Alaska Airlines has overcome a major hurdle in its plans to buy Hawaiian Airlines.
The U.S. Department of Justice has decided not to challenge the $1 billion deal, which airlines believe will create a company that will serve travelers better.
Alaska Air announced in December that it would pay $18 in cash for each share of Hawaiian Airlines, including a debt of $900 million owed by the latter.
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If the merger goes ahead, the brands of both airlines will be preserved—a move that is rare in an industry in which decades of acquisitions have left just four big carriers dominating the U.S. market.
Alaska and Hawaiian have some overlapping routes. The say the aim of the merger is to enable the new company to compete more effectively with the nation’s four biggest carriers: American Airlines, Delta Air Lines, Southwest Airlines and United Airlines.
Alaska Air and Hawaiian Holdings, the parent company of Hawaiian Airlines, said in regulatory filings with the Securities and Exchange Commission (SEC) on Tuesday that the review period for the Justice Department, which had already been extended several times, expired just after midnight.
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But the closing is still subject to approval from the Department of Transportation. Alaska and Hawaiian have been working with Transportation Department on a number of ongoing issues, according to the SEC filing.
The decision by the Justice Department to not challenge the deal contradicts the Biden administration’s opposition to two recent attempts at further consolidation in the airline industry.
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The Justice Department successfully sued to block JetBlue Airways from buying budget carrier Spirit Airlines and prevented JetBlue from striking a partnership with American Airlines in the Northeast.
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In both cases, the administration argued that allowing the deals would have reduced choice and driven up prices for consumers.
If Alaska and Hawaiian close their agreement, it will be the first merger of sizeable U.S. airlines since 2016, when Alaska outbid JetBlue to buy Virgin America.
Shares of Hawaiian Holdings Inc. jumped more than 12 percent after the announcement. Alaska Air Group Inc. shares remained unchanged
Hawaiian has not recovered from the COVID-19 pandemic in the same way that larger airlines, including Alaska, have.
Hawaiian depends heavily on tourism from Japan, which dropped sharply after the coronavirus outbreak and now suffers from a weakened yen, which has fallen by about 40 percent in comparison with the dollar since the start of 2021.
Additionally, Hawaiian faces more competition on flights between the islands and the U.S. mainland and from Southwest on intra-islands service.