The CEO of Alaska Airlines, Ben Minicucci, has big plans. Now, he has a second airline to help achieve them.
Alaska completed its acquisition of Hawaiian Airlines on Wednesday, the first major airline deal since 2016, when Alaska bought Virgin America. The purchase gives the airline access to more airports, planes and customers, which could accelerate Alaska’s growth, including by adding larger, wide-body jets to its fleet that can fly longer distances.
“We saw the potential of us becoming a wide-body operator, being able to offer international flights, potentially in the future out of Seattle — there was so much to like,” Minicucci said in an interview with The New York Times before the deal closed. “This is something that makes sense for the future of Alaska.”
Airline mergers are notoriously difficult and have often wreaked financial and operational havoc on the companies that have attempted them. The merger of United Airlines and Continental Airlines in 2010 created problems for years, disrupting flights and frustrating passengers and employees.
The industry is also quite consolidated. Four carriers dominate commercial aviation in the United States, and it’s not clear whether the acquisition will help Alaska, which will remain the fifth-largest airline, to break through to the industry’s big leagues, a feat only a few small airlines have managed.
“We remain cautious about medium-term execution risk,” Savanthi Syth, an airline analyst at Raymond James, wrote in a research note about Alaska last month, citing concerns about economic conditions, weak earnings at Hawaiian Airlines and the complexity of merging the airlines.
Minicucci acknowledged the challenges his company faces, which include obtaining regulatory approval to operate as a single airline, the smooth combination of reservation systems and figuring out how to market and maintain seats on Hawaiian as a separate brand under Alaska’s ownership. But he said the company’s experience absorbing Virgin gave him confidence.
“This is not our first rodeo,” he said. “Most of the folks are still here at Alaska that did that integration, so all those lessons learned are still vivid in our minds.”
Alaska’s acquisition may be one of the last big airline mergers for a while because regulators have become more reluctant to allow big deals. This year, a federal judge sided with the Justice Department in blocking JetBlue Airways’ purchase of Spirit Airlines, saying the deal would reduce competition and hurt travelers.
The Alaska-Hawaiian deal was not challenged by the Justice Department, and it secured a crucial Transportation Department approval this week. The two airlines will run independently until they receive regulatory approval to combine under a single operating certificate, which can take more than a year.
The acquisition combines two airlines that are similar in how they operate, though they do so on complementary routes. Alaska Airlines has sizable operations in Alaska and is based in Seattle.
It connects West Coast cities with the rest of the country. Hawaiian flies mainly from the island state to the rest of the country and to international destinations in and around the Pacific Ocean.
With Hawaiian, Alaska will now command nearly 8% of the U.S. commercial air travel market, less than half the share of the next-largest carrier, United Airlines, which has 16%, according to federal data.
The deal gives Alaska access to more skilled workers and planes, both of which are difficult to come by.
Supply chain problems and high demand for planes mean that jets ordered today might not be delivered until the end of the decade or later.
“We had some ideas about what we want to do in the future, but there were external constraints,” Minicucci said.
He said that Alaska, which for much of its history has flown mostly or only Boeing jets, may now use some of the larger Airbus planes that Hawaiian owns to fly longer routes. A mixed fleet could protect the company against problems that may arise with planes produced by either manufacturer, which have each faced supply chain problems in recent years.
“The fleet makes sense for Hawaiian, and in the future, it’ll make sense for us,” Minicucci said.
He also said he was pleased with changes Boeing made since January, when a panel blew off one of the manufacturer’s 737 Max 9 planes during an Alaska flight. No one was injured, but the episode raised widespread concern about the quality of Boeing’s planes.
“They put a lot of effort in the last few months improving their quality systems, their production systems, and we’ve seen it,” Minicucci said. “We have our own people on the floor, on the Boeing production floor, providing oversight. We do quarterly audits.”
Alaska has received 11 new planes from Boeing this year, all of which have been highly reliable, Minicucci said. He added that he met with and had “a lot of confidence” in Boeing’s new CEO, Kelly Ortberg.
This article originally appeared in The New York Times.
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