Alaska Airlines agreed to purchase Hawaiian Airlines, possibly setting the airline up for conflict with the Biden administration, which is concerned about rising travel costs, in a $1.9 billion transaction revealed on Sunday.

In a market where four major brands dominate the U.S. market due to a wave of acquisitions, the combined business would retain the brands of both airlines, which is an unusual decision.

The firms announced on Sunday that Alaska will purchase Hawaiian shares for $18 in cash per share. Hawaiian’s stock ended at $4.86 on Friday, having lost slightly more than half of its value this year.

The Impacts Of Alaska Deal

The alliance, according to representatives of both airlines, would strengthen the business to take on the nation’s Big Four Airlines: American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines. The carriers had few routes in common.

Additionally, Alaska CEO Ben Minicucci stated during a conference call with investors that it would produce a “clear leader” in the lucrative $8 billion Hawaiian market.

“We enhance our unique business model and create a stronger competitor to network carriers by combining two companies with shared values that have competed and survived longer than most through many industry cycles,” he stated.

600,000 workers in the manufacturing and aerospace sectors are represented by the International Association of Machinists and Aerospace Workers (IAM), a trade union. The IAM has stated that it will do everything within its power to defend the rights of its members at both carriers during and after the acquisition.

IAM District 142 President and Directing General Chair John Coveny stated, “We will be engaged in every conversation as this agreement comes into focus and protect and and defend the interests of our members.”
Regarding the possible layoffs, he remarked, “I can’t tell you what that number is, but I’m hopeful that the number is not large.”

With the $900 million in Hawaiian debt included in the transaction, the acquisition is valued at $1.9 billion overall.   of Alaska would lead the merged airline, which would have its headquarters in Seattle. The acquisition is expected to boost profits within two years of the deal closing, which is anticipated to occur in the next 12 to 18 months, according to the companies.

The companies declared that they are “committed to maintaining and growing union-represented workforce” in Hawaii and that Honolulu would remain a crucial hub.

At a press conference on Sunday, Minicucci informed reporters that it is “too soon to tell” how many non-union jobs would be destroyed following the completion of the merger.

Although the boards of both firms have given their approval, Hawaiian Holdings’ shareholders still need to provide their approval. It will also require clearance from US regulators, which have opposed further airline consolidation due to concerns that it would result in higher ticket prices.

As the largest low-cost airline in the country, JetBlue’s planned $3.8 billion acquisition of Sprit Airlines is already being opposed by the Biden administration. Additionally, the Justice Department prevailed in a lawsuit that ended JetBlue and American Airlines’ cooperation.

In the spring, the average domestic airfare from Seattle was $409.93. From $293.08 two years prior, that was more, as per U.S. Department of Transportation data. In the spring of this year, the average domestic fare out of Honolulu increased to $367.94 from $329.93 the previous two years.

Alaska’s Geo-Location

Alaska is one of the 50 states that constitute the US. On January 3, 1959, it became the 49th state to join the union.

Alaska is halfway from much of Asia and Europe and is central to the Great Circle Route, which connects North America with Asia by air and sea. Since the Japanese invasion of the Aleutian Islands in 1942 during World War II, Alaska has been strategically crucial due to its central location.

Hawaiian’s history in the Hawaiian Islands dates back to 1929, when it was incorporated as Inter-Island Airways.
American Airlines, British Airways, and Cathay Pacific are members of the oneworld Alliance, which the amalgamated carrier would join.

Hawaii and Alaska are both smaller than the leading carriers in the country. According to their announcement, the agreement would combine two complementary networks, boosting connectivity to 138 locations for travelers passing through the continental United States and the Pacific. This includes 29 international locations in the Americas, Asia, Australia, and the South Pacific that would offer nonstop service.