The Anatomy of an Airline Merger

Alaska’s acquisition of Hawaiian Airlines is the first airline merger that will occur in the U.S. since Alaska Air’s 2017 takeover of Virgin America. Because of this, and the enormity of what it means for some, I’d like to go over the anatomy of an airline merger to let you all know what to expect as we travel down this path. 

Airline mergers can be a number of things, depending on the type of person you are. For hardcore loyalists, they can be anxiety-inducing affairs, while for points and miles people, it can be a massive game of chance. Either way, everyone always has the same question – what next? Well, today, I’m going to cover just that in my anatomy of an airline merger. And while every merger is a bit different, they all follow the same structure. Luckily for us all, we have five relatively different examples to go off of. 

The Anatomy of an Airline Merger

In a typical airline merger, there are nine significant steps that are consistent across the board. However, we’ve already passed the first four, so as we cover the anatomy of an airline merger today, I’ll focus on the latter five. 

The First Four Steps

The first four steps in the anatomy of an airline merger are the announcement, shareholder approval, regulatory approval, and merger close. The merger announcement occurred in December 2023, followed by the shareholder approval in February 2024. The regulatory approval happened this month, with the transaction closing on September 18, 2024. Alaska’s process was a bit more convoluted thanks to the different regulatory environment, especially with the DOT approval coming before the operating exemption approval. But it is what it is. 

Reciprocal Benefits

The next step in the anatomy of an airline merger, one crucial point of interest for all points and mile addicts, is when reciprocal benefits will become available. This means elite benefits recognition between both airlines, the ability to earn and redeem miles on both, and the ability to have elite status qualifications across the two. This step usually occurs QUICKLY, as airlines seek to maximize the return on their investment.

To highlight how quickly this step happens, here’s the timing of it on the last five airline mergers:

• Alaska-Virgin (AS-VX): merger closed on December 14, 2016, and reciprocal benefits began on January 9, 2017
• American-US Airways (AA-US): merger closed on December 9, 2013, and reciprocal benefits began on January 7, 2014
• United-Continental (UA-CO): merger closed on October 1, 2010, and reciprocal benefits began on October 12, 2010
• Southwest-AirTran (WN-FL): merger closed on May 2, 2011, and reciprocal benefits began on April 14, 2013
• Delta-Northwest (DL-NW): merger closed on October 29, 2008, but reciprocal benefits began on October 28, 2008 

Combined Frequent Flier Program

The next step in the anatomy of an airline merger is the merging of frequent flier programs. Historically, this has resulted in the acquiring airline integrating the members of the acquired airlines’ members into their program. Things are going to be a little different this time around (sort of), though I do think these timelines remain a good benchmark. You’ll notice, though, that some airlines take far longer than others to hit this milestone. However, most get here before obtaining their single operating certificate. 

• Alaska-Virgin (AS-VX): January 1, 2018 (13 months from closing)
• American-US Airways (AA-US): March 28, 2015 (15 months from closing)
• United-Continental (UA-CO): March 3, 2012 (17 months from closing)
• Southwest-AirTran (WN-FL): November 2, 2014 (42 months from closing)
• Delta-Northwest (DL-NW): October 1, 2009 (12 months from closing)

Single Operating Certificate

Following the combination of frequent flyer programs, the next step in the anatomy of an airline merger is the issuance of a single operating certificate. An operating certificate is a Federal Aviation Administration document certifying that an airline has the right to operate and is specific to each airline. As such, when airlines combine, they need new operating certificates to legally continue operations, even if they remain two distinct brands. This piece of the puzzle takes an average of 13 months, though there is a broad spectrum of timeframes:

• Alaska-Virgin (AS-VX): January 11, 2018 (13 months from closing)
• American-US Airways (AA-US): April 8, 2015 (16 months from closing)
• United-Continental (UA-CO): November 30, 2011 (14 months from closing)
• Southwest-AirTran (WN-FL): March 1, 2012 (10 months from closing)
• Delta-Northwest (DL-NW): December 31, 2009 (14 months from closing)

Merged Customer Service Systems

Perhaps one of the most complicated steps of all in the anatomy of an airline merger is the integration of the two airlines’ reservation/customer service systems. This usually takes longer to accomplish than obtaining a single operating certificate, though usually not by much. 

• Alaska-Virgin (AS-VX): April 25, 2018 (16 months from closing)
• American-US Airways (AA-US): October 17, 2015 (22 months from closing)
• United-Continental (UA-CO): March 3, 2012 (17 months from closing)
• Southwest-AirTran (WN-FL): November 2, 2014 (42 months from closing)
• Delta-Northwest (DL-NW): March 31, 2010 (15 months from closing)

Brand Integration

The final step in the anatomy of an airline merger is brand integration, which is the point at which the branding of the acquired airline is completely phased out. This is, by far, the longest phase of most mergers and one of the costliest, as it includes repainting of aircraft and facilities, reprinting of safety cards, and more. However, this step isn’t occurring this time around, as Alaska Air plans on keeping Hawaiian as its own brand. That said, this usually takes an average of around two years. 

The Anatomy of an Airline Merger, Final Thoughts

No one really knows how the Alaska Air and Hawaiian Air merger is going to play out. That said, we have five relatively recent examples of airline mergers to reference, including one that Alaska Air completed in the near future. And, given their experience and what they’ve disclosed thus far, it sounds like things should be smoother and quicker this time around, even if it was pretty quick last time, too. But only time will tell what ultimately happens.