Hawaiian Air stock sank 10% further today on negative merger sentiment. That while Southwest faces government scrutiny on safety incidents. An unimaginable future: Hawaii travel without both Hawaiian and Southwest Airlines.
Home » Blog » Hawaii Travel News » DOJ “Unlikely to Approve” Hawaiian/Alaska Deal + Southwest’s Tailspin Risks Hawaii Travel
Aloha, It’s always sad to see airlines go into tailspins. Hopefully Southwest and Hawaiian will pull out of this and make a nice soft landing in Hawaii. So many families rely on the jobs that they provide. The airline business is absolute cutthroat competition. Southwest is a little behind the curve with technology and amenities, but they can catch up with a renewed focus on customer confidence in their product, if they spend the money to update. They have been losing money on their Hawaii service since its inception 5 years ago. Let’s hope for the best. Hawaiian is in a no win situation if the merger with Alaska is vetoed. They are hemorrhaging so much money every month and the fierce competing they face in almost all their markets makes it a really tough row to hoe for them. It will be very interesting to watch how the leadership of these 2 companies move forward. Obviously the status quo is not working for them. Mahalo
Hi! The SeekingAlfa post you linked to re DOJ direction itself fully relied on a post by “CTFN”. It’s not clear to me that CTFN isn’t something garbage-like being used in this case as a vehicle to manipulate pricing to aid underwater short sellers or similar.
Yeah, there is so much information online that it’s
really hard to separate fact from fiction.
Please do not make that prediction about doj blocking the Alaska and Hawaiian merger it is important for them to merge
Please don’t make assumptions that Hawaiian needs this merger either. Hawaiian may have debt, but it is not at a point where it is solely dependant on a Merger. Alaska Airlines needs this merger to go through more than Hawaiian needs it because of what Hawaiian has that Alaska has been struggling to obtain but never will on it’s own, International flights and global brand recognition. Alaska Airlines, internationally is not a recognized brand by the Global public. A lot of it is due to the name sake of the Airline itself, Alaska. That name unfortunately markets itself specifically for the State of Alaska and the Pacific Northwest. Hawaiʻi at the end of the day is more Marketable to International Travelers than Alaska’s base routes in the Pacific Northwest.
Are you kidding? Hawaiian is basically looking at insolvency options (like Spirit is right now) this this gets blocked. They need this 1000% more than Alk. Alk is a viable, profitable going concern without the merger. Hawaiian would likely be left bankrupt within a year.
Okay, so explain what insolvencies is Hawaiian Airlines doing since you seem to know so much about what they are doing as far as their Finances and Operations. Becuase, Spirit Airlines defered it’s deliveries for their orders with Airbus for their new A321Neo’s from 2025 through 2026 and pushed it back to 2030 & 2031. Hawaiian Airlines didn’t defer and have begun taking their deliveries of their new Boeing 787-9 Dreamliner’s. You do realize how much money it costs to certify the aircraft, ETOPs cert, crew certification for both Flight Deck and Cabin Crew along with Maintenance. If Hawaiian didn’t have the means to bring it online they would have defered.
They delayed the 787 more times than I can remember.
1st I don’t have any special knowledge about HA at all. It’s a public company and its finances are open for anyone to review.
2nd, I didn’t say they were insolvent right now. They still have an open credit line for day to day expenses.
What I do know is that HA’s stock was trading for about $4 per share before the ALK announcement and was losing money. And its market cap that assumed a large risk of future insolvency. And it has only lost money since then. Its share price in 24 has solely reflected a bet on the probability of the merger closing.
I know that Spirit has a $300m market cap right now, meaning the market assumes likely insolvency (and probable liquidation).
And if the merger doesn’t happen, HA’s stock will go below $4, and the market’s assumption will be that it can only continue bleeding cash for so long while making payments on its mountains of debt.
You are quite correct … those who think HAL can “go it on their own” or perhaps they “don’t need” the merger (which is actually a life raft for HAL) from this point forward are simply indulging in wishful thinking …
Feels like it’s made up. Never mind the flying public, how about the human beings with livelihoods in the balance? Please stop playing with our emotions.
Another thing to consider is swa is flying a max-8, 176 passengers while Hawaiian interisland uses a 717, significantly less when comparing load factor percentage
I’d much rather fly on a 717 than a MAX anyday
Yeah! At least in the 717, you know what it feels like to be stuffed in a sardine can.
