What the Alaska-Hawaiian Air merger could mean for consumers

Alaska Air Group (ALK) will buy Hawaiian Holdings (HA) for $1.9 billion, solidifying Alaska Air as the 5th largest US carrier. The merger could face some uphill battles as the Biden administration has pushed back on similar deals such as the one between JetBlue (JBLU) and Spirit (SAVE). But the bigger question for fliers is: what does this deal mean for me? Boyd Group International President Mike Boyd joins Yahoo Finance to give insight into how the deal could shape consumer experience and competition in the travel sector.

Boyd explains his cautious optimism for the deal: "For Hawaiian Airlines, which has done a brilliant job of making what historically was, basically, an ongoing bankruptcy airline into a major well-run airline, it's a great thing. But, the issue is they are dependent upon leisure traffic to and from the US and other places in the world. Leisure traffic is the first to go. I'm confident this will work but we may have some ugliness take place in the leisure sector and the first quarter of next year."

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Video Transcript

BRAD SMITH: Mike, let's game this out a little further. Say it does go through as we are continuing to evaluate and the cases that these companies have been making at least in press release and perhaps a little bit more about that case from the CEOs later on in this hour here.

If this does go through at the end of the day, what can consumers expect from the broader kind of airline servicing operations that continue here in the US? And especially at a time where a lot of these airlines to have been monitoring the international equation. What does that set up in terms of next steps for how these airlines are continuing to engage with consumers?

MIKE BOYD: For the consumer, it's not going to make a big hit at all. I mean, it's not going to change much like the ownership change. But the real issue, don't think there's going to be a lot more international traffic connecting over Honolulu. 40 years ago where you had to stop for gas, that made sense.

Today, Honolulu is in the wrong spot to connect anything from the US to the Pacific Rim. Now, for leisure traffic, maybe so. But it really isn't going to add a great deal, but it sure as the devil is not going to take anything away. It's just going to make both airlines more efficient and that's good for the customer.

SEANA SMITH: Mike, when it comes to travel demand right now, we know Hawaiian Holdings, Hawaiian Airlines here ahead of this deal have been struggling. Their shares were off just about 50%, the slow return that they've seen in travel, especially among their customers from the Asia-Pacific region. When you talk about demand looking ahead to 2024, do you see it improving substantially?

MIKE BOYD: Well, I'm not really enthusiastic about that. I hope so. It looks that way. But right now, we have a recession going, whether they say it's there or not, a non-recession. We have inflation going up. And for Hawaiian Airlines, which has done a brilliant job of making what historically was basically an ongoing bankruptcy airline into a major well-run airline, it's a great thing.

But the issue is, they are dependent upon leisure traffic to and from the US and other places in the world. Leisure traffic is the first to go. I'm confident this going to work. But we may have some ugliness take place in the leisure sector in the first quarter of next year.

BRAD SMITH: Yeah. And we kind of heard about that from Delta CEO Ed Bastian few weeks back saying essentially that the days of revenge travel are essentially behind us. So what does the airline positioning look like going into a period of perhaps normalization?

MIKE BOYD: Well, look at this. Airlines are adding capacity up the wazoo into Florida. And that's all leisure traffic. And the flights are full. We have spill levels in some cases. So this argument that I was just making that the recession is going to cut down on leisure traffic really isn't upheld by the facts that are there today.

What we don't know-- and this is a biggie-- is what these new labor contracts are going to do. Where you have 30% and 40% increases in both cabin safety, flight attendants, and pilots, that's going to make a difference to what airlines can charge. And discretionary traffic is dependent upon what they charge.