Proposed merger of Alaska and Hawaiian airlines a promising fit, observers say

Residents of Hawaii and Alaska, two states with close ties despite their vast distance apart, should generally expect improvements in air travel with the merger of Alaska and Hawaiian airlines, industry observers said Monday.

Alaska Airlines announced on Sunday it had a definitive agreement to purchase its smaller West Coast counterpart in a $1.9 billion deal, assuming regulators approve in the next year or so.

The agreement will also need the approval of Hawaiian Airline shareholders, but given that Alaska Airlines is paying a premium for its rival, that’s a likely outcome, one observer said. Hawaiian Airlines’ stock value tripled on Monday, highlighting the deal’s massive value for Hawaiian Airlines’ shareholders.

Travelers in both states will see increased travel opportunities, observers said.

[Alaska Air to acquire Hawaiian Airlines in $1.9B deal]

Alaskans who already frequently travel to Hawaii, often for winter relief on Alaska Airlines, can expect better access to more Hawaii destinations, and even international stops such as Japan and Australia, through Seattle or Honolulu. Alaskans will also see new opportunities to boost Alaskan Airlines’ mileage rewards that yield discounts, since Hawaiian Airlines is currently not a miles partner, observers said.

[Alaska to buy Hawaiian: Here’s what we know about miles and perks]

Under the deal, the combined company would operate a hub in Honolulu, where Hawaiian Airlines is based, second only to the combined company’s headquarters in Seattle, where Alaska Airlines is based. Both companies are more than 90 years old and were founded in their respective states.

For residents of Hawaii and Alaska who rely on the airlines for critical services, often in small remote towns with limited transportation options, the combination is a promising fit, observers said. Alaska Airlines already has a presence in Hawaii, and will likely make sure the needs of that states’ rural communities are met, they said.

Hawaii is a natural extension of Alaska Airlines’ focus on the West Coast market, where demand for travel to the Hawaiian islands is strong, said Brett Snyder, an airline industry analyst who runs the crankyflier.com blog. Snyder had called for a merger of the two airlines in recent years and said Monday on his blog that he loves the airlines’ decision to unite.

There are many things the two companies can do together that they can’t do alone, which is not always the case in an airline merger, he said. Hawaiian widebody aircraft that travel internationally will join Alaska’s narrow-body aircraft that travel domestically, opening up potential travel combinations for passengers, he said.

“Maybe Alaska starts flying to London or Tokyo using wide-bodies from Seattle, and that makes it a seamless easy connection for Alaska Air loyalists in Alaska get to those locations,” he said.

Trans-Pacific hub

Some Alaskans are looking at the deal skeptically and say they’d rather see Alaska Airlines investing to improve their customer service rather than buying another company, six years after it acquired Virgin America for $2.6 billion, said Scott McMurren, a transportation and hospitality consultant in Alaska who writes for the Anchorage Daily News and owns alaskatravelgram.com.

But most seem to think the merger is exciting, based on comments on online forums, he said.

The deal could create a resurgence of Honolulu as a trans-Pacific hub, which could open up better travel opportunities and mileage redemption for Alaskans flying on Alaska Airlines, McMurren said.

Alaskans will have more single-airline, direct connections through Honolulu to Hawaiian Airlines’ destinations, which include Japan, South Korea, New Zealand, Australia, Tahiti and others, McMurren said.

“So the idea of having a through-flight on one airline (with different brands) bodes well, and it also bodes well for those of us who are collecting miles and looking to redeem miles,” he said. “The idea that you can use Honolulu as a hub to these destinations is a real benefit for Alaskans.”

The deal can also have the reverse effect, opening the door to bring more travelers to Alaska from Hawaii and international destinations for, say, jumping onto cruise ships plying Alaska waters, he said.

“People in New Zealand and Australia love to go on cruises,” he said.

[Alaska Air was ready to grow. Hawaiian hit hard times. An airline match is made.]

Ben Minicucci, chief executive of Alaska Air, said on Sunday that the proposed merger won’t impact the the airlines’ operations until it passes regulatory muster. The plans call for a combined company that keeps the Hawaiian and Alaska airlines brands, but under a single rewards program and single collective-bargaining agreements for their different unions, Alaska Airline officials said.

The expanded company will open access to 138 destinations throughout the airlines’ networks, including non-stop service to 29 international destinations, the airlines said. It will open more than 1,200 destinations through the oneworld Alliance that expands travel options involving other airlines.

Regulatory scrutiny

At least two financial service firms who attended a public meeting with airline officials on Sunday said the deal is a sensible one for both companies. They expressed concerns that federal regulators may look closely at the deal.

“Alaska’s balance sheet is back to pre-pandemic strength while Hawaiian’s stock is hit by what should be short-lived earnings challenges,” such as engine issues, the fires in Maui that hurt travel and slow demand in Japan, said Raymond James and Associates in a report on Monday.

Alaska is buying “at the bottom,” a departure from its Virgin America purchase, the report said.

“Given that the U.S. Department of Justice pushed back on the JetBlue/Spirit deal, we aren’t convinced they approve this,” the firm TD Cowen said in a report. “That said, we think this combination makes a lot of sense, and it should be approved.”

Scott Laird, who grew up in Alaska and Hawaii and is a freelance travel writer for Fodor’s and others, said the two airlines have just a small percentage of markets where they overlap. That could reduce regulatory concerns about anti-competitive outcomes of a merger.

Laird, a former Anchorage-based travel agent who also worked in the airline industry, said both airlines have a deep commitment to serving people in their namesake states, and that can be expected to continue with a merger.

He said there shouldn’t be any major impact to Alaskans from the deal, if approved. Hawaiian Airlines does not serve the Alaskan market, so it will not eliminate competition in Alaska, he said.

He said Alaska Airlines has already made significant investments to understand the Hawaii market, he said.

The merger “will benefit both Alaskans and Hawaii residents because they will have a stronger airline in the end that can better compete with some of the incumbents,” he said, referring to the largest airlines such as American Airlines.

Laird said his Hawaiian friends have expressed concerns with Hawaiian Airlines’ moving its corporate headquarters to Seattle from Honolulu. They say high-paying jobs in Hawaii will be reduced, he said.

And some Hawaiians might regret seeing changes to their local airline, he said.

“There’s that sort of touchy-feely point of pride, in that the airline with our name on it is based in Hawaii, and it’s run by people who are our neighbors,” he said. “So there will probably be some of that feeling that this airline is no longer home-grown and locally connected.”

Peter Forman, an aviation historian and expert from Honolulu, said Alaska and Hawaii are both similarly unique in that many communities rely on aviation and not roads to reach the outside world.

“There’s always a concern when there’s a merger because you wonder how things will change,” he said. But he believes Alaska Airlines is the “best possible partner” for Hawaiian Airlines.

“It looks to me like it’s a really, really good fit,” he said.