Alaska and Hawaiian merger is a contrasting tale to ill-fated JetBlue/Spirit deal
In Dec-2023, Alaska Airlines entered a definitive agreement to acquire Hawaiian Airlines for a transaction value of approximately USD1.9 billion. Less than nine months later, the merger is proceeding with little regulatory pushback, with the review period during which the carriers were prohibited from closing the agreement under antitrust legislation expiring uneventfully.
This is a very different story than the unconsummated merger between JetBlue Airways and Spirit Airlines, which faced heavy scrutiny from the US Department of Justice (DoJ) in the form of an antitrust lawsuit. The transaction was eventually blocked by a US District Judge in Jan-2024, and the companies terminated their merger agreement in Mar-2024.
Alaska and Hawaiian merger may challenge the status quo of the US majors
As the US' Big Three airlines grow their market share with new codeshare agreements and landmark aircraft orders, competition in the low-cost and interstate markets is needed now more than ever.
While consolidation in the low-cost market brings about fears of increased fares and market control, a merger between two full-service airlines like Alaska and Hawaiian may challenge the status quo of the US' major airlines.
Alaska Airlines and Hawaiian Airlines currently compete on 12 routes, less than 4% of their combined network
The combined Alaska/Hawaiian airline is set to operate more than 330 domestic and international routes with a fleet of 365 aircraft.
Of these 330 routes, Alaska and Hawaiian currently compete on 12 services, less than 4% of their combined network.
In comparison, JetBlue and Spirit overlapped on 99 routes at the time of their merger application.
US Department of Justice (DoJ) stated a merger between the carriers would create a "presumptively anticompetitive" threshold in the overlapping markets.
Alaska Airlines and Hawaiian Airlines network overlap at the time the merger was announced in Dec-2023
US District Judge William Young ruled in favour of DoJ's antitrust lawsuit against the JetBlue/Spirit merger, stating: "The loss of Spirit's influence on JetBlue as a head-to-head competitor would likely result in less competition to both discipline the prices and spur the innovation of JetBlue as a smaller, maverick - more competitive - market participant."
Alaska Airlines and Hawaiian Airlines' limited network overlap means their merger wouldn't pose significant harm to consumers and market competition. Rather, a combined fleet, employee base and the addition of Honolulu Daniel K Inouye International Airport as an Alaska Airlines hub would provide the combined carrier with the scale needed to challenge the Big Three airlines.
US regulator inaction is an action in itself
The 90 day review period during which Alaska Airlines and Hawaiian Airlines were prohibited from closing their merger agreement under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act expired on 19-Aug-2024. While this isn't a bright green light for the merger to go ahead, the US Department of Justice can no longer sue to block the closing of the transaction.
The transaction remains subject to customary closing conditions, including US Department of Transportation approval. However, union support from the International Association of Machinists and Aerospace Workers (IAMAW) and the dismissal of a consumer lawsuit against the Alaska/Hawaiian merger in mid Aug-2024 points to minimal obstacles ahead.