Alaska Air Group recently announced its plan to acquire Hawaiian Airlines for $1.9 billion in cash and debt. However, the acquisition might face regulatory hurdles due to concerns over anticompetitive practices.
Previous challenges by the Justice Department
This is not the first time that President Joe Biden's Justice Department has challenged airline deals that it views as anticompetitive.
Last year, the Justice Department sued to block JetBlue Airways' $3.8 billion acquisition of budget carrier Spirit Airlines. The department argued that the purchase of Spirit would harm consumers in the form of higher fares if the budget airline is absorbed by JetBlue. Earlier this year, the Justice Department successfully broke up JetBlue's partnership with American Airlines in the U.S. Northeast.
Potential challenges for Alaska's acquisition of Hawaiian
Alaska's acquisition of Hawaiian could face similar challenges from regulators. While Alaska and Hawaiian have defended their deal, citing little overlap and the ability to expand their reach, some experts expect a challenge from regulators.
"The starting point is one of skepticism," said William Kovacic, a professor at the George Washington School of Law and a former chair of the Federal Trade Commission. He said the Justice Department's review of the deal will focus on where Hawaiian and Alaska compete and "consider how the two companies might have expanded service in different ways were it not for the merger itself."
Alaska's plan for the acquisition
Alaska plans to keep separate Hawaiian and Alaska brands, two carriers that are key to the far-flung states they serve. This is different from Alaska's 2016 acquisition of Virgin America, when it spent years getting rid of Virgin's branding and fleet of Airbus jets in favor of a streamlined Boeing airline.
Alaska and Hawaiian executives have defended their deal, citing little overlap and the ability to expand their reach. The carriers' CEOs said the deal will help them expand their networks, giving Alaska access to Hawaiian's network in the Asia-Pacific region and expanding Hawaiian's current reach with Alaska's network throughout the U.S., for example.
"We're confident that this is unique from others that are pursuing combinations," Alaska CFO Shane Tackett said in an interview with CNBC. "We have very similar product offerings and we have very limited network overlap." He said that the two carriers have about a 3% overlap with seats and 12 routes.
Timeline and potential impact of the deal
Alaska and Hawaiian executives said they expect it to take 12 to 18 months to close the deal, a timeframe which would push it beyond next year's presidential election and potentially into a new administration.
Summary
While Alaska's acquisition of Hawaiian could potentially benefit both carriers and expand their networks, it might face regulatory hurdles due to concerns over anticompetitive practices. The Justice Department's review of the deal will focus on where Hawaiian and Alaska compete and consider how the two companies might have expanded service in different ways were it not for the merger itself. It remains to be seen whether this acquisition will go ahead or face regulatory challenges.
(This article is sourced from cnbc.com and curated by Thetransporteronline24)
