Alaska Airlines to Acquire Hawaiian Airlines for $1.9 Billion

On Sunday, Alaskan Airlines announced its plans to buy Hawaiian Airlines for $1.9 billion. This announcement comes after a series of struggles for Hawaiian Airlines in recent years.

Hawaiian Airlines has struggled to recover from the pandemic, posting net losses every year since 2020. This year, Hawaiian Airlines has also been dealing with a decrease in travel demand to Hawaii due to the Maui wildfires in August. Hawaiian Airlines had helped evacuate people during those wildfires by lowering main cabin tickets to Honolulu to $19. Hawaiian Airlines has also been facing increased competition from Southwest Airlines in the Hawaiian market, engine recall issues with their eighteen A321neo aircraft and higher labor costs for pilots. 

Alaskan Airlines agreed to pay $18 per share for Hawaiian Airlines, almost 4 times as much as Hawaiian Airlines’ closing stock price from the week before. The price also reflects Alaskan Airlines’ purchase of Hawaiian’s debt of $900 million. Alaskan Airlines CEO Ben Minicucci considers this deal a bargain, pointing out that its price was valued less than Hawaiian Airlines’ annual revenue, a deviation from the industry standard of acquiring companies at prices greater than their yearly revenue.

The merger is Subject to Approval from Federal Regulators

Before this agreement can come to fruition, it is still subject to approval by antitrust regulators in the Department of Justice, who have opposed mergers in the airline industry. To prevent companies from easing competition and obtaining a more dominant control in the travel market, antitrust regulators previously disbanded an alliance between Jetblue Airways and American Airlines and have been trying to throw off plans from last year for Jetblue to acquire Spirit Airlines.

Despite this, Alaskan CEO Minicucci is optimistic that the merger between Alaskan and Hawaiian Airlines will be approved, noting that the two airlines only have 12 overlapping flight routes out of an approximately combined 1400 routes. This is much fewer than the 60 overlapping routes Jetblue and Spirit have out of a combined 566 routes. 

Potential Outcomes of a Successful Merger

Four airlines – Delta, United, American, and Southwest –  dominate 80% of the US air travel market. Alaskan Airlines is the 5th largest airline in the country, and a merger between Alaskan and Hawaiian Airlines would more readily combat this market dominance if successful. Alaskan Airlines would gain control of over 50% of the Hawaiian market.

Alaskan Airlines operates a fleet of all Boeing aircraft and will likely phase out Hawaiian’s Airbus aircraft over several years once they inherit their fleet. This was the case with Alaskan Airlines’ merger with Virgin America in 2016. Alaskan has gradually retired all of Virgin America’s Airbus aircraft since then, with the last one being removed just this September. 

However, unlike their previous merger with Virgin America, Alaskan Airlines will preserve Hawaiian Airlines’ brand as a gesture of respect for their nearly 100 years of service to a unique community. Hawaiian Airlines loyalty members are expected to have access to the benefits of Alaskan Airlines’ membership in the OneWorld alliance.  

If approved, it won’t be until late 2024 or even 2026 until the merger is completed, and little will likely change as Hawaiian Airlines will still operate under its own brand. Perhaps Alaskan Airlines’ acquisition of Hawaiian will allow for more successful and profitable flight operations in Hawaii.

Sources:

https://www.reuters.com/markets/deals/alaska-air-buy-hawaiian-airlines-19-bln-2023-12-03/

https://www.cnbc.com/2023/12/03/alaska-airlines-to-acquire-hawaiian-airlines-in-1point9-billion-deal.html

https://www.cnn.com/2023/12/03/business/alaska-airlines-to-acquire-tk/index.html

https://newsroom.hawaiianairlines.com/

Cover Image: Aviation Week

Daniel Luo

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