Alaska Airlines just dropped a Sunday bombshell: they went shopping and picked up a Hawaiian Airlines in a hefty $1.9 billion deal, subject to regulatory approval. The cash transaction values each Hawaiian Airlines share at $18.00, with the overall package including $0.9 billion of Hawaiian’ Airlines’s net debt.
The Hawaiian brand isn’t going anywhere, however. The marriage of these two carriers will keep both the Alaska Airlines and Hawaiian Airlines brands intact, backed by a unified loyalty program. The resultant behemoth will boast a fleet of 365 aircraft, providing connections to 138 destinations on HA/AS metal, and hooking into the extensive Oneworld Alliance for access to over 1,200. This merger isn’t just about dollars and cents; it’s about establishing Honolulu (HNL) as a strategic hub for the combined airline. This move promises expanded services for Hawaii residents headed to the mainland U.S., and opens up fresh connections for Alaska to the Asia-Pacific market.
Admittedly, airline mergers are generally bad for consumers, but dare I say that this one would be an overall good thing for most passengers? Currently, American and Alaska’s route networks to Hawaii and the Asia-Pacific market are… other than the best. While there is, of course, bound to be some overlap, the existing two US Oneworld carriers don’t really compete with Hawaiian in any substantial way. Rather, the addition of Hawaiian to the alliance will be a complement to American and Alaska’s existing route networks. Aside from a limited partnership with JetBlue (which we expect to be unwound), Hawaiian currently lacks a serious network of feeder flights within the mainland, making it tough to fly Hawaiian to/from secondary markets in the continental US.
As an example, let’s say your home airport is Tulsa (TUL). Currently, in order to fly Hawaiian to HNL, your options are to either drive 7-8 hours to Austin (AUS) to catch a nonstop, or book a separate positioning flight (at your own risk) to a market that Hawaiian serves. Now that Hawaiian will be joining Oneworld, you could book a flight on Hawaiian to/from TUL, with AA acting as the “last mile.” The inverse applies as well, giving Hawaii residents new options to reach secondary markets on the mainland (and some large markets, too, like Dallas/Fort Worth (DFW)), driving down prices through competition.
On the flip side, the news could be the final death knell for American Airlines’ dreams of establishing an international gateway at Seattle-Tacoma International Airport (SEA). If the recent confirmation that AA’s SEA-LHR route is permanently grounded didn’t already spell the end of that experiment, this Alaska-Hawaiian affair definitely seals the deal.
Am I the only one who saw this coming? Hawaiian has been a perennial money-loser in the wake of Southwest Airlines barging into the Hawaii market (I wish I’d been blogging back then so I could link to the article where I called this). Hawaiian is essentially the mom-n-pop store in a battle with the Costco of airlines (okay, maybe Southwest is more like a Walmart than a Costco, but… you get the idea). Like ’em or not, Southwest’s scale is a huge competitive advantage for them, and you’re not going to be able to compete against them with a fleet of 62 aircraft. The only paths forward for Hawaiian were to merge with a larger player, or die out. The fact that Alaska is allowing Hawaiian to maintain their distinct brand identity makes this the airline’s best shot at continued survival amid mounting economic pressures. Both airlines generally have a good reputation, so I don’t foresee the level of service suffering on either side here. The pilots also are represented by the same union, so arguably this is a great match.
But let’s not pop the champagne just yet. The Biden Administration might still rain on this parade. The Biden DOJ, notorious for its tough stance on mergers and antitrust cases (see also: JetBlue x Spirit), could throw a spanner in the works. So, while some are clinking glasses to celebrate, others are watching with a cautious eye, aware that the fate of this union ultimately rests in the hands of regulators.