As long as Southwest is in Hawaii, they will fly interisland.
They have no maintenance in Hawaii, relying instead on rotating their planes interisland and then back to the mainland.
So unlike Hawaiian, interisland profitability doesn’t necessarily have to stand on its own.
Flying interisland has nothing to do with maintenance. AA, UA, DL….in fact every other airline has no interisland service and does most of not all of their maintenance on the mainland. The two points are completely unrelated.
HA will probably go bankrupt if the merger doesn’t go through but I doubt it will be allowed to go out of business by the state. I anticipate a major shrinkage of flight schedule and services though. SW may end up benefitting from it and gaining market share – perhaps even becoming the predominate interisland carrier if they begin RON’ing their aircraft in state…
Best Regards
Jay – What makes you think that HA is going Bankrupt without this merger? If the Company is headed for bankruptcy then, they would already be filing for it because a pending merger isn’t going to prevent them from going under, unless they’ve received approval. Also, HA isn’t behaving like a company going into bankruptcy. They’ve taken delivery of their new 787 fleet and also began new routes and increased more West Coast frequencies, which all cost money. If Hawaiian didn’t have the money to do this, then they would be doing the opposite. Hawaiian Airlines has debt, there’s no arguing that, but the business itself is not at a point where they are going to file Bankruptcy. What they need need should the Merger fail is a new CEO.
That’s not how it works.
If the merger goes through, HA’s shareholders get $18 per share and HA becomes a wholly owned subsidiary of ALK.
If it doesn’t go through, then HA stays an independent company. They’ll be able to keep operating for a while using existing credit facilities, but if HA can’t ultimately turn around its losses it will need to restructure its debt in bankruptcy.
And of course HA is operating normally now while they await the outcome. It would literally be illegal for for HA to act like a ALK owns it before the antitrust approval. HA is required by law to keep acting or operating “normally” until then.
Best Reply to that Ez is a quote from Lyndon Johnson’s top economic advisor:
“That which cannot go on forever will stop”
Herbert Stein
You cannot go on forever losing millions of dollars a month, therefore, it will stop…
Best Regards
From the article: “DOJ “Unlikely to Approve” Hawaiian/Alaska Deal” …
Right. Just like I said when this subject first “popped” on BoH …
Been there, done that when doing airline-speak … and when it comes to those flying machine companies (and things in general I’ve come to learn after 70+ years of livin’ and breathin’) — “the more things change, the more they stay the same” …
Aloha, my Bruddah’s and Sistah’s …
My wife and I have loyally flown on HA for over 20 years.
HA has been mismanaged.
If the DOJ denies the merger with Alaska,
HA will have no choice but to file bankruptcy.
Lee B – there’s no doubt that there’s mismanagement happening at Hawaiian, but to say they are going bankrupt if this merger doesn’t go through is far from the truth. Hawaiian does need new Leadership but it does not neccesarily mean Alaska’s Management will be any better. Alaska manages their Airline operations for it’s network and branding, Hawaiian Airlines operates a completely different from them, and Alaska’s CEO has admitted that they have no experience in Interisland operations or International flying which is the primary reason for Alaska wanting to merge with Hawaiian. So, which is worst? Management that is doing a bad job, or a new Company that doesn’t know what they are doing?
Thank God I got paid today, gonna book a vacation and redeem my miles before the inevitable bankruptcy. Will be sad to see Hawaiian go
“Hawaii’s economy is completely reliant on air travel”
You can thank the Sierra Club, the Judiciary and the surf bums on Kauai for driving Superferry out of the islands.
If I’m an investor at a huge hedge fund, I can pay SeekingAlpha to create a scary hit piece, then push the stock price down, grab a bunch of cheaper shares, then reap the rewards once the DOJ report approves the merger. It wasn’t an accident this morning shares were down sub $11, then quickly back over $12.40.
Besides, BOA itself has been demonstrating through articles that there will be plenty of competition for Hawaiian routes….
October 2023, before the Alaska takeover news, HAL stock was as low as $3.91 a share. Who would be willing to buy Hawaiian Air Stock at this time?
Perhaps a new President might change the zeitgeist as it is the little people who will suffer most if Hawaiian folds as a result of DOJ policy.
Mahalo and bingo! Doj seems to be bored now they’ve exhausted all the soon to be former administration’s lawfare attacks. Too bad most Hawaiians are still living under stone age. I try to educate them when I’m there, which is dozens of times over last 55 years.
