SEATTLE — Alaska Airlines agreed to buy Hawaiian Airlines in a $1.9 billion deal announced Sunday, potentially putting it on track for a clash with a Biden administration wary of higher airfares.
The combined company would maintain both airlines’ brands, an unusual move in an industry where waves of acquisitions have led to four big brands dominating the U.S. market. On Sunday, the companies said Alaska will pay $18 in cash for each share of Hawaiian, whose stock closed Friday at $4.86 after losing just over half its value in the year so far.
Officials from both companies called the deal a chance to combine two carriers with few overlapping routes, which they said would create a stronger company to compete with the nation’s Big Four: American Airlines, Delta Air Lines, Southwest Airlines and United Airlines. It would also create a “clear leader” in the lucrative, $8 billion Hawaiian market, Alaska CEO Ben Minicucci said in a conference call with investors.
“We combine two companies with shared values that have competed and survived longer than most through many industry cycles, enhancing our differentiated business model and creating a stronger competitor to network carriers,” he said.
The deal includes $900 million in Hawaiian debt, bringing the acquisition’s total value to $1.9 billion. The combined airline would be based in Seattle, with Alaska’s Minicucci at its head. The companies forecast the acquisition will add to profits within two years of the deal closing, which is forecast to happen between 12 and 18 months from now.
The combined airline would participate in the oneworld Alliance, which includes American Airlines, British Airways and Cathay Pacific.
Alaska and Hawaiian are both smaller than the nation’s dominant carriers. They said the deal would meld two complementary networks, increasing connectivity to 138 destinations for passengers traveling through the continental United States and across the Pacific, including nonstop service to 29 international destinations in the Americas, Asia, Australia and the South Pacific.
Hawaiian has a deep and long history within the islands, stretching back to its incorporation in 1929 under the name Inter-Island Airways.
The companies said they would keep Honolulu as a key hub and that they’re “committed to maintaining and growing union-represented workforce” in Hawaii.
The Alaska Airlines acquisition of Hawaiian Airlines will not result in the loss of any union jobs and the “majority” of the 1,400 non-union employees will be retained to run the expanded service, the companies’ top executives say.
The new company will maintain and burnish the brands of Alaska and Hawaiian Airlines, Hawaiian Airlines’s president and CEO Peter Ingram, and Alaska Airlines CEO Ben Minicucci told the Honolulu Star-Advertiser in an interview Sunday morning, shortly after the $1.9 billion deal was announced.
Until the shareholder review and regulatory processes play out, Hawaiian and Alaska “remain competitors,” Ingram said.
“Nothing changes in terms of how we operate our business on the Hawaiian side. We don’t have any plans for reductions in activities during that period of time,” he said.
Minicucci said Alaska Airlines will not cut Hawaiian Airlines’ union workforce.
“No union jobs are going away … with this combination. Honolulu becomes our second-largest hub in the Alaska system, behind Seattle. We’ll need many non-union jobs,” said Minicucci, who added that exact staffing numbers won’t be available until the deal is finalized. “We will need a significant portion of the people who already work here going forward.”
Ingram said the commitment to keep about 5,800 union jobs and trying to find a place for the 1,400 non-union workers was “very important” to Hawaiian Airlines’ leadership team while negotiating the deal.
“We’re very concerned about the potential impacts to employment and one thing that gives us comfort going forward is that this creates a platform, for growth in the long-term,” said Ingram, who emphasized that “none of those decisions have been made yet.”
The companies also said the combination would triple the destinations that can be reached within one stop in North America for travelers from Hawaii.
For example, customers can not currently fly to Washington, D.C., on Hawaiian, but they would be able to through the combined company.
“Aloha, everyone,” Hawaiian Airlines CEO Peter Ingram said on a call with investors.
He said Alaska approached his company about a deal and that “the Hawaiian brand will remain an important part of our home state.”
The deal has been approved by the boards of both companies, but it still needs an OK from the shareholders of Hawaiian Holdings. It will also need the blessing of U.S. regulators, which have resisted more airline consolidation out of fear it could lead to higher fares.
The Biden administration is already trying to block JetBlue’s proposed $3.8 billion acquisition of Sprit Airlines, which would subsume the nation’s biggest budget carrier. The Justice Department also won a lawsuit that killed a partnership between JetBlue and American Airlines.
The average domestic airline fare out of Seattle during the spring was $409.93. That was up from $293.08 two years earlier, according to data from the U.S. Department of Transportation. The average domestic fare out of Honolulu during the spring was $367.94, up from $329.93 two years earlier.
But given how little Alaska and Hawaiian’s routes overlap, their proposal may not create much angst in Washington, said Henry Harteveldt, a travel industry analyst at Atmosphere Research Group.
The Honolulu Star Advertiser via Tribune News Service contributed to this report