Alaska Air Buys Hawaiian Airlines for $1.9 Billion

New York
CNN
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Alaska Air (ALK) announced the acquisition of the rival on Sunday Hawaiian Airlines (H.A) at $1.9 billion.

According to Alaska Airlines CEO Ben Minicusi, the acquisition is the culmination of “several months” of negotiations. This includes $900 million in Hawaiian Airlines debt.

“This is a fantastic deal that brings together two airlines that have amazing loyalty in our regions,” Minicusi said at a news conference, adding that the merger will provide customers in both states with expanded domestic and international choices.

The agreement is predicted to be taken between Nine and In 18 months, both companies will own their brands, a unique decision that Minigucci and Hawaiian Airlines CEO and President Peter Ingram said honors their 100-year heritage. Airlines and the communities they serve.

Both states are “uniquely dependent on air travel,” Alaska Airlines said in a news release Sunday. The airline currently serves 19 cities, many of which are not connected by road.

Alaska will pay $18 per share in cash for each share of Hawaiian Airlines, a 270% premium over Friday’s closing price. Hawaiian stocksThe stock, which has fallen more than 50% so far this year, rose more than 180% in premarket trading, while shares Alaska Air It fell more than 12% in premarket trading.

The deal must be approved by federal antitrust regulators before closing. Most airline connections in recent decades have been recognized with little complication, allowing a series of connections that carry the 11 largest U.S. airlines to only the four largest carriers that control 80% of the nation’s air traffic.

But the Biden administration has taken on a lot Hard line on antitrust issues, argue that it results in higher fares by reducing choices for passengers, particularly on airline connections. Already won The end of an alliance Between American Airlines and JetBlue in the Northeast, it’s challenging A proposed merger between JetBlue and Spirit Airlines. Closing arguments in the Federal Court case in that connection are set to begin on Tuesday.

But Minicucci said that while he has not spoken to regulators about the proposed deal, the merger would differentiate the two airlines from other airlines that serve many of the same routes.

“When you combine these complementary networks, there are about 1,400 flights per day,” Minicucci said on a call with investors on Sunday. “Of those 1,400 aircraft, we have only 12 overlapping markets. So from a competitive standpoint, I think it’s going to be really good.

But data from aviation analytics company Cirium shows that Hawaiian Airlines has 24% of the seats on flights between the U.S. and Hawaii, and Alaska already has 15%, ranking fourth behind Hawaiian, United and Southwest. Both would give the same carrier nearly 40% capacity on those planes.

CIrium’s data shows that the two flights between the mainland and Hawaii have average fares of $290 one-way, very close to each other, and less than 8% below the industry average. So allowing the two to merge would remove one of the low-cost carriers from the market, albeit Southwest.

Those facts may raise concerns among regulators.

Hawaiian Airlines was struggling financially and seemed to need a shareholder. While the major US airlines have all returned to profitability, helped by strong demand for travel and higher airfares, Hawaiian faces increased competition from entering its domestic market. Southwest Airlines On the market in 2019.

Increased competition has driven down average revenue from passengers per seat on Hawaiian Airlines flights, a key measure of airfares. That rate is lower than a year ago and the same period before the pandemic. It has reported only one profitable quarter since the pandemic began, and despite lower fuel costs, losses widened in the latest quarter and year-to-date.

Part of the financial crisis has been Rising labor costs. Earlier in the year, it reached an agreement with its pilots union that will increase wages by 32% over the four years of the contract, including an immediate 16% pay raise. While wage increases of that size have become common across the airline industry, the new contracts have helped lift labor costs at the airline by 18% so far this year.

The merger will make Honolulu the company’s second largest hub, “enabling West Coast travelers throughout the Asia-Pacific region greater international connectivity with one-stop service via Hawaii,” according to the news release.

Alaska Airlines’ fleet will expand from approximately 300 to 365 aircraft, serving a total of 138 destinations, including non-stop service to 29 top international destinations in the Americas, Asia, Australia and the South Pacific. liberation

As Alaska’s member of the Oneworld international airline alliance, Hawaiian Airlines loyalty customers will receive enhanced benefits such as lounge access, an enhanced credit card loyalty program and the ability to earn and redeem more miles.

“At Alaska Airlines, we are joining an airline that has served Hawaii for a long time and has a complementary network and shared service culture,” said Ingram. “With the additional scale and resources this transaction with Alaska Airlines brings, we will be able to accelerate investments in our guest experience and technology while maintaining the Hawaiian Airlines brand.”

Minicucci, who is CEO of both airlines, called the move “pro-consumer.” The country’s fifth largest airline currently commands 80% of the domestic market share, competing very strongly with United, Delta, Southwest and American Airlines.