HONOLULU — Consumers must wait longer to learn whether federal antitrust enforcers will approve a proposed $1.9 billion merger between competitors Hawaiian Airlines and Alaska Airlines.
The airlines announced in separate current-earnings releases Monday that they had agreed to a 10-day extension for the Department of Justice’s formal review period for their proposed merger, which includes $900 million in Hawaiian debt.
Hawaiian and Alaska need approval from antitrust enforcers to complete their proposed merger, which was announced Dec. 3. The delay allows more time for DOJ and state attorneys general to decide whether to block the deal or allow it to proceed.
The airlines on May 7 certified substantial compliance with the Justice Department’s second request for additional information, which, according to the terms of an earlier timing agreement, triggered the start of the 90-day review period slated to expire Monday.
Alaska Airlines President and CEO Ben Minicucci said during a July 18 second-quarter earnings call, “Look, we went through the entire process with the DOJ, and all the documents and discussions have occurred. We’re in the homestretch here in two weeks, and we’re waiting to see what DOJ comes back to us with. So we’ve made our case, and we feel pretty strong about our case on being pro-consumer and pro-competitive.”
Hawaiian shares took a recent tumble amid news reports the Justice Department was looking to challenge the merger, which would give Alaska Air more than 50% of the market for Hawaii flights.
Hawaiian and Alaska, which are small carriers relative to the four major U.S. airlines, have argued the merger would benefit customers by allowing travelers to reach more places, and that there only 12 overlapping routes between the two airlines.
However, a consumer antitrust lawsuit, Yoshimoto v. Alaska Airlines, is still active in the U.S. District Court for Hawaii, seeking to stop the deal on the grounds the merger would result in higher fares, job losses and fewer flights and cause injury to Hawaii’s economy.
So far, a reason for the extension has not been revealed; however, the new review period ends at 12:01 a.m. Eastern time on Aug. 15.
“We and Alaska have been working cooperatively with the DOJ and expect to continue to do so,” Hawaiian Airlines President and CEO Peter Ingram said Tuesday during an earnings call. “Once we have more to share, we will do so in a timely manner.”
During the call, Hawaiian reported a second-quarter net loss of $1.30 a share, or $67.6 million, as compared with $12.3 million a year ago. When adjusted for nonrecurring costs, the second-quarter loss came to $1.37 a share.
Hawaiian reported second-quarter revenue of $731.9 million, up 3.5% from some $706.9 million a year ago.
Ingram said Hawaiian has taken steps to raise working capital and provide ample liquidity should the regulatory process be extended.
“Even as we work towards regulatory clearance of our combination with Alaska Airlines, we are securing a bright sustainable future for Hawaiian Airlines,” he said. “While we are optimistic that the merger will achieve regulatory clearance in due course, these steps provide a meaningful liquidity runway into 2029.”
Hawaiian Airlines Executive Vice President and CFO Shannon Okinaka said during the call that financing 10 A321 neo aircraft added about $400 million in liquidity. Okinaka said Hawaiian also exchanged $1.2 billion in loyalty bonds due in 2026 for $985 million in new bonds due in 2029 and a partial cash repayment.
“While we are confident in the merits of our merger, we’re also managing the business and the balance sheet in case the closing is delayed,” she said. “We’re focused on improving labor productivity, adjusting our commercial response to market opportunities and monetizing the investments we have made.”
It’s still unclear how the Justice Department will rule. The Biden administration has been more apt to scrutinize mergers, as evidenced by the challenges JetBlue and Spirit encountered when those two air carriers tried to merge.
Bloomberg reported Tuesday that “Justice Department officials remain divided internally over whether to file a lawsuit to block the deal given the small relative size of Alaska and Hawaiian compared to the US’s four major airlines, according to people familiar with the review. Federal officials have shared their potential reservations with state regulators who are also reviewing the transaction, said the people, who asked not to be identified discussing internal deliberations.”
If the merger is approved, Hawaiian shareholders are set to receive a premium of $18 in cash per share. Hawaiian’s stock, which was trading at $4.86 a share when the deal was announced, closed Tuesday at $13.26 and rose to $13.30 during after-hours trading.
