Alaska Airlines and Hawaiian Airlines planes take off from San Francisco International Airport (SFO) in San Francisco, California, USA on June 21, 2023.
Teyfan Coskun | Anadolu Agency | Getty Images
In recent months, President Joe Biden’s Justice Department has successfully tried to halt the partnership between the two airlines in court.it doesn’t necessarily spell doom alaska airline’s plan to purchase Hawaiian Airlines.
U.S. District Judge William Young sided with the Justice Department and blocked the move Tuesday. jet blue airlines‘ attempted a $3.8 billion acquisition spirit airlinessaid the elimination of low-cost carriers known for their lowest fares would “hurt cost-conscious travelers” who rely on those cheap flights.
The decision immediately raised questions about whether the combination of Alaska and Hawaii would suffer a similar fate in antitrust litigation. Hawaiian stock plummeted within minutes of the ruling, but eventually recovered.
“You would be lying to yourself if you thought the odds of a successful merger were not decreasing.” [Tuesday’s] verdict,” Deutsche Bank aviation analyst Michael Linenberg wrote in a note Wednesday.
But the pitfalls that derailed the Spirit-JetBlue deal may offer hints about how Alaska and Hawaiian can navigate talks with regulators and negotiations in court. The Justice Department did not immediately respond to a request for comment on whether it intends to challenge the Alaska-Hawaiian agreement.
“The court in JetBlue was clearly concerned that this merger would eliminate low-cost carriers,” said Herbert Hovenkamp, a law professor and antitrust expert at the University of Pennsylvania’s Carey School of Law.
“What does that say about Alaska and Hawaii and their advisors?” [and] Lawyers need to make sure they avoid these problems, he said.
JetBlue and Spirit jointly said they disagree with the decision and are considering next legal actions, including an appeal.
different types of trading
Alaska and Hawaii state leaders have expressed confidence in the roughly $2 billion deal, which includes Hawaiian’s debt.
“Decisions involving other airlines do not affect our planned merger with Hawaiian Airlines,” an Alaska Airlines spokesperson said in a statement Thursday. “Our agreement brings together two airlines with complementary networks, and we believe this transaction will enhance competition and expand consumer choice.”
A Hawaiian Airlines spokesperson said the airline believes its partnership with Alaska Airlines “delivers compelling benefits for our employees, guests, communities and all stakeholders,” but JetBlue He declined to comment on the contract.
The state of Alaska agreed to buy Hawaiian Airlines in December after the Maui wildfires caused bookings to plummet and competition in the domestic market intensified. southwest And Asian travel is slow to recover.
JetBlue argued that it needed to acquire Spirit to better compete with the largest airlines, which control about 80% of domestic capacity, but this is a result of years of megamerger dynamics. It is.
In the case of JetBlue and Spirit, Young took issue with the large number of overlapping routes. The airline offered a sale to solidify the deal, but to no avail.
The Alaska-Hawaiian merger will not be easy for regulators, but the two agreements are quite different.
Alaska Airlines and Hawaiian Airlines said in investor presentations last month that their networks overlap by less than 3% and include more than 1,300 flights per day.
“From a competitive standpoint, I think this worked out very well,” Alaska CEO Ben Minicucci said on a Dec. 3 conference call with analysts after the merger was announced. said.
JetBlue had planned to modify Spirit’s bright yellow, tightly packed planes to look like its own planes, with fewer seats, more legroom and other amenities.
In contrast, the state of Alaska said it intends to keep its Hawaiian and Alaska brands separate. Alaska Airlines discontinued the brand after acquiring Virgin America Airlines in 2018.
“None of the important points raised by the court in the JBLU/SAVE merger decision directly apply to the Hawaiian acquisition,” JPMorgan aviation analyst Jamie Baker said after Tuesday’s ruling.
Department of Justice Challenge
However, this does not mean that the Department of Justice will not undertake this effort.
Biden’s Justice Department has already voted 2-2 against the deal with the airline after another federal district judge sided with the Justice Department in May to end its partnership with JetBlue. are doing. american airlines In the northeastern United States, the alliance received government approval in the final stages of the Trump administration.
The agreement allows JetBlue and American to adjust routes and schedules in the Northeast, but congestion at airports and airspace makes it difficult to compete with larger rivals. Both companies argued.
The Justice Department successfully argued that the partnership was anticompetitive, and the airlines terminated the agreement last year, but American Airlines announced it would appeal the decision.
Still, the department just won another victory in court, which Hovenkamp said “may give it more incentive to challenge it.” [Alaska-Hawaiian] In the same way. “
Minicucci said last month that the airline expected the deal to take 12 to 18 months to complete. But some analysts say the Justice Department’s victory over JetBlue Spirit will overshadow the deal with Alaska.
“Even if you think everything is going well, the reality is that the chances of an agreement should be lower than they were before the JetBlue Spirit ruling,” said Conor Cunningham, an aviation analyst at Melius Research. Ta.
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