Alaska Air Commits to Acquiring Struggling Hawaiian Airlines

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In a strategic move, Alaska Air Group Inc. has entered into an agreement to acquire Hawaiian Holdings Inc.’s Hawaiian Airlines in a substantial $1.9 billion deal, aiming to merge the two carriers and challenging the Biden administration’s stringent stance on mergers, which has previously thwarted such partnerships.

As part of the deal, Alaska will pay $18 per share in cash, encompassing around $900 million of Hawaiian’s debt, as outlined in a statement released on Sunday. This offer represents a noteworthy premium compared to Hawaiian Holdings’ closing share price of $4.86 on Friday.

The acquisition holds the potential to serve as a vital lifeline for Hawaiian, whose stock has faced a significant decline of over 52% this year. The company has grappled with the slow resurgence of tourism between Asia and Hawaii post-pandemic, compounded by Southwest Airlines Co.’s increased growth in the Hawaii-to-US market.

Alaska’s decision to proceed with the acquisition comes despite the Justice Department’s heightened scrutiny of corporate mergers, which led to a record number of challenges last year and an ongoing antitrust challenge to a separate airline deal. The imminent closure of a federal antitrust lawsuit involving JetBlue Airways Group Inc.’s $3.8 billion cash takeover of Spirit Airlines Inc. further underscores the complex regulatory landscape.

Earlier this year, federal regulators successfully dismantled an alliance between JetBlue and American Airlines Group Inc. in the northeastern US, citing concerns about the partnership’s impact on market competition and consumer choice.

This move is not Alaska’s first foray into acquisitions. In 2016, the carrier outbid JetBlue to acquire Virgin America Inc. for $2.6 billion in cash, extending a consolidation trend prevalent across the airline industry.

The amalgamation with Hawaiian is projected to contribute to Alaska’s earnings within two years of completion, generating annual run-rate savings of $235 million, according to the statement.

For the acquisition to proceed, it necessitates approval from the boards of both airlines, Hawaiian Holdings shareholders, and regulatory authorities. The closing of the deal is anticipated within 12 to 18 months, as indicated by the carriers.