Alaska Airlines and Hawaiian Airlines merger advances, clears antitrust concerns

This week, the proposed merger between Alaska Airlines and Hawaiian Airlines overcame a significant challenge as the Department of Justice decided not to intervene.

The DOJ, which examined the merger proposal, chose not to initiate an antitrust lawsuit before the conclusion of the mandated review period, as confirmed by the airlines on Tuesday, eight months after their initial merger announcement.

The $1.8 billion deal still requires approval from the Department of Transportation before moving forward. The timeline for this approval remains uncertain.

"This marks a crucial step in the journey to unite our airlines," Alaska Airlines stated on Tuesday. "Throughout the DOJ's investigation, we collaborated closely with the Hawai'i Attorney General to strengthen and clarify our commitments for Hawaiian Airlines and the consumers in Hawai'i."

Alaska has reiterated its commitment, first announced in December, to maintain the Hawaiian Airlines brand, along with jobs and interisland routes and service frequencies.

If finalized, this merger would represent the largest U.S. airline merger since Alaska Airlines acquired Virgin America in 2016.

The DOJ's tacit approval sharply contrasts with the Biden administration's recent policies, which have vigorously pursued and successfully blocked consolidations in the airline sector.

In January, the DOJ secured a victory in an antitrust case that halted JetBlue's proposed takeover of Spirit Airlines. During a monthlong trial in federal court in Boston last fall, the DOJ contended that the merger would harm competition in the industry.

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During the trial, JetBlue contended that acquiring Spirit's aircraft and crew was essential for it to compete more effectively against larger U.S. airlines. Spirit claimed it was in a vulnerable financial state and could no longer sustain its ultra-low-cost model without making significant changes. If the merger proceeds, JetBlue would take over Spirit's assets, rebranding them under its own operations.

In 2022, the DOJ also successfully sued to prevent the Northeast Alliance between JetBlue and American Airlines, which involved the two airlines coordinating their flight schedules and sharing codes. JetBlue argued that it needed the partnership to compete against larger carriers, while American claimed it was being pushed out of the New York market by Delta and United Airlines.

Nevertheless, the proposed Alaska-Hawaiian merger is expected to be quite different from JetBlue's approach.

Upon completion, the airline would become the fifth-largest in the U.S. by fleet size, boasting 365 aircraft.

While JetBlue had numerous overlapping routes with both American and Spirit, Alaska and Hawaiian claim that less than 3% of their networks intersect. Out of a total of 1,400 daily flights, only 12 markets overlap, as stated by the airlines when they announced the merger late last year.

At the time of the announcement, the merged airline was expected to operate initially at 138 destinations, including 29 international locations. Additionally, over 1,200 destinations would be reachable through Oneworld partners.

Unlike the JetBlue-Spirit merger, the Alaska-Hawaiian alliance would not eliminate a low-cost carrier from the market. Since the merger's blockage, Spirit has faced ongoing financial challenges and has launched new fare options that contradict its traditional ultra-low-cost business model.

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Meanwhile, Hawaiian has been facing difficulties in recent years and is in urgent need of assistance. The tourism industry has suffered due to wildfires in Maui and a weaker yen, which has diminished travel from Japan to the islands. Additionally, strong competition from Southwest Airlines has intensified financial strains on the airline.

Hawaiian politicians have expressed strong backing for the merger since its announcement last December.

"I believe that the merger of these two airlines will create a more robust company, providing additional travel options for residents and businesses in Hawai'i, while boosting competition throughout the U.S. airline sector," said Hawaii Gov. Josh Green on Tuesday. "I commend the DOJ for considering Hawai'i's unique circumstances in its review of this merger. I eagerly anticipate the progress of this merger and the significant benefits it will bring to consumers, employees, and the community at large."

The DOT has not yet responded to TPG's request for a comment.