Alaska/Hawaiian Deal “At Their Own Risk” Per Feds?

In what is becoming a strangely endless number of turns and twists associated with Alaska Airlines’ acquisition of Hawaiian Airlines, Alaska, just made a subtle but perhaps revealing change. Also, the government may have indicated something totally unexpected. They may, in fact, not be done with their approval or rejection of the Alaska/Hawaiian Deal. The lack of clarity is surprising at best.

Also particularly relevant to the merger, Alaska Airlines just changed the language in this weeks earlier press release. The revision seems to align with an awareness of a previously stated FTC’s position on mergers and the potential risks of moving forward without a definitive conclusion from the regulatory authorities.

These latest twists also bring to mind that the Department of Justice antitrust attorney, previously involved in blocking the JetBlue-Spirit merger, was recently approved to appear in federal district court in Honolulu. Why? While this move initially suggested that federal regulators were gearing up for a more active role in scrutinizing the deal, after that, no further action materialized. Or at least it hasn’t yet.

Why did Alaska “quietly” change its messaging on the deal’s approval?

A subtle yet significant unannounced change in Alaska Airlines’ press release after it was published this week has made the situation more ambiguous.

Here is the original language on the Alaska press release: “The time period for the U.S. Department of Justice to complete its regulatory investigation of the proposed combination of Alaska Airlines and Hawaiian Airlines under the HSR Act has expired…”

And here is Alaska’s revised language: “The time period during which the parties were prohibited from closing under the HSR Act has expired. The government’s review is ongoing.”

While initial reports from a plethora of sources, started by Alaska Airlines and followed by BOH, suggested the merger had cleared the DOJ’s major regulatory hurdles, that may or may not have been true.

FTC’s Position: no implied approval of the Alaska/Hawaiian deal.

In 2021, the Federal Trade Commission (FTC) issued guidance indicating that the expiration of a statutory review period, such as the one that ended in this deal on Monday, should not be construed as tacit approval of a merger by the Department of Justice (DOJ).

This clarification has become particularly relevant in the context of the Alaska Airlines-Hawaiian Airlines deal. The FTC emphasized that even if a review period expires without formal objection, the government retains the authority to challenge the merger at any point before or after it is finalized.

This nuanced position from the DOJ complicates the narrative around this airline deal. The original language in Alaska Airlines’ press release seemed to imply that the DOJ had effectively given Alaska the green light to proceed by allowing the review period to lapse.

However, the revised language now reflects the ongoing nature of the government’s review, subtly acknowledging that the merger is not yet fully cleared. Alaska’s change in language appears to be in direct correlation to this FTC position.

The FTC adjusted its process for reviewing mergers due to a surge in filings. FTC Bureau of Competition Director Holly Vedova noted that for deals not fully investigated within the timelines required by the Hart-Scott-Rodino (HSR) Act, the FTC has begun issuing standard form letters to companies. These alert companies that the FTC’s investigation remains open and remind them that the agency may later determine the deal to be unlawful. We can’t say whether Alaska received such a letter.

“Companies that proceed with transactions without a full investigation do so at their own risk, as the FTC may later seek to undo the transaction.”

Federal Trade Commission.

Investor sentiment and revealing stock market reaction.

Despite these legal uncertainties, investor sentiment remains optimistic about the merger’s prospects. This is evidenced by stock market behavior since yesterday. After a Seeking Alpha article drew attention to the modification of the press release, Hawaiian Airlines’ stock dropped by over 5%, which we’ll point out was not a huge swing compared with others revolving around this deal. However, the stock has since fully rebounded, indicating reflecting that investors still believe the deal will proceed despite the odd and lingering uncertainties.

The path forward remains uncertain for now.

As Alaska and Hawaiian navigate this changing and uncertain regulatory landscape, much will depend on the government’s next steps, if there even are any. The altered language in Alaska’s press release could be seen as a merely a highly precautionary measure, ensuring the company’s compliance with FTC guidelines and yet signaling confidence in the deal’s future.

The potential for a DOJ challenge of the Hawaiian/Alaska deal still looms. If the deal is blocked or conditions are imposed, for reasons BOH already suggested, it could lead to significant ramifications.

We welcome your courteous input.