Alaska Air agrees to buy rival Hawaiian Holdings in $2.5 billion deal
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Alaska Air is taking on the acquisition despite the US Justice Department filing a record number of challenges last year to such mergers.
PHOTO: AFP
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Dallas – Alaska Air Group has agreed to buy rival Hawaiian Holdings in a US$1.9 billion (S$2.5 billion) cash and debt deal, challenging the Biden administration’s aggressive stance on mergers that has already derailed one partnership between carriers.
Alaska will pay US$18 per share in cash in a deal that includes about US$900 million of Hawaiian’s debt, according to a statement on Dec 3.
The offer is a significant premium to Hawaiian Holdings’ US$4.86 closing share price on Dec 1.
The deal could provide a valuable lifeline to Hawaiian, whose stock has tumbled more than 52 per cent in 2023.
The company has been hurt by the slow return of tourism between Asia and Hawaii following the Covid-19 pandemic and a ramp up in growth in the Hawaii-to-mainland US market by Southwest Airlines.
Alaska Air Group will be the parent holding company, with Alaska Airlines and Hawaiian Airlines continuing to operate under their separate brands.
Alaska is taking on the acquisition despite the US Justice Department filing a record number of challenges in 2022 to corporate combinations and a pending antitrust challenge to a separate airline deal.
A federal antitrust lawsuit over JetBlue Airways’ US$3.8 billion cash takeover of Spirit Airlines is nearing a close.
“We believe the facts will prevail that this is pro-competitive and pro-consumers,” Alaska chief financial officer Shane Tackett said in an interview.
Alaska and Hawaiian Airlines overlap on 12 routes, or 3 per cent of their total seats, he said. “They are very complementary businesses.”
US regulators earlier in 2023 succeeded in breaking up an alliance in the north-eastern United States between JetBlue and American Airlines Group, after a federal judge found the partnership gave the carriers too much power in certain markets and harmed consumers by raising fares and limiting choices.
Bloomberg Intelligence analysts George Ferguson and Francois Duflot wrote in a note that the deal could “improve fares, though increase complexity by adding long-haul operations from Hawaii to US cities and into Asia”.
“Overlap appears to be limited, which improves odds of approval,” they said.
Mr Tackett said a large part of what convinced Alaska to approach Hawaiian leadership about a combination earlier in 2023 is that the company will hold more than 50 per cent of the Hawaiian market, with an annual revenue of US$8 billion.
This is not Alaska’s first experience with an acquisition.
The carrier outbid JetBlue to acquire Virgin America in 2016 for US$2.6 billion in cash to extend a stretch of consolidation that had occurred across the industry.
Current Alaska chief executive Ben Minicucci oversaw Virgin America’s operations while the two carriers combined, helping to prepare him for the latest effort.
The almost 20-year Alaska veteran was named CEO in 2021.
The combination with Hawaiian will add to Alaska’s earnings within two years of closing and will produce annual run-rate savings of US$235 million, according to the statement.
The acquisition has been approved by the boards of both airlines but still requires approval from Hawaiian Holdings shareholders and regulators. It is expected to close in 12 to 18 months, the carriers said. BLOOMBERG
