Alaska Airlines and Hawaiian Airlines have received the green light from the U.S. Department of Transportation (DOT) to proceed with their $1.9 billion merger, following an agreement to preserve essential routes and uphold consumer protections. The deal, which was initially announced in December, marks a significant consolidation in the U.S. airline industry, bringing together the fifth-largest and tenth-largest domestic carriers.
The DOT's approval comes with specific conditions designed to protect consumers, particularly those who rely on the airlines' frequent flyer programs and essential air services. Under the terms of the agreement, the merged entity must ensure that frequent flyer miles from both Alaska's Mileage Plan and Hawaiian's HawaiianMiles programs retain their value. Members will be able to transfer miles on a 1-to-1 basis without any penalties, and the airlines are prohibited from devaluing existing miles. Additionally, the merged carrier is required to maintain or increase the status levels of HawaiianMiles members within Alaska's program.
The Transportation Department's decision follows the Justice Department's earlier choice in August not to block the merger, signaling a significant step toward its finalization. However, the merger's approval is contingent on the carriers' commitment to maintaining key routes, especially those connecting the Hawaiian islands with the continental United States and inter-island routes within Hawaii. This provision is seen as vital for ensuring that remote and rural areas continue to receive essential air services.
Transportation Secretary Pete Buttigieg emphasized the importance of these commitments during a press call, stating, "The preservation of essential air services and the protection of consumer rights are paramount. This merger must enhance competition and expand choices for consumers, not diminish them."
The agreement also requires Hawaiian Airlines to adopt Alaska Airlines' practices regarding family seating and compensation for significant flight delays or cancellations. Specifically, the airlines must guarantee that families can sit together without incurring additional fees, a policy that has become increasingly important as airlines introduce more a la carte pricing models. Moreover, the merged airline will be obligated to provide compensation to passengers when delays or cancellations are the fault of the carrier, aligning with Alaska's current customer service practices.
Alaska Airlines expressed confidence that the commitments made to the DOT would not detract from the merger's expected benefits. In a statement, the airline noted that the conditions "align with the plans announced when the transaction was signed and do not impact the synergies of the deal, which will enhance competition and expand choice for consumers."
The merger will combine the fleets of both airlines into a 360-airplane operation serving over 130 destinations. Despite the merger, Alaska and Hawaiian will maintain their respective brands, operating under a unified platform. This strategic consolidation is expected to strengthen their market position, particularly in the competitive Pacific and West Coast regions.
As the merger process moves forward, the airlines must still obtain final approval for their transfer application, which will allow them to combine and operate international routes under a single certificate. This step is critical to fully integrating their operations and realizing the potential efficiencies of the merger.
Hawaiian Airlines saw a nearly 4% rise in its stock price following the DOT's announcement, reflecting investor optimism about the merger's prospects. The deal is anticipated to close in the coming days, marking the beginning of a new chapter for both airlines as they navigate the challenges and opportunities of the post-pandemic travel landscape.
