Alaska-Hawaiian Merger Secret Weapon Is An Unlikely Twist

Alaska Airlines CEO, Ben Minicucci, spoke at a JP Morgan conference, where he insisted he’s confident in the merger being approved in spite of what appear to us and others to be daunting regulatory challenges that are upcoming. One thing that’s been highlighted by Alaska, Hawaiian, and others is something near and dear to Hawaii travelers that might also help to assuage the U.S. Justice Department.

In a fast-evolving airline industry landscape, especially here In Hawaii’s skies, Ben Minicucci maintains a positive outlook on the proposed $2B acquisition of Hawaiian Airlines. These are Minicucci’s first remarks since the court ruling that permanently blocked the nearly $4B Spirit-JetBlue merger. He said, in fact, that he thinks that the JetBlue decision sets a precedent that will play in favor of the Alaska/Hawaiian deal. “I think it’s a positive for us,” he said.

According to Minicucci, the Spirit-JetBlue ruling was emphatic about the need to preserve airline competition for the public’s benefit. He sees Alaska’s position in this proposed merger as one of maintaining competitive pricing strategies while integrating Hawaiian within the Alaska portfolio.

Minicucci has, since the outset, acknowledged some minimal route overlap between Hawaiian and his company. He restated Alaska’s commitment to persevering in the upcoming regulatory challenges toward the goal of a successful merger process. Minicucci feels that Alaska’s operational model is one that distinguishes the Alaska-Hawaiian merger from previous merger plans.

U.S. Justice Department wants more details.

Minicucci said that the two companies are now in receipt of the 2nd request for information from regulators as part of the antitrust investigation process at the Justice Department. He acknowledged the painstaking nature of the regulatory review and said that he is confident in the process, being both transparent and diligent.

Next significant update is expected in three months’ time.

Minicucci said he expects to be able to provide more information on the status of the merger in June after the airlines provide additional information to the Justice Department which is due May.

At this point, the Justice Department’s success in halting the JetBlue/Spirit merger in its tracks won’t stop Alaska from giving this all that they have.

The court’s decision blocking the JetBlue/Spirit merger was based on the prospect that it would “harm cost-conscious travelers” who use airlines like ultra-low-cost Spirit. Alaska, of course, thinks that the Hawaiian deal differs significantly.

Some in the industry believe that the different issues at hand in this deal may be significant enough to pass muster. That contention is based largely on the minimal overlapping routes and largely complementary route networks, plus one more trick that Alaska has up its sleeve.

Alaska says that the acquisition will in fact enhance competition and provide travelers with more options, saying, “Our deal combines two airlines with complementary networks, and we believe the transaction will enhance competition and expand choice for consumers.”

Will keeping the Hawaiian Airlines brand separate be the key to regulatory success?

JetBlue had planned to integrate Spirit with its own operations. Alaska, on the other hand, says it will maintain the Hawaiian brand as separate and distinct from the Alaska brand. Together with the largely differing and complementary routes, these may form the basis for this case attaining regulatory approval.

Probably not of primary concern to the Justice Department, Hawaiian Airlines largely remains a symbol of pride as Hawaii’s largest private employer. The idea of a good portion of the company relocating from Honolulu to Seattle, however, may somewhat change people’s feelings about the merged company.

There remains concern about Alaska’s track record in retaining brands. The Virgin America brand was killed off by Alaska after that $2.6B deal went through in 2017. In spite of promises to retain features Virgin America customers loved, ultimately, Alaska said that consistency and efficiency required a single brand. Virgin’s fleet also ultimately ended up at American Airlines.

In summary, here’s where the Alaska/Hawaiian deal stands.

The seemingly valid points that Alaska Airlines makes notwithstanding, many still believe that the airline-merger-adverse Justice Department may cast a shadow on this deal ever coming to fruition. Until then, Alaska and Hawaiian continue to forge ahead while fully recognizing the potential pitfalls they may face. Without the merger, we are not sure what will become of Hawaiian Airlines, and we remain hopeful of the merger happening.