Alaska Airlines completes acquisition of Hawaiian Air, which will remain a separate brand

Alaska Airlines closed its $1 billion purchase of Hawaiian Airlines Wednesday, a day after the federal government removed the last major regulatory obstacle to the deal.

Alaska will also assume about $900 million in Hawaiian debt. Alaska says it will keep Hawaiian as a separate brand, eliminating the need to repaint planes.

To win approval from the U.S. Transportation Department this week, the airlines agreed to maintain current levels of service on key routes within Hawaii and between the island state and the U.S. mainland where they don’t face much competition.

The decision to clear the way for the airlines to merge stands in contrast to the administration’s adamant opposition to previous airline deals. The U.S. Justice Department (DOJ) successfully sued to block JetBlue from buying Spirit Airlines for $3.8 billion, and it went to court to kill a partnership between JetBlue and American Airlines.

Alaska and Hawaiian also agreed to a handful of consumer protections, including not lowering value of frequent-flyer rewards as they combine their loyalty programs and promising to compensate passengers for cancellations and significant delays that are the carriers’ fault.

Seattle-based Alaska Airlines said those conditions were similar to its plans from the time it announced the deal in December.

The Transportation Department, which also must approve airline mergers, said Alaska and Hawaiian promised to meet certain conditions for six years.

Those include preserving subsidized flights to smaller communities in Alaska and Hawaii, and maintaining current levels of service between Hawaii and the mainland where no more than one other airline currently flies the same route. The Transportation Department could drop the latter requirement if the flying becomes unprofitable.

Alaska and Hawaiian also agreed to some consumer protections, including maintaining the value of frequent-flyer rewards as they combine their loyalty programs, guaranteeing families can sit together without paying extra fees, and offering lower costs to military families.

Looking specifically at the rewards protections the Department of Transportation outlined in a news release Tuesday what Hawaiian Airlines rewards members can expect to get when this merger is officially finalized. Those protections include:

• All HawaiianMiles miles and Alaska Mileage Plan miles earned before conversion into the new combined loyalty program must not expire.
• Rewards members can transfer HawaiianMiles miles to and from Alaska Mileage Plan miles at a 1:1 ratio before the launch of a new combined loyalty program.
• As the release explains, “The combined airline must not take any actions that would devalue HawaiianMiles miles, must maintain the value of each unredeemed HawaiianMiles mile earned prior to the merger closing, must honor all active HawaiianMiles promotions from prior to the merger closing, and must continue to award HawaiianMiles miles at the same or greater value.”
• The Department of Transportation’s release also explicitly states that, “Under the new combined loyalty program, the combined airline must match and maintain the equivalent status levels that HawaiianMiles members hold under the HawaiianMiles program, match and maintain status levels and conferred benefits that are equivalent to Alaska’s Mileage Plan program, and match or increase status and conferred benefits as necessary to ensure members of each existing loyalty program are treated no less favorably relative to status, including by matching or increasing members’ elite status in the new combined loyalty program, for the remainder of the applicable program year.”
• The combined airline is not permitted impose cancellation or change fees on rewards redemption tickets for travel on carrier-operated flights.

U.S. Transportation Secretary Pete Buttigieg said the airlines also promised to compensate passengers for cancellations and significant delays that are the carriers’ fault.

“Our top priority is protecting the traveling public’s interest in this merger. We have secured binding protections that maintain critical flight services for communities, ensure smaller airlines can access the Honolulu hub airport, lower costs for families and service members, and preserve the value of rewards miles against devaluation,” Buttigieg said in the federal agency’s statement. “This more proactive approach to merger review marks a new chapter of DOT’s work to stand up for passengers and promote a fairer aviation sector in America.”

Seattle-based Alaska Airlines said in a statement that the promises are similar to its plans all along and would not affect “the synergies of the deal, which will enhance competition and expand choice for consumers.”

The Transportation Department said it gave Alaska and Hawaiian an exemption to combine ownership — to merge.

Some reasons why the deal came to be and where we go from here

Aviation analyst Scott Hamilton spoke to KIRO Newsradio about the purchase and the merger of the airlines Wednesday. He noted that Hawaiian Airlines has struggled since the pandemic.

“Hawaiian never really fully recovered from the losses and impact of the pandemic,” Hamilton said. “When you have wide-body airplanes like the 787 or the Airbus 330, (flying) through in the skies with a lot of empty seats,  you rack up losses pretty quickly.”

Overall, Hamilton supports the merger, but he acknowledges the combined company may face some early problems.

“Strategically, I think it’s a good idea, Hamilton said. Short term, tactically, I think there could be some real struggles ahead.”

Also, financially, Alaska Airlines will be do some heavy lifting for a time.

“Alaska has one of the best balance sheets out there and it has the ability to raise money. It has been profitable. It’s a lot of money, but I think they can shoulder that,” Hamilton said to KIRO Newsradio. “But it’s the losses they will  also be incurring until they can turn Hawaiian around to profitability and there’s just no telling how long it’s going to take to do that. ”

The airlines announced the deal in December. The deal solidifies Alaska Air Group’s position as the fifth-largest U.S. airline company by revenue and expand its international profile with Hawaiian’s extensive flying between the island state and Asia.

Shares of Alaska Air Group fell a little more than 1% Wednesday.

Editors’ note: This story originally was published on Thursday, Sept. 17, 2024. It has been updated and republished multiple times since then.

Contributing: The Associated Press; Heather Bosch, KIRO Newsradio; Steve Coogan, MyNorthwest