering over 150 daily inter-island flights and serving as a necessary transport link for the Aloha state. Although the board of Alaska Air Group has approved the merger, it is still subject to government regulatory approval. Moreover, Alaska will seek approval from Hawaiian shareholders in the first quarter of 2024.
In a statement, Alaska Airlines Chief Executive Officer Ben Minicucci said, “This combination is an exciting next step in our collective journey to provide a better travel experience for our guests and expand options for West Coast and Hawai’i travelers.” He added that the merger will give customers expanded domestic and international choices. Regarding the inter-island services, Minicucci stated, “We are fully committed to investing in the communities of Hawai’i and maintaining robust neighbor island service.”
This merger is unique in that both airlines will be their brands. Hawaiian President Peter Ingram and Minicucci say it was done out of respect for both carriers’ almost hundred-year legacy and the communities they serve. Moreover, both airlines are rooted in the 49th and 50th US states, primarily reliant on air travel. The deal is forecasted to take anywhere from nine to eighteen months or as late as June 2025.
A New Alaska-Hawaiian Airlines
Albeit AS and HA will continue to operate under separate brands, their frequent flyer programs will be combined. Alaska CEO Ben Minicucci will become the CEO of both airlines and stated that the acquisition would allow Alaska to offer more robust competition to American Airlines, Delta Air Lines (DL), United Airlines (UA), and Southwest Airlines (WN). Altogether, these airlines make up 80% of the market share in the United States. Alaska plans to expand Hawaiin’s hub at Daniel K. Inouye International Airport (HNL) to implement more international connectivity for travelers from the West Coast to the Asia-Pacific region.
Alaska is the sixth largest airline in the US by seats, while Hawaiian is the tenth largest. Combined, Alaska and Hawaiin would be the fifth largest carriers, only behind American Airlines, Delta Air Lines, United Airlines, and Southwest Airlines. That said, if JetBlue’s (B6) acquisition of Spirit Airlines (NK) is approved by the United States Department of Justice (DOJ), they would take the fifth spot, and Alaska-Hawaiian would be sixth.
Hawaiian Airlines Chief Executive Officer Peter Ingram celebrated the announcement: “In Alaska Airlines, we are joining an airline that has long served Hawai’i and has a complementary network and a shared culture of service. With the additional scale and resources that this transaction with Alaska Airlines brings, we will be able to accelerate investments in our guest experience and technology, while maintaining the Hawaiian Airlines brand.”
The merger will expand Alaska Airlines to a fleet of 365 aircraft consisting of AS’s Boeing 737 fleet and HA’s fleet of 717s, Airbus A330s, and Airbus A321neos. HA is also awaiting delivery of 12 Boeing 787-9s.
Since the pandemic, Hawaiian has struggled to return to profitability despite being the top carrier for on-time performance by the United States Department of Transportation. Hindering the airline’s return to profitability, including the slow recovery of Japanese visitors, which pre-pandemic was a significant market, and the issues with the Pratt & Whitney turbofan engines that power its fleet of 18 Airbus A321neos. The engine issue has resulted in HA grounding anywhere from four to two aircraft at a time for inspection, taking a substantial toll on the small fleet.
Hurdles for the Acquisition
It is not yet known if the DOJ will approve the Hawaiian-Alaska deal. In the past, the DOJ has taken a firm position against airline consolidation as it recently ended the Northeast Alliance between American Airlines and JetBlue and has gone to trial in an attempt to block JetBlue’s proposed $3.8 billion acquisition of Spirit Airlines. In November, JetBlue Airways Chief Executive Officer Robin Hayes had to testify in federal court in the antitrust lawsuit filed by the DOJ together with attorney generals from six states, including California, Maryland, New Jersey, North Carolina, New York, Massachusetts, and the District of Columbia over the proposed Jetblue-Spirit merger.
The deal comes after JetBlue Airways CEO Robin Hayes testified in federal court in November in an antitrust lawsuit filed by the Justice Department and the attorneys general from six states and the District of Columbia over JetBlue’s proposed $3.8 billion acquisition of Spirit Airlines.
Another hurdle is the union workers of both airlines. The Association of Flight Attendants Union (AFA), which is in serious contract talks with Alaska Airlines, and the International Association of Machinists (IAM) union, which ground staff for both airlines, provided weary statements. The AFA stated that their support of the merger would depend on improving conditions for flight attendants. The IAM followed a similar message: they will protect union members’ rights and collective bargaining agreements.
To garner union support, Alaska emphasized growing and maintaining union-represented employees “including preserving pilot, flight attendant, and maintenance bases in Honolulu.”
Another huddle is the combination of two separate fleet types. Alaska Airlines operates an all-Boeing fleet, while Hawaiian operates a majority Airbus fleet. In September, Alaska finally removed all of the Airbus jets it received from its acquisition of Virgin America (VX) in 2016. Alaska transitioned all Virgin Airbus pilots to the 737s, allowing simpler operations. Like Alaska, Southwest also operates a fleet of all Boeing 737 aircraft, allowing for cost reductions in training and equipment.
Featured image: Hawaiian Airlines A330-200 taxiing past two Alaska Airlines 737s. Photo: Brandon Farris/Airways