Alaska Airlines Announces $1.9 Billion Deal: Alaska Air Group has agreed to pay $1.9 billion to buy Hawaiian Airlines, which is a competitor. This could lead to another regulatory fight, as this is the second planned airline merger in less than two years.
Alaska Airlines Announces $1.9 Billion Deal
Hawaiian and Alaska said Sunday that Alaska would buy Hawaiian for $18 a share and take on $900 million in debt. Hawaiian Airlines’ shares finished on Friday at $4.86, which gave the company a market value of around $250 million. This year, they’re down almost 53%.
The company has had problems, such as the Maui wildfires and more competition from Southwest Airlines.
that has been expanding its service in Hawaii over the past few years, and the slow return of travel to and from Asia after the pandemic. Since the beginning of 2020, Hawaiian has had net losses in all but one quarter. Meanwhile, Alaska and other airlines’ finances have become more stable as the pandemic ended.
“What we saw here was a one-of-a-kind chance at the price we saw Hawaiian at,” Alaska Airlines’ CFO Shane Tackett said in an interview. In addition, he said that the deal would make the new company a “market leader” in Hawaii for high-end travel.
Hawaiian’s stock was up 187% in early afternoon trading on Monday, reaching almost $14 a share. However, it was still less than the price that was suggested to be paid for the company. Alaska’s stock was down more than 15%.
When carriers have said they need to work together to better fight with bigger rivals, President Joe Biden’s Justice Department has been very against them. In the beginning of this year, the Justice Department won a case to end JetBlue Airways’ regional partnership in the Northeast.
Lawyers for the Justice Department also tried to stop JetBlue Airways.
“planned purchase of low-cost airline Spirit Airlines
The hearing should be over in the next few days. Southwest—control about 80% of the U.S. market. This is the result of years of deals that made the market more concentrated.
Hawaiian and Alaska said the deal should go through in 12 to 18 months, as long as officials and Hawaiian’s owners agree.
Alaska CEO Ben Minicucci told analysts on a call on Sunday night that he was confident the deal would be passed. He cited 12 countries that overlap, a total of 1,400 daily flights, and a bigger network as reasons for his optimism. He said that the airline would then be able to compete with the four biggest airlines.
“We hope that people will see it in a good way,” he said.
The deal would be looked at by the Association of Flight Attendants-CWA, which speaks for cabin workers at both companies.
The AFA said in a statement, “Our first priority is to find out if this merger will improve conditions for Flight Attendants in the same way that the companies have said it will for shareholders and customers.” This is what we need to do in order to back the merger.
The new company will be run by Minicucci and have its headquarters in Seattle, which is also home to Alaska Airlines.
Because of the amount of money we spent, he said on the call, “We feel this is strategically a step-change for us to accelerate not only our financial performance but also the growth of our network.”
The two airlines said they would keep their own brands but work together on a single platform, with a fleet of 365 planes flying to 138 locations.
Alaska Airlines bought Virgin America for $2.6 billion in 2016 before going after Hawaiian.
The deal with Hawaii is a big change for Alaska. It takes care of Boeing
It spent years getting rid of Virgin’s fleet of Airbus planes to make its own fleet more efficient. Alaska’s fleet would include a wide range of Boeing and Airbus narrow-body and wide-body jets if it bought Hawaiian.
Sunday’s call featured Hawaiian CEO Peter Ingram. “The Hawaiian brand will remain an important part of our home state with Honolulu becoming a strategic hub for the combined company and expanded service for Hawaii residents,” Ingram said.
With this merger, Alaska Airlines will be able to offer three times as many direct or one-stop trips from the Hawaiian islands to North American cities. It will also include Hawaiian’s long-haul flights to and from Asia. Hawaiian made a deal with Amazon last year to fly cargo planes that had been changed.
CFO Tackett said on the call on Sunday, “We will be closely assessing whether more dedicated freighter flying for ourselves or an asset-light model for others could make sense for the combined company over time.”
Alaska Airlines said that their earnings should go up by at least $235 million in the next two years because of the deal. These benefits are called “run-rate synergies.”