Alaska Airlines has announced plans to acquire Hawaiian Airlines, which is something that I didn’t see coming. This is a huge win for Hawaiian investors, though I’m not sure I understand Alaska’s logic here?
Alaska to buy Hawaiian for $1.9 billion
Alaska Airlines has entered into a definitive agreement to acquire Hawaiian Airlines, with a transaction value of roughly $1.9 billion, including $900 million in debt. Alaska plans to buy Hawaiian for $18 per share in cash — goodness, that’s amazing for Hawaiian investors, as the carrier’s shares were recently trading for under $4.
The airlines expect that it will take 12-18 months for the merger to finalize, assuming there aren’t major regulatory challenges. Keep in mind that Alaska acquired Virgin America for around $4 billion back in 2016, so this would be Alaska’s second major acquisition in several years.
Funny enough, Alaska has historically been an all-Boeing airline, which was a point of pride, given that the carrier is based in Seattle. The airline just retired its last former Virgin America Airbus jet, only to announce an acquisition of Hawaiian, which largely flies Airbus jets. Hah.
Here’s how Alaska Airlines CEO Ben Minicucci describes plans for the acquisition:
“This combination is an exciting next step in our collective journey to provide a better travel experience
for our guests and expand options for West Coast and Hawai‘i travelers. We have a longstanding and deep respect for Hawaiian Airlines, for their role as a top employer in Hawai‘i, and for how their brand and people carry the warm culture of aloha around the globe. Our two airlines are powered by incredible employees, with 90+ year legacies and values grounded in caring for the special places and people that we serve.I am grateful to the more than 23,000 Alaska Airlines employees who are proud to have served Hawai‘i for over 16 years, and we are fully committed to investing in the communities of Hawai‘i and maintaining robust Neighbor Island service that Hawaiian Airlines travelers have come to expect. We look forward to deepening this stewardship as our airlines come together, while providing unmatched value to customers, employees, communities and owners.”
What the Alaska & Hawaiian merger would look like
Practically speaking, what would a merged Alaska Airlines and Hawaiian Airlines look like?
- Alaska and Hawaiian would continue to be branded separately, while integrating into a single operating platform; the airlines would operate a combined fleet of 365 aircraft, with no plans to materially change the current fleet strategy, though the company notes there’s flexibility
- The airlines would maintain their general business models, including Alaska’s “high-value, low fare options,” and Hawaiian’s “international and long-haul product on par with network carriers”
- Hawaiian Airlines would be integrated into Alaska’s Mileage Plan program, and both carriers would belong to the oneworld alliance
- The airlines describe their route networks as complementary, with passengers traveling throughout the continental United States, US West Coast, and across the Pacific, benefiting from more choices and increased connectivity, with service to 138 destinations
- Hawaiian would maintain its strong inter-island network, and Alaska would give people in Hawaii access to triple the number of destinations throughout North America with up to one stop
- Honolulu would become the combined carrier’s second biggest hub, and a strategic one that would allow West Coast travelers to get connectivity to the Asia Pacific region
- Alaska is expecting $235 million in run-rate synergies with the combined airline
There’s a website talking more about the value of the proposed merger, with the URL localcareglobalreach.com.
Below is a map showing the combined route network of the carriers.
Below is a chart showing some numbers behind the Alaska and Hawaiian merger.
My take on the Alaska & Hawaiian merger
I’m not sure what exactly to make of this merger, but it’s not one that I saw coming. I have a few different thoughts, so let me break them down…
Hawaiian Airlines has been having a tough time
Hawaiian Airlines has been struggling for quite some time, so this acquisition would be a great deal for Hawaiian investors. Personally I don’t think Hawaiian is just in a temporary rut, but rather I think the airline has some major long term challenges as an independent player:
- Hawaiian now faces brutal competition from Southwest on inter-island flights, while previously there wasn’t much competition
- US mainland carriers (including Alaska) have added a ton of capacity to Hawaii, and Hawaiian has been struggling to expand to the mainland in a profitable way
- Hawaiian has also been having a tough time in Asia, and with Japan’s currency having weakened so much, there’s not as much inbound tourist demand from Japan to Hawaii (which has historically been a huge market)
- Then you have all kinds of temporary issues, ranging from the pandemic, to the Maui wildfires, to leisure demand being stronger to Europe than Hawaii right now
I don’t understand what Alaska gets out of this?
While I understand Hawaiian is in a tough spot, I don’t really get how Alaska acquiring Hawaiian improves the situation all that much?
- There’s a lack of synergies from continuing to maintain two independent airline brands, and I wonder if that’s really the long term plan
- This isn’t like JetBlue’s acquisition of Spirit (which is questionable in a different way), where it’s just about trying to get employees and planes to grow operations and compete on a national level
- How will Alaska taking over Hawaiian improve the carrier’s challenges on inter-island flying, and on Asia Pacific flying?
But what’s really the plan beyond that?
- Is this just about essentially eliminating a competitor between the mainland and Hawaii? If so, that seems like it could lead to some regulatory scrutiny, since that’s not great for consumers
- How will Alaska harmonize products between the fleets? Will A330s maintain flat beds?
- Could Alaska end up using Hawaiian’s upcoming 787s to operate other long haul routes out of Seattle, rather than out of Hawaii? The presentation hints at the possibility of cross-fleeting long haul aircraft…
In terms of loyalty perks, this would be great
As a consumer, I probably wouldn’t mind this merger. Alaska Mileage Plan is a way better program than HawaiianMiles, and I’m happy to see that Hawaiian could join oneworld. This could be a great new option for earning and redeeming points. But then again, my perspectives are often skewed by caring about loyalty programs more than the average consumer, as the downside here would be the elimination of a competitor between the mainland and Hawaii.
I would assume that Hawaiian miles will convert into Alaska miles at a 1:1 ratio. I’ve seen some people ask whether it makes sense to move transferable points currencies to HawaiianMiles, with the hopes of eventually earning Mileage Plan miles?
Personally I wouldn’t do that just yet, especially since we’re potentially well over a year from when the airlines merge, if the deal happens at all.
Bottom line
Alaska Airlines intends to acquire Hawaiian Airlines in a $1.9 billion deal. If this happens, the two airlines would maintain their separate brands, though Hawaiian would join the Mileage Plan program and the oneworld alliance.
As far as airline mergers go, this one isn’t that expensive in terms of total purchase price. It’s less than half the cost of Alaska’s takeover of Virgin America. But still, I’m struggling to see the upside here?
As an aviation geek, I do kind of love the thought of Alaska returning to Asia and introducing flat beds, though it would be indirect, given that the airlines will maintain their separate brands.
What do you make of Alaska acquiring Hawaiian?
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