Alaska Airlines will acquire Hawaiian Airlines, Alaska Air Group and Hawaiian Holdings announced on Sunday.
The two airlines have entered into a definitive agreement to merge in a $1.9 billion deal, Alaska Airlines reported in a statement.
The deal is not expected to close for 12 to 18 months, the airline said. The agreement comes six years after Alaska Airlines acquired Virgin America for $2.6 billion.
It means Alaska Air, the fifth largest U.S. airline, will expand to a fleet with 365 narrow and wide-body planes, the airline said. It will bring together two airlines with 55 million passengers annually, more than $13 billion in annual revenues as of this fall, and more than 31,000 employees, according to Alaska Airlines.
The expanded company will open up access to 138 destinations throughout the airlines’ networks, including non-stop service to 29 international destinations such as Tokyo, Seoul, Sydney and Auckland, the airline said. It will open more than 1,200 destinations through the oneworld Alliance that expands travel options involving other airlines, the airline said.
“This combination is an exciting next step in our collective journey to provide a better travel experience for our guests and expand options for West Coast and Hawai’i travelers,” Ben Minicucci, Alaska Airlines chief executive, said in the statement. “We have a longstanding and deep respect for Hawaiian Airlines, for their role as a top employer in Hawai’i, and for how their brand and people carry the warm culture of aloha around the globe. Our two airlines are powered by incredible employees, with 90-plus year legacies and values grounded in caring for the special places and people that we serve.”
Alaska Airlines completed the deal with an all-cash transaction of $18 per share, providing a premium for Hawaiian Airlines shareholders, the airline said. Alaska earnings are expected to grow by at least $235 million in two years, after the closure of the deal, the airline said. As part of the deal, Alaska Airlines will assume $900 million in Hawaiian Airlines debt. Alaska Airlines will also pay $1 million in cash.
The combined company will continue the Hawaiian and Alaska airlines brands, but with a single loyalty program, one operating certificate and single collective-bargaining agreements for each of the unions, Alaska Airline officials said.
Minicucci, in a call with financial analysts Sunday, praised the purchase as a good value that will expand the company’s footprint in Hawaii, with its $8 billion market for passenger travel.
After the pandemic reduced travel, Alaska Air focused on improving its financial position, he said. When the opportunity to acquire Hawaiian Airlines arose, it made sense to acquire it, he said.
“It’s just an attractive attractive opportunity that sometimes you just can’t let go,” he said.
Regulatory scrutiny ahead
The agreement has been approved by both boards. But it will need regulatory approval. It will also need approval by Hawaiian Holdings, Inc. shareholders to be finalized, the airline said.
The Biden administration has stepped up scrutiny of mergers and their potential impact on competition within a variety of industries.
The two companies have not spoken with regulators yet, Minicucci said in the call with analysts.
But the combination has 1,400 daily flights but only 12 overlapping markets, and will improve choices for customers, he said.
“So from a competitive standpoint, I think that that lands really, really well,” he said.
The combined company will be based in Seattle under Minicucci’s leadership, Alaska Airlines said.
“Since 1929, Hawaiian Airlines has been an integral part of life in Hawai’i, and together with Alaska Airlines we will be able to deliver more for our guests, employees and the communities that we serve,” said Peter Ingram, Hawaiian Airlines president and CEO. “In Alaska Airlines, we are joining an airline that has long served Hawai’i, and has a complementary network and a shared culture of service.”
“With the additional scale and resources that this transaction with Alaska Airlines brings, we will be able to accelerate investments in our guest experience and technology, while maintaining the Hawaiian Airlines brand,” he said. “We are also pleased to deliver significant, immediate and compelling value to our shareholders through this all-cash transaction. Together, Hawaiian Airlines and Alaska Airlines can bring our authentic brands of hospitality to more of the world while continuing to serve our valued local communities.”
Alaska Airlines is a much larger company, with a current market capitalization of more than $5 billion. Hawaiian Airlines has a market capitalization of $250 million, after its stock value has plummeted over the last 2 ½ years.
In a news conference in Hawaii on Sunday, Ingram said the companies have shared traditions that will help the combined company succeed, including serving remote communities in Hawaii and Alaska.
“Together, we will be stronger, better able to compete, to maintain and grow jobs, to build careers and to invest in a sustainable future for airlines and the communities we serve as companies,” Minicucci said at the press conference.
Nothing at the airlines will change until the deal is closed, Minicucci said.
The Association of Flight Attendants-CWA, AFL-CIO said the union is currently negotiating with Alaska Airlines and will be watching the merger to make sure it improves conditions for flight attendants.
“Our support of the merger will depend on this,” the organization said in a statement. “As a practical matter, our union Constitution and Bylaws provides a detailed process for this review with AFA leadership from each airline.”
Alaska flight attendants, joined by Hawaiian flight attendants, will be on the picket line Dec. 19 during the busy holiday travel season, the statement said.
The Alaska Airlines Master Executive Council of the Air Line Pilots Association said in a statement that it is studying the merger to determine what it may mean for pilots and passengers of both airlines.
Alaska Airlines said in the statement that the combined companies will “protect and grow” union-represented jobs.
Additional information is available at a joint website at localcareglobalreach.com.