Hawaiian can survive on its own but it will need a leadership change to do so. They can certainly make competitive margins operating to, from, and within Hawaii but they’ve got to have the courage to get their costs under control. I know it will be challenging but with the right leadership it’s doable.
And if the Alaska deal does happen, you can be certain that Alaska will make all of those changes. All of this professional positioning they’ve been doing (bribing) within Hawaii won’t keep them from fixing the same issues that Hawaiian could fix.
How do you know that cost cutting is “doable” for Hawaiian? And that’s only half the equation. There is a very competitive revenue side that allows much larger airlines, like United and Delta, to scale their cost structures in a way Hawaiian cannot match.
If it takes the scale of Delta, United, etc. to cover your fixed costs to operate an airline in Hawaii, then you are right Ruti…Hawaiian can’t survive. Maybe even HA+AS can’t survive if that’s the scale required.
Personally, I don’t believe that scale is needed for a profitable Hawaii-based operation. What you do need is efficiency in the controllable expenses. And that means nothing is off the table, including people changes. In the past 10 years it looks like Hawaiian has only worked the revenue side of the equation and has not materially addressed the cost side. That was all “fine” when fares kept rising and the economy was growing. The pandemic artificially protected Hawaiian from tough people-impacting decisions. There’s no more room to run from those choices.
With Alaska, they will make tough choices. Without Alaska, Hawaiian will either make those choices or have them forced upon them in bankruptcy.
Nope … without the merger, HAL is toast. They’ve been mismanaged for decades and it hasn’t gotten any better.
Labor costs and fuel are the two biggest cost drivers of any airline and reflects on the pricing for your tickets. HAL has paid their staff way out of industry standards of late — make that about a decade … (ask me how I know) … or don’t.
Aloha
Hi DICKIE_D.
Consider us curious. 😊
Aloha.
I can’t see DOJ not approving some kind of merger. Who would a non approval benefit? SWA does not have the capacity at this point to do the same schedule as HA. People who fly between the islands for work would really be compromised.
It’s not like we can drive to work to another island.
Lastly, what sources are you using to come to the conclusion that merger is pau?
Thanks again for the reporting gentleman.
As a wa resident I’m opposed to as ha merger, as it will reduce competition from pnw to hi, where airfares are higher then those in the CA to hi. AS has a very bad record on customer service, where
I waited for days for a call back to chg a tkt for an inbound hi flight.
Feds need to consider if the merger will offer a reasonable standard
of service as a must have for merger approval. AS, espically flying the death plane aka 737 max clearly fails on that score.
If globalization is a good then why not allow foreign carriers buy HA?
USA airlines are among the lowest quality carriers among the developed world. Better service and lower prices are possible with foreign carriers that fly larger planes like a380, 787, 777 would offer passenger comfort.
Your “death plane” comment is applicable to every aircraft when it’s put in the hands of incompetent crews. Everything ever designed has flaws. Everything. One of the primary jobs as pilots is to fly the machine safely to the ground when it misbehaves. Both accident crews failed to do their jobs. Evidenced by the fact that the first Lion Air crew got the plane safely back to the ground with the same malfunction.
There is far too much drama involved in vacationing in Hawaii.
You can say that again.
Given your description of the air travel ecosystem it is hard to understand why the DOJ would put a halt on the merger. What is the potential justification? Is there anything frequent travelers between the main land and Hawaii can do to influence the outcome?
It may sound trite but this is the US DOJ we are talking about and they no longer really need hard reasons to do anything. It is just their current mode of operation.
Based on you posting, I think I know who you are in Realville, Don K. — and I don’t mean to imply you are Duke Kuhanamouku who tried to get my Mom to “go surfing” with him back in the ’50s … too much Aloha and smiles …
But for what it’s worth — I think your call on this subject is right-on, Bruddah’ …
We were there too! Bruddah IZ was pretty fed up with all the politics in hawaii too.
Well,let the merger fail and see its results like Loves bakery on the economy.Its only money and we have plenty of that, Right?
Well? Are we out of bread here in Hawaii? The answer is a big fat No! Regarding Loves, Hawaiian Airlines undercut Aloha Air Cargo and messed up deliveries to the neighbor islands. Greedy Hawaiian Airlines trying to monopolize and take everything. Run Island Air out of business too! Well guess what Hawaiian Airlines? There are always someone out there ready to eat your lunch! Karma’s a bitch!