The Biden administration is letting Alaska Airlines complete its $1 billion purchase of Hawaiian Airlines after the carriers agreed to certain conditions, including maintaining current service on routes between Hawaii and the mainland U.S. where they don’t have much competition.
Transportation Department officials said Tuesday that no obstacles remain to the airlines closing the deal and beginning to merge, although some final approvals were still pending.
Alaska Airlines said it expected to close the deal “in the coming days.”
Alaska’s stock closed down 1%, while shares in Hawaiian Holdings rose 4% to $18, the price per share that Alaska agreed to pay for its smaller rival.
The decision to clear the way for the airlines to merge stands in contrast to the administration’s adamant opposition to previous airline deals. The Justice Department successfully sued to block JetBlue from buying Spirit Airlines for $3.8 billion, and it went to court to kill a partnership between JetBlue and American Airlines.
The Justice Department could still challenge the Alaska-Hawaiian deal, but that appeared unlikely.
The Transportation Department, which also must approve airline mergers, said Alaska and Hawaiian promised to meet certain conditions for six years.
Those include preserving subsidized flights to smaller communities in Alaska and Hawaii, and maintaining current levels of service between Hawaii and the mainland where no more than one other airline currently flies the same route. The Transportation Department could drop the latter requirement if the flying becomes unprofitable.
Alaska and Hawaiian also agreed to some consumer protections, including maintaining the value of frequent-flyer rewards as they combine their loyalty programs, guaranteeing families can sit together without paying extra fees, and offering lower costs to military families.
Looking specifically at the rewards protections the Department of Transportation outlined in a news release Tuesday what Hawaiian Airlines rewards members can expect to get when this merger is officially finalized. Those protections include:
- All HawaiianMiles miles and Alaska Mileage Plan miles earned before conversion into the new combined loyalty program must not expire.
- Rewards members can transfer HawaiianMiles miles to and from Alaska Mileage Plan miles at a 1:1 ratio before the launch of a new combined loyalty program.
- As the release explains, “The combined airline must not take any actions that would devalue HawaiianMiles miles, must maintain the value of each unredeemed HawaiianMiles mile earned prior to the merger closing, must honor all active HawaiianMiles promotions from prior to the merger closing, and must continue to award HawaiianMiles miles at the same or greater value.”
- The Department of Transportation’s release also explicitly states that, “Under the new combined loyalty program, the combined airline must match and maintain the equivalent status levels that HawaiianMiles members hold under the HawaiianMiles program, match and maintain status levels and conferred benefits that are equivalent to Alaska’s Mileage Plan program, and match or increase status and conferred benefits as necessary to ensure members of each existing loyalty program are treated no less favorably relative to status, including by matching or increasing members’ elite status in the new combined loyalty program, for the remainder of the applicable program year.”
- The combined airline is not permitted impose cancellation or change fees on rewards redemption tickets for travel on carrier-operated flights.
U.S. Transportation Secretary Pete Buttigieg said the airlines also promised to compensate passengers for cancellations and significant delays that are the carriers’ fault.
“Our top priority is protecting the traveling public’s interest in this merger. We have secured binding protections that maintain critical flight services for communities, ensure smaller airlines can access the Honolulu hub airport, lower costs for families and service members, and preserve the value of rewards miles against devaluation,” Buttigieg said in the federal agency’s statement. “This more proactive approach to merger review marks a new chapter of DOT’s work to stand up for passengers and promote a fairer aviation sector in America.”
Seattle-based Alaska Airlines said in a statement that the promises are similar to its plans all along and would not affect “the synergies of the deal, which will enhance competition and expand choice for consumers.”
The Transportation Department said it gave Alaska and Hawaiian an exemption to combine ownership — to merge. The department is still reviewing the airlines’ request to fly international routes under one operating certificate, which is likely only a formality.
The airlines announced the deal in December, when they valued it at $1.9 billion including Hawaiian debt that Alaska will take over. Alaska vowed to retain the Hawaiian brand.
The deal will solidify Alaska Air Group’s position as the fifth-largest U.S. airline company by revenue and expand its international profile with Hawaiian’s extensive flying between the island state and Asia.
Contributing: The Associated Press; Steve Coogan, MyNorthwest