It’s hard to believe that five months have passed since Alaska Airlines announced that they were going to acquire Hawaiian Airlines. Two months later, Hawaiian shareholders accepted. Now, we’re just waiting for their anti-trust review, and we now know the DOJ will decide on the AS-HA merger by August.
Hawaiian’s first quarter earnings were better than what we’ve been seeing lately, but they’re still bleeding. However, their challenges are only increasing. Their fantastic new fleet of Boeing 787s don’t come cheap, nor will the new fleet of aircraft they’ll need to purchase to replace the venerable 717. With the financial condition they’re in today, it’s difficult to see how they can do it all on their own.
But even if they are able to pull it off all on their own, the competitive environment is only becoming more challenging, bringing questions about how long they’ll be able to go at it alone. The same, of course, can be said of Alaska, even though they’re much larger and in much better financial condition. So there’s no doubt, at least in my mind, that this merger has to happen. Of course, what we’re all waiting for now is antitrust approval, and now we know that the DOJ will decide on the AS-HA merger by August.
The DOJ Will Decide on the AS-HA Merger by August
From the beginning, the big question for Alaska’s plan to purchase Hawaiian has been if they’d be able to obtain regulatory approval. This is especially true with all that’s happened with JetBlue’s failed attempt to acquire Spirit. I’ve always contended that these were very different situations, though we won’t have to wait long to learn the fate of Alaska’s acquisition – maybe – as the DOJ will decide on the AS-HA merger by August 5.
The Department of Justice’s antitrust review of Alaska’s proposed acquisition is all that’s standing in the way of the transaction at this point. However, I still think they’ve got a great shot.
As I’ve said before, the reason the B6-NK merger failed is because 1) their networks had a tremendous amount of overlap; 2) it was a low-cost carrier acquiring an ultra-low cost carrier; and 3) B6 always intended to acquire NK for its assets, meaning they were going to eliminate the airline and raise prices. Sure, Frontier would and still remains, but taking down Spirit to fold it into a higher-cost airline will increase costs while reducing competition. That’s not what’s happening with Hawaiian and Alaska.
To me, the biggest concern is that the combined Alaska and Hawaiian networks will have over 40% market share of the available seats between the West Coast and Hawaii. They’ll also have nearly 100% of the intra-Hawaii market, though that’s how things are today, and should’t really influence the decision. However, on the West Coast-Hawaii market, would be easy to rectify – the DOJ could simply order the combined airline to divest slots/gates to open up space for additional competition. That said, the only other airline capable of commencing Hawaii service, and also considering it, is Frontier.
I sincerely hope Frontier doesn’t begin service to Hawaii. Allegiant can stay the hell away, too. After all, their first go around with Hawaii went so well. Props for trying, though.
Final Thoughts
I’m glad that the DOJ will decide on the AS-HA merger by August 5. That’s less than three months from now, and if goes in Alaska and Hawaiian’s favor, will allow them to remain on track. However, the decision could go the other way, which would then trigger a lawsuit to block the merger. Personally, though, I’m still optimistic that the DOJ will allow the merger to go through. Again, this situation is not the same as B6 and NK, so we can’t really use that as precedence.