Alaska Air clears big hurdle in proposed merger with Hawaiian Airlines

Alaska Air is one step closer to acquiring Hawaiian Airlines after the US Department of Justice chose not to challenge the US$1-billion deal that the carriers say will create a company better able to serve travellers.

Alaska Air announced in December that it would pay US$18 in cash for each share of Hawaiian. The deal includes US$900 million in debt held by Hawaiian Airlines.

The brands of both airlines would be preserved after the merger, which is rare in an industry where decades of acquisitions have left only four big carriers dominating the United States market.

Alaska and Hawaiian say they have few overlapping routes, and the intent of a tie-up is to allow the new airline to better compete with the nation’s Big Four: American Airlines, Delta Air Lines, Southwest Airlines and United Airlines.

Alaska Air and Hawaiian Holdings, the parent company of Hawaiian Airlines, said in regulatory filings with the US Securities and Exchange Commission on Tuesday that the review period for the Justice Department, which had already been extended several times, expired just after midnight.

The closing is still subject to approval from the US Department of Transportation.

The decision by the Justice Department to give the deal a pass runs counter to the Biden administration’s opposition to two recent attempts at further consolidation in the airline industry. The Justice Department successfully sued to block JetBlue Airways from buying budget carrier Spirit Airlines, and prevented JetBlue from striking a partnership with American Airlines in the northeast. In both, the administration argued that allowing the deals would have reduced choice and driven up prices for consumers.

If Alaska and Hawaiian close their agreement, it will be the first combination of sizeable US airlines since 2016, when Alaska outbid JetBlue to buy Virgin America.

Hawaiian has not recovered from the coronavirus pandemic. The carrier depends heavily on tourism from Japan, which dropped sharply after the outbreak of COVID-19 and now suffers from the weakness of the yen, which has fallen by about 40 per cent in comparison with the dollar since the start of 2021. In addition, Hawaiian faces more competition on flights between the islands and the US mainland and from Southwest.

– AP