US Markets
Monday, December 4th, 2023 3:45 pm EDT
Key Points
- Alaska Air Group’s Acquisition of Hawaiian Airlines: Alaska Air Group has announced a $1.9 billion deal to acquire Hawaiian Airlines. The agreement involves Alaska paying $18 per share for Hawaiian and taking on $900 million of its debt. This move sets the stage for a potential regulatory battle, marking the second proposed airline merger in less than two years.
- Challenges Faced by Hawaiian Airlines: Hawaiian Airlines has encountered various challenges, including the impact of Maui wildfires, heightened competition from Southwest Airlines, and a slow recovery of travel to and from Asia post-pandemic. These challenges have led to Hawaiian Airlines posting net losses in almost every quarter since the beginning of 2020.
- Regulatory Landscape and Path Forward: The aviation industry has faced regulatory opposition from the Justice Department, particularly when airlines argue for mergers to better compete with larger rivals. Despite this, Alaska Air Group expressed confidence in gaining regulatory approval, highlighting overlapping markets, a substantial combined daily flight count, and an extended network that positions them to compete with major carriers. The Association of Flight Attendants-CWA plans to evaluate the merger’s impact on flight attendants’ conditions before offering support. The combined company will be headquartered in Seattle, led by Alaska’s CEO, Ben Minicucci, and is expected to operate both Hawaiian and Alaska Airlines under a single platform, creating a 365-airplane fleet covering 138 destinations. The deal is viewed as strategically significant for Alaska, representing a shift in its operations and providing opportunities for network growth and financial performance acceleration.
Alaska Air Group has made a significant move in the aviation industry by agreeing to acquire Hawaiian Airlines in a deal valued at $1.9 billion. The transaction involves Alaska paying $18 per share for Hawaiian and taking on $900 million of its debt. Hawaiian Airlines has faced numerous challenges, including the Maui wildfires, increased competition from Southwest Airlines, and a slow recovery of travel to and from Asia post-pandemic. Alaska Airlines sees this acquisition as a unique opportunity due to the valuation of Hawaiian. The deal positions the combined companies as a “market leader” in the premium-travel Hawaii market.
Despite Alaska’s offer representing a substantial premium, Hawaiian’s stock surged by 180% in morning trading, reaching $13.57 a share but remaining below the proposed purchase price. In contrast, Alaska’s shares were down by 17% in morning trading. The regulatory landscape poses a potential hurdle for the deal, given recent opposition from the Justice Department to airline mergers. The department successfully broke up a regional partnership between JetBlue Airways and American Airlines earlier this year.
The consolidation in the airline industry has faced scrutiny, especially when carriers argue that mergers are necessary for them to compete effectively against larger rivals. Alaska and Hawaiian anticipate the transaction’s closure within 12 to 18 months, subject to regulatory approval and approval by Hawaiian’s shareholders. Alaska’s CEO, Ben Minicucci, expressed confidence in gaining approval, citing overlapping markets, a combined 1,400 daily flights, and a larger network to compete with major carriers.
The Association of Flight Attendants-CWA, representing cabin crews at both airlines, expressed the need to evaluate the deal’s impact on flight attendants’ conditions. The combined company, based in Seattle (Alaska Airlines’ headquarters), will operate under a single platform while retaining both brands. The deal is a strategic move for Alaska, which previously acquired Virgin America in 2016. The acquisition brings a mix of Boeing and Airbus jets under Alaska’s roof, with plans to triple nonstop or one-stop flights from the Hawaiian islands to destinations throughout North America. The deal is expected to bolster earnings within the next two years, with projected synergies of at least $235 million.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/12/03/alaska-airlines-to-acquire-hawaiian-airlines-in-1point9-billion-deal.html
