Alaska-Hawaii airline merger approved by Biden administration, with some restrictions

The Biden administration is allowing Alaska Airlines to complete its $1 billion acquisition of Hawaiian Airlines after the carriers agreed to certain conditions, including maintaining current flights on routes between Hawaii and the U.S. mainland, where they face little competition.

Transportation Department officials said Tuesday that there are no obstacles to closing the $1 billion deal between the airlines and beginning the merger, but some final approvals are still pending.

Alaska Airlines said it expected to complete the deal “within days.”

Alaska shares closed down 1%, while Hawaiian Holdings shares rose 4% to $18, the price per share Alaska was willing to pay for its smaller rival.

The decision to clear the way for the airlines’ merger stands in contrast to the administration’s unyielding 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 end a partnership between JetBlue and American Airlines.

The Justice Department could still challenge the Alaska-Hawaii deal, but that seems unlikely.

The Transportation Department, which must also approve airline mergers, said Alaska and Hawaiian agreed to meet certain conditions for six years.

These include maintaining subsidized flights to smaller communities in Alaska and Hawaii, and maintaining the current level of service between Hawaii and the mainland, where currently no more than one other airline flies the same route. The Department of Transportation could drop the latter requirement if the flight becomes unprofitable.

Alaska and Hawaiian also agreed to protect consumers by preserving the value of frequent flyer rewards as they merge their loyalty programs, ensuring that families can sit together without paying extra fees, and offering lower fares to military families.

Transportation Secretary Pete Buttigieg said the airlines also promised to compensate passengers for cancellations and significant delays that were the airlines’ fault.

Seattle-based Alaska Airlines said in a statement that the commitments are consistent with the company’s plans all along and would not affect “the synergies of the deal, which will increase competition and expand choice for consumers.”

The Department of Transportation said it granted Alaska and Hawaiian an exemption to combine ownership — to merge. The department is still reviewing the carriers’ request to fly international routes under a single operating certificate, which is likely to be a formality.

–David Koenig, The Associated Press