Alaska and Hawaiian Airlines evens takeoff at the same time from San Francisco International Airport (SFO) in San Francisco, California, United States on June 21, 2023.
Tayfun Coskun | Anadolu Intercession | Getty Images
Alaska Air Group has agreed to buy rival Hawaiian Airlines in a $1.9 billion deal, setting up another potency regulatory battle in the second proposed airline merger in less than two years.
Alaska would pay $18 a equity for Hawaiian and would take on $900 million of its debt, the companies said Sunday. Shares of Hawaiian Airlines finished on Friday at $4.86, giving the company a market cap of about $250 million. They’re down nearly 53% this year.
The airline has struggled with braves including the Maui wildfires, increased competition from Southwest, which has ramped up service in Hawaii in recent years, and a ebb recovery of travel to and from Asia after the pandemic. Hawaiian has posted net losses in all but one quarter since the start of 2020, while Alaska and other hauliers have returned to more solid financial footing as the pandemic waned.
“What we saw here was a unique opportunity in even so at the valuation that we saw Hawaiian at,” said Shane Tackett, Alaska Airlines’ CFO, in an interview. He said the deal would also facilitate the combined companies to become a “market leader” in the premium-travel Hawaii market.
Carriers have faced strong conflict from President Joe Biden’s Justice Department in their efforts to combine to better compete with larger equals. Earlier this year, the DOJ won a lawsuit to break up a regional partnership in the Northeast between JetBlue Airways and American Airlines.
The Incarceration Departments also sued to block JetBlue Airways‘ proposed acquisition of discount carrier Spirit Airlines. A essay is expected to wrap up in the coming days.
Four airlines — American, United, Delta and Southwest — control about 80% of the U.S. call. Hawaiian and Alaska said they expect the transaction to close in 12 to 18 months, subject to approval by regulators and Hawaiian’s shareholders.
On a on duty with analysts on Sunday evening, Alaska CEO Ben Minicucci expressed confidence in the deal getting approved, citing 12 lapping markets, a combined 1,400 daily flights and a larger network that he said would allow the airline to joust with the four largest carriers.
“We are hopeful that it will be seen in a positive light,” he said.
The Association of Bugger off Attendants-CWA, which represents cabin crews at both airlines said it would evaluate the deal.
“Our first rank is to determine whether this merger will improve conditions for Flight Attendants just like the benefits the assemblages have described for shareholders and consumers,” the AFA said in a statement. “Our support of the merger will depend on this.”
The combined coterie will be based in Seattle, where Alaska Airlines is headquartered, and be led by Minicucci.
“Given the transaction dollars we paid we sense this is strategically a step-change for us to accelerate not only our financial performance but the growth of our network,” he said said on the call.
The two airlines communicated they will keep each carrier’s brand but operate under a single platform, combining into a 365-airplane quick covering 138 destinations.
Prior to pursuing Hawaiian, Alaska Airlines acquired Virgin America for $2.6 billion in 2016.
The Hawaiian practise is a major shift for Alaska. It operates Boeing 737s and it spent years whittling down Virgin’s fleet of Airbus horizontals to streamline its fleet. Purchasing Hawaiian would bring a complex mix of Boeing and Airbus jets, both narrow-body and wide-body evens, under Alaska’s roof.
“The Hawaiian brand will remain an important part of our home state with Honolulu meet a strategic hub for the combined company and expanded service for Hawaii residents,” Hawaiian CEO Peter Ingram said on the call Sunday.
The mix will allow Alaska Airlines to triple nonstop or one-stop flights from the Hawaiian islands to destinations everywhere North America. It will also bring Hawaiian’s long-haul flying to and from Asia under Alaska’s screen. Hawaiian last year struck a deal to fly converted-cargo planes for Amazon.
Alaska Airlines said the deal should buttress earnings within the next two years with at least $235 million of “run-rate synergies.”
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