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Alaska Air, Hawaiian deal: CEOs explain why it's a 'win-win' for investors, customers

The two CEOs believe regulatory approval shouldn't be a problem either.

Two of America’s largest regional airlines are joining forces in an industry dominated by size.

Alaska Airlines (ALK) and Hawaiian Airlines (HA) entered into a definitive merger agreement, in which Alaska will buy Hawaiian in an all-cash deal ($18 per share) for $1.9 billion including debt. Following the deal, the two airlines will have 365 jets and fly to 138 destinations.

Major airlines such as United and Delta command approximately 950 jets each in their fleets, meaning the relatively small merger of Alaska and Hawaiian will allow them to better compete, especially in the large Western US market — with Hawaii as a focus.

Alaska and Hawaiian Airlines planes takeoff at the same time from San Francisco International Airport.
Alaska and Hawaiian Airlines planes take off at the same time from San Francisco International Airport (SFO) in San Francisco, California, United States on June 21, 2023. (Photo by Tayfun Coskun/Anadolu Agency via Getty Images) (Anadolu Agency via Getty Images)

“This is an $8 billion market [Hawaii]. We will be the clear market leader in Honolulu and the state of Hawaii, so this — this makes this very attractive,” Alaska Airlines CEO Ben Minicucci said in an interview with Yahoo Finance. “If you look at the deal in terms of valuation, this will be EPS accretive in the first two years after the deal closes, and the other thing it provides is so much opportunity for employees and choice for customers ... It's just a win-win across the board.”

Read more: How travel credit cards can help you save on your next vacation

Despite Alaska being the acquirer, the two airlines will maintain separate identities to capitalize on Hawaiian Airlines' strong brand recognition and popularity on the islands, the two airlines said. This differs from Alaska’s prior merger with Virgin Airlines, which saw the Virgin brand disappear when its fleet was absorbed by Alaska’s operations.

With any merger in a competitive space like the airline industry, regulatory approval is generally a hurdle. From a structural point of view, keeping Alaska and Hawaiian's operations separate will help regulatory review, the companies believe, in addition to the fact that the two airlines operate in different regions.

“The networks are very complementary; there's really not a lot of overlap in our two networks,” Hawaiian Airlines CEO Peter Ingram said in an interview with Yahoo Finance. “We only have a dozen overlap routes in total of about 1,400 total flights for the combined carriers, so I think when the regulators look at this deal on its own merits, they will see that it's pro-consumer, pro-competitive and we're going to add competition for the big four network carriers [that are] far larger than the company will be after the merger.”

Also in Alaska and Hawaiian’s favor is the fact that the combined airline operation will be quite small. When looking at industry size metrics like available seat miles (ASM), Alaska's (15.7 billion) and Hawaiian’s (4.9 billion) combined total of 20.6 billion pale in comparison to industry heavyweights like United (65.7 billion ASM), American (65.0 billion), Delta (61.3 billion), and Southwest (38 billion).

“It’s not a merger where consumers are going to lose an option,” Boyd Group International president Mike Boyd said on the Alaska Airlines-Hawaiian Airlines deal. “That’s why regulators shouldn’t really be bothered by this.”

Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.

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