Hawaiian Airlines and Alaska Airlines have announced a further extension on the US Department of Justice (DOJ) review of their proposed merger agreement.
The Department of Justice has once again extended its review of the proposed merger between Hawaiian Airlines and Alaska Airlines, pushing the deadline to August 20, 2024.
This marks the third delay in the process in as many weeks. The latest extension signals a potentially heightened scrutiny of the deal by antitrust regulators. Investors appear confident that the latest extension signals that a potential closure is forthcoming. Hawaiian Airlines share price saw a rise of 10% on Thursday 15 August, off the back of the extension.
Originally announced in December 2022, the $1.9 billion merger aimed to create a larger airline with a strong presence in the Pacific region. The combined entity would offer expanded routes, increased flight frequencies, and enhanced loyalty programs for customers. Proponents of the merger argue that the move would stimulate competition, lower fares, and improve service.
DOJ Competition Concerns
However, the DOJ has expressed concerns about the potential impact of the merger on competition. The prime concern is for routes between the mainland US and Hawaii. The agency is tasked with ensuring that mergers do not harm consumers by reducing competition and leading to higher prices.
Currently, a limited number of carriers serve the Hawaii market. Accordingly, the DOJ is likely scrutinizing whether the combined airline would have an inappropriate and excessive market power.
Extended Review Period: Implications
The extended review period suggests that the DOJ and the airlines are engaged in ongoing negotiations to address antitrust concerns. Potential remedies could include divesting certain routes, or providing access to airport gates. These and other measures may be imposed to mitigate the impact on competition.
The uncertainty surrounding the merger has created challenges for both airlines and consumers. Hawaiian Airlines has seen its stock price rise significantly since the deal was announced. However the repeated delays have introduced volatility into the market. The 10% rise in Hawaiian share price yesterday perhaps signals a growing confidence with investors of a positive merger outcome.
Consumers are also facing uncertainty about future travel plans and potential changes in fares and service levels.
Summary
For the time being, the fate of the merger lies in the hands of the DOJ. If the agency determines that the deal would substantially lessen competition, it could seek to block it entirely.
However, if the airlines successfully address the DOJ’s concerns, the DOJ may still approve the merger, potentially with conditions. As the review process drags on, the aviation industry and consumers will be watching closely to see just how this protracted saga finally resolves.
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