(UPDATED 6:40 p.m. ET with more details)
Alaska Airlines expects to finalize its $1.9 billion merger with Hawaiian Airlines as soon as Wednesday after the Department of Transportation cleared the transaction, the company announced Tuesday.
The two airlines committed to a number of consumer protections to secure DOT approval, which was the last remaining hurdle for the merger. The Department of Justice last month quietly approved the transaction.
The combination of Alaska Airlines (NYSE: ALK) and Hawaiian Airlines (NASDAQ: HA) is important from a freight perspective because Alaska will take over cargo transportation for e-commerce giant Amazon. Hawaiian Airlines is operating a handful of Airbus A330 converted freighters for Amazon’s air logistics network and expects to have 10 cargo jets by next year.
The companies have never indicated whether the Amazon transportation services agreement with Hawaiian will need to be modified. Hawaiian began operating its first freighter last October. Amazon has warrants to take a 15% equity stake in Hawaiian Airlines after nine years conditioned on meeting a spending threshold of $1.8 billion.
Alaska Airlines has long operated a small fleet of freighter aircraft, primarily between Alaska and Seattle. It currently has five converted freighters: three Boeing 737-700s and two 737-800s. Officials have previously said they anticipate savings from integrating the cargo operations from belly transport in passenger aircraft.
Alaska is the fifth-biggest airline in the U.S. and Hawaiian is No. 10. The combination will solidify Alaska’s position as a stronger No. 5, which is important for the carrier to remain competitive with major U.S. carriers American, Delta, United and Southwest.
Alaska Air will now work to obtain a single operating certificate from the Federal Aviation Administration, but plans to operate as separate brands.
Until then, Alaska Airlines and Hawaiian Airlines will operate as one organization with two separate airline operations, under two individual operating certificates. As previously announced, Peter Ingram will step down as chief executive officer of Hawaiian when the transaction closes. Current Alaska Airlines regional president of Hawai‘i/Pacific, Joe Sprague, will be named CEO of Hawaiian Airlines. He will be responsible for leading all aspects of Hawaiian Airlines’ operations until the FAA grants Alaska a single operating certificate, the company said in a news release. Several senior executives from Hawaiian Airlines were named Tuesday to the interim Honolulu leadership team
The deal will give Alaska the opportunity to take some of Hawaiian’s long-range Boeing 787s and Airbus A330s and run them out of Seattle to Asia and Europe, but the real impetus for the merger was beating back Southwest Airlines. Both airlines serve Hawaii but lost market share when Southwest began serving the state in 2019.
DOT conditions for the merger include that Alaska and Hawaiian protect the value of rewards programs, maintain existing service on key Hawaiian routes to the continental United States and inter-island, preserve support for rural service, ensure competitive access at the Honolulu hub airport, and and lower costs for military families. By locking in protections from Alaska and Hawaiian upfront, the department said it is establishing a more proactive approach to the merger review process that prioritizes protecting the public interest from the outset.
Alaska committed last December, when agreeing to buy Hawaiian Airlines, to keep serving Hawaii.
Click here for more FreightWaves/American Shipper articles by Eric Kulisch.
Write to Eric Kulisch at ekulisch@freightwaves.com.