Another proposed airline merger tests Biden administration’s resolve to preserve competition – WTOP News
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Another proposed airline buyout has renewed debate over whether there has been too much consolidation in the industry, and whether…
Another proposed airline buyout has renewed debate over whether there has been too much consolidation in the industry, and whether it is hurting consumers.
The Biden administration has taken a tough stance against mergers, and it is certain to take a close look at Alaska Air Group’s proposed $1.9 billion acquisition of Hawaiian Airlines.
The deal is smaller than the mergers that reshaped the airline industry more than a decade ago. But the Justice Department is already fighting another smallish deal — JetBlue’s proposal to buy Spirit Airlines.
Alaska Airlines parent Alaska Air Group announced Sunday that it will pay $18 per share for Hawaiian — a huge premium over Hawaiian’s closing stock price on Friday. Hawaiian has struggled to recover from the pandemic and new competition from Southwest on intra-islands flights. It has lost $159 million so far this year.
Alaska says Hawaiian will continue to operate as a stand-alone brand, an unusual step.
Here’s some information about each airline’s customer base, the way antitrust regulators will view the deal, and the impact of past mergers.
ALASKA AND HAWAIIAN CUSTOMERS
Alaska Air Group, based in Seattle, is the fifth biggest U.S. airline company by 2022 revenue, slightly ahead of JetBlue, but is not widely known beyond the West Coast. Its biggest operation is in Seattle, and it bulked up in California in 2016 by buying Virgin America for $2.6 billion after a bidding war with JetBlue.
Hawaiian Airlines — only a quarter the size of Alaska Air by revenue — operates flights throughout the island chain and to the U.S. mainland and also relies heavily on traffic between Asia and Hawaii.
WHAT ARE THEIR REPUTATIONS?
Alaska and Hawaiian are rather traditional airlines. Their fares are typically in line with larger carriers and higher than those charged by discount airlines. In September, both charged slightly lower than average fares for economy-class seats between Hawaii and the mainland, according to figures from aviation-data firm Cirium.
Helped by good weather, Hawaiian often tops the industry for on-time flights, and Alaska usually ranks near the top too. Both score in the middle for consumer complaint rates, according to U.S. Department of Transportation data.
WILL REGULATORS EXAMINE THIS DEAL?
This deal will provide another test for the Biden administration’s resolve to preserve competition in various industries.
The Justice Department succeeded earlier this year in killing a partnership between JetBlue and American Airlines, and the trial over the government’s lawsuit to stop JetBlue from buying Spirit Airlines is scheduled to wrap up this week.
PRO AND CON ARGUMENTS
In the JetBlue case, the Justice Department sued because it wants to preserve Spirit, the nation’s biggest discount airline. If regulators sue to block the Alaska-Hawaiian deal, they are likely to make a different argument — that it would put too much traffic between Hawaii and the U.S. mainland in the hands of one company.
Between them, Hawaiian and Alaska control about 40% of that market, according to Cirium.
Alaska CEO Ben