Following the news last Sunday of the news that Alaska Airlines and Hawaiian Airlines will combine, we ask the following: Why is it so significant?
The West Coast airline announced that they would be acquiring all shares in the island-based carrier for $1.9bn, or $18.00 per share.
In this piece, let’s take a brief look at both carrier’s stories, and how this is going to change the playing field for the airline industry in that part of the U.S.
Alaska Airlines’ Story Goes Back Quite Some Time…
Alaska Airlines has a long history, dating back to 1932, when the carrier started out life as McGee Airways.
Going from Star Air Service, to Alaska Star Airlines, the carrier finally settled with the name it has today in 1944.
From expanding in the cold region of the United States to slowly but surely expanding it’s presence as a west coast warrior, the airline has built up quite the legacy over the last 90 or so years.
Nowadays, the carrier serves over 120 destinations with a fleet size of over 300 aircraft.
Hawaiian Airlines Has A Similar History…
Hawaiian Airlines’ history is just as vast, if not even longer, starting out life in January 1929 as Inter-Island Airways.
From utilising the Sikorsky S-38s in the 1930s, to finally changing it’s name to Hawaiian Airlines in 1941, the carrier has always been focused on slow and very steady growth.
Nowadays, the carrier has over 60 aircraft in the fleet, and serves over 30 destinations around the U.S and Asia.
They have the islands very well connected, which will no doubt provide significant benefits to Alaska Airlines as a result of this combination.
What This News Will Mean for the Industry…
As you can see from the map above, there are clear benefits for both Alaska Airlines and Hawaiian Airlines to combine.
The West Coast and quite a lot of the mainland United States is covered by Alaska Airlines, with quite a strong network westbound to Asia and the Pacific quite prevalent.
Once the combination is complete, there will be a total of 365 aircraft within the holdings & 138 destinations (29 of which are international).
Hawaiian Airlines will also benefit from Alaska Airlines’ membership in oneworld, which currently sees around 1,200 global destinations served across all member carriers.
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Annual passenger counts will rise to 54.7m between the two of them, which will also cement the group’s position into the top 5 largest airlines in the country.
This consolidation will mean further coverage on the West Coast particularly, with Hawaiian having the opportunity to branch out further east.
As we will discuss further below, there could be some stumbling blocks, as observed in regulatory approvals for such combinations.
Any Stumbling Blocks Ahead?
As has been openly commentated on over the last 12 months, the JetBlue & Spirit combination is in the courts and are at the time of writing (5/12/23) going through closing arguments to get this over the line following DoJ opposition.
At this stage, it is unclear whether the Alaska Airlines & Hawaiian Airlines merger will go through the same difficulty or not.
With there being consolidation on the West Coast, it will be down to regulators to establish whether there is enough competition in that area of the U.S and in Hawaii that it would potentially be bad for the consumer.
This will certainly be something to look out for as we get closer to the transaction closure deadline, which is expected to be over the next 12-18 months.
Overall: Full Steam Ahead for Alaska Airlines & Hawaiian?
For now, time will tell to see whether the DoJ will look into any antitrust concerns regarding the concerns of Alaska Airlines & Hawaiian Airlines.
With the JetBlue & Spirit merger being on a more bigger scale for such a combination, it ultimately depends on the outcome of the courts in Boston to see whether they would try again in the context of the two West Coast airlines.
Looking ahead, all eyes will be on how the process of combination goes for the two carriers over the next 12-18 months, as well as whether the transaction will close without any hiccups.
But what remains clear is that this combination is significant news for the industry, and opens up each side to a plethora of benefits on the domestic and international stage.
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