The Biden administration is letting Alaska Airlines complete its $1 billion purchase of Hawaiian Airlines after the carriers agreed to certain conditions, including maintaining current service on routes between Hawaii and the mainland U.S. where they don’t have much competition.
Transportation Department officials said Tuesday that no obstacles remain to the airlines closing the deal and beginning to merge, although some final approvals were still pending.
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Alaska Airlines said it expected to close the deal “in the coming days.”
Alaska's stock closed down 1%, while shares in Hawaiian Holdings rose 4% to $18, the price per share that Alaska agreed to pay for its smaller rival.
The decision to clear the way for the airlines to merge stands in contrast to the administration’s adamant opposition to previous airline deals. The Justice Department successfully sued to block JetBlue from buying Spirit Airlines for $3.8 billion, and it went to court to kill a partnership between JetBlue and American Airlines.
The Justice Department could still challenge the Alaska-Hawaiian deal, but that appeared unlikely.
The Transportation Department, which also must approve airline mergers, said Alaska and Hawaiian promised to meet certain conditions for six years.
Those include preserving subsidized flights to smaller communities in Alaska and Hawaii, and maintaining current levels of service between Hawaii and the mainland where no more than one other airline currently flies the same route. The Transportation Department could drop the latter requirement if the flying becomes unprofitable.
Alaska and Hawaiian also agreed to some consumer protections, including maintaining the value of frequent-flyer rewards as they combine their loyalty programs, guaranteeing families can sit together without paying extra fees, and offering lower costs to military families.
Transportation Secretary Pete Buttigieg said the airlines also promised to compensate passengers for cancellations and significant delays that are the carriers' fault.
Seattle-based Alaska Airlines said in a statement that the promises are similar to its plans all along and would not affect “the synergies of the deal, which will enhance competition and expand choice for consumers.“
The Transportation Department said it gave Alaska and Hawaiian an exemption to combine ownership — to merge. The department is still reviewing the airlines’ request to fly international routes under one operating certificate, which is likely only a formality.
The airlines announced the deal in December, when they valued it at $1.9 billion including Hawaiian debt that Alaska will take over. Alaska vowed to retain the Hawaiian brand.
The deal will solidify Alaska Air Group's position as the fifth-largest U.S. airline company by revenue and expand its international profile with Hawaiian's extensive flying between the island state and Asia.