Alaska Air Received DOT Approval

As I had predicted all along, Alaska Air received DOT approval for its acquisition of Hawaiian Airlines, clearing the way for them to close on their transaction and begin the arduous process of combining their operations. However, the DOT has imposed some restrictions on their combination. 

Nine months after first announcing its plans to acquire Hawaiian Airlines, Alaska Air received DOT approval to proceed with its transaction. That path here was unexpectedly bumpy, with many casting doubts on whether or not they’d receive Department of Justice and then Department of Transporation approval. I had no doubt in my mind that they would, especially with the differences in this combination compared to the failed JetBlue acquisition of Spirit.

Of course, I always thought someone would impose concessions on the agreement. When the DOJ didn’t, that came as a surprise and led me to believe that the DOT would. This belief was strengthened when the DOT announced it was investigating the Big 4 U.S. airlines and their loyalty programs. Since Alaska Air received DOT approval, we now know that the DOT has indeed imposed concessions, though not quite to the level that I thought they would. 

 

Alaska Air Received DOT Approval

As the title of this article states, Alaska Air received DOT approval for its acquisition of Hawaiian Airlines. However, the DOT also notes that the two airlines still need to obtain approval for the route exemptions, which would allow Hawaiian to continue operating as an independent airline under the ownership of the Alaska Air Group until a combined operating certificate can be obtained. Both airlines also need to have their route authorities re-issued under one another so that they can continue operating their respective international routes. However, with DOT approval of the overall transaction, these final approvals are a done deal – they just need to be processed, which can take time. 

 

Concessions

Now, unlike my predictions, Alaska-Hawaiian isn’t being forced to give up gates or slots at certain West Coast airports to help promote competition as a condition of the fact that Alaska Air received DOT approval. This was a prediction that was always kind of iffy, though. Yes, the combined airline will control about half of all the available seats between the West Coast and Hawai’i, but competition in these corridors is exceptionally robust. 

That said, as I mentioned when I reported on the DOT’s investigation into frequent flier programs, it does appear that the investigation is impacting the merger in some way, as the DOT is mandating that Alaska-Hawaiian transfer Alaska Mileage Plan and HawaiianMiles into their new program at a rate of 1:1. They’re also mandating that the miles cannot expire. Moreover, “[u]nder the new combined loyalty program, the combined airline must match and maintain the equivalent status levels that HawaiianMiles members hold under the HawaiianMiles program, match and maintain status levels and conferred benefits that are equivalent to Alaska’s Mileage Plan program.”

The DOT is also barring the combined airline from imposing change or cancellation fees on award tickets and is forcing Alaska to maintain the value of each HawaiianMiles in the new, combined program. 

Beyond the loyalty concessions, Alaska-Hawaiian will have to maintain their current level of service to passenger and cargo capacities within Hawai’i and on “key routes between Hawai’i and the continental U.S. to preserve competition,” along with preserving essential air support routes either airline flies. 

Further, “[b]oth airlines will update their customer service plans to provide at least one free standard carry-on and at least two free standard checked bags for service members and their accompanying spouse and children. They will also waive change fees for service members and their families who reschedule flights due to a military order or directive.”

Hawaiian must also join Alaska Air in guaranteeing adjacent seating for children 13 or under and an accompanying parent/gaurdian, and must also provide a travel credit or frequent flyer miles when, due to circumstances within the control of either airline, a flight is canceled and the wait is three hours or more for a new flight, or a flight is delayed by three hours or more from the scheduled departure time. 

Finally, the combined airline is “barred from directly or indirectly taking action that would discriminate against new airline entrants or smaller competitors’ access to airport infrastructure as part of new or existing investments at the Daniel K. Inouye International Airport in Honolulu, a key vacation destination and hub for the State of Hawaii.”

On the loyalty front, I always thought that the miles would transfer 1:1. The way Mileage Plan and HawaiianMiles are structured for both earning and elite qualifications are very similar. Things only really change on the redemption side. The maintenance of service, on the other hand, was kind of a given. That said, this is going to make the Boeing 717 replacement discussion more interesting, as up-gauging and reducing frequencies may not be kosher, depending on how exactly the concessions are mandated. 

 

Leadership Changes

Now that Alaska Air received DOT approval to close on its acquisition of Hawaiian Airlines, leadership changes have been implemented at Hawaiian. The most significant change is, of course, that Peter Ingram is out. I wouldn’t feel too bad for him, though, as he received a sizeable golden parachute. Replacing Ingram is Alaska Air Group’s Regional President, Hawai’i/Pacific Region, Joe Sprague, who now assumes the title of CEO at Hawaiian. Sprague will continue to serve in this role until both airlines receive a single operating certificate. 

 

 

 

 

 

 

 

 

 

 

 

Joining Sprague on Hawaiian’s leadership team is Alaska Air’s Regional VP of Hawai’i, Daniel Chun. He will oversee community and cultural relations, government affairs, and Hawai’i Sales. If you didn’t know, Daniel Chun is a local boy who graduated from Mililani High School and the University of Hawai’i at Mānoa and has deep ties within the community. 

Others on the interim leadership team will be familiar to anyone who follows Hawaiian’s corporate affairs at all, including:

• Shannon Okinaka, EVP of Administration 
• Robin Kobayashi, SVP of Human Resources
• Jim Landers, SVP of Tech Ops (Maintenance & Engineering, Flight Ops and System Operations Control Center)
• Lokesh Amaranayaka, VP of Airport Operations and In-Flight
• Terry Hill, Managing Director of Safety
• Alisa Onishi, Director of Brand and Culture
• Bob Johnson, VP of Flight Operations
• Beau Tatsumura, VP of Maintenance & Engineering
• Tom Zheng, VP of Technical Operations Business Planning & Service
• Justin Doane, VP of Labor & People Relations

Noticeably absent from the listings is Alex Da Silva, Director of External Communications. Now, I don’t think he was listed on the website before Alaska Air received DOT approval, but he has been a constant voice for Hawaiian for years. So, if he has already been removed, his absence will be noticeable but not surprising. 

 

What’s Next?

Now that Alaska Air received DOT approval, the next step is to close on the merger. However, after that, the real work of combining these two airlines takes place. I know  the question everyone has on their minds is when Alaska Mileage Plan and HawaiianMiles will combine into one program.

Well, if we look at the history of the recent U.S. airline merger, then you can expect to wait over a year for the combination to occur. In fact, the fastest frequent flier program merger was that of Alaska Air and Virgin America, which took 13 months to complete. That’s also the amount of time it took for Alaska Air to receive its new single operating certificate from the FAA, though the two timelines lining up like that is more an exception than the standard. 

However, it’s worth noting that reciprocal benefits for Alaska-Virgin America began in January 2017 – just a month after the merger closed. So, expect this ability to begin SOON. How soon? Alaska Air says manual transfers, ticket purchases on either airlines’ websites begins later THIS MONTH. 

Moreover, a new program called Huaka’i which brings new benefits to Hawai’i residents, including 10% discounts on all inter-island fares, and a 20% quarterly discounts on inter-island flights for Hawaiian Airlines World Elite Mastercard members. A free membership is required for these benefits, so keep an eye on your email for the invite!

 

Alaska Air Received DOT Approval, Final Thoughts

This post is getting quite long, so I think I’m going to stop things here for now. There are so many things we could discuss since Alaska Air received DOT approval, but I’ll save those topics for another time. However, it’s great to have finally reached this milestone – the last major potential impediment to the combination. Now, the real work begins. Let’s just hope they can pull things off as seamlessly and quickly as they did with Virgin America. After all, Hawaiian has had a very rough recent history with its systems.