The World Opens To Alaska Airlines With Its Merger Approval
Sep. 19, 2024 12:01 PM ET
Tim Dunn
Summary- Alaska Airlines completed its acquisition of Hawaiian Airlines and expects to integrate operations while maintaining the Hawaiian brand and ensuring significant operations in Hawaii.
- The merger is expected to generate $250 million in synergies, with integration costs estimated at twice that amount, enhancing Alaska Air's network and operational efficiency.
- ALK aims to avoid past merger mistakes by leveraging Hawaiian's assets and expanding its international presence, particularly in Asia and the South Pacific.
- The merger positions Alaska as a strong mid-tier airline, benefiting from favorable macroeconomic conditions, including lower fuel prices and increased consumer spending.
Alaska Airlines, a subsidiary of Alaska Air Group, Inc. (NYSE: ALK), completed its purchase of Hawaiian Airlines (delisted) on July 18, 2024. While the U.S. Dept. of Justice recently objected to two previous airline transactions, both involving JetBlue Airways Corporation ( JBLU), the DOJ previously allowed its review of the Alaska-Hawaiian merger to end on August 20 without comment. The Dept. of Transportation took another month before issuing its approval based on several conditions, most of which are viewed as pro-consumer and not significantly impacting the operation of Hawaiian as a subsidiary of ALK or negatively impacting the value ALK expected from the transaction. The State of Hawaii obtained assurances from ALK that it would continue to maintain significant operations and employment in Hawaii, including for existing international Hawaiian Airbus SE ( OTCPK:EADSY) A330 aircraft, continuation of interisland service including in codeshare relationships with other airlines, and maintaining loyalty program benefits, all of which ALK expected it would need to provide. The next step in the process is for the FAA to allow Alaska and Hawaiian's operations to be integrated; although ALK has committed to retaining the Hawaiian Airlines brand, it will merge the operations of the two carriers under a single operating certificate.
Alaska Hawaiian merger summary (alaskaair.com)
A Fast Timeline for An Airline Merger
Alaska Airlines announced its merger with Hawaiian on December 3, 2023, so it completed the transaction in just over nine months which is rather speedy for airline mergers and faster than its estimates at the time the merger was announced. While Alaska Airlines has repeatedly sought to grow beyond its traditional northwest U.S. presence (the airline is headquartered in Seattle where it operates its largest hub), it saw an opportunity not just to improve on how it handled its previous acquisition of Virgin America during the last ten years but also to help out a fellow legacy airline which has struggled mightily since Covid. In contrast to Virgin America which was a short-lived domestic airline startup that was part of bringing discounted domestic premium cabin services to U.S. transcontinental markets, Hawaiian Airlines was one of the nation's oldest airlines, founded 30 years before Hawaii became a state in 1959. As is the case in the state of Alaska, aviation has played a key role in Hawaii as a result of the geographic expanse of the state, its military importance to the country, and its attractiveness as a tourist destination for people not just from the mainland but from other countries. The airplane became essential to connect the Hawaiian islands and to extend Hawaii's position as the largest economy in Polynesia. Hawaii was a key stop on some of the earliest air routes from the mainland U.S. to the South Pacific and to Asia.
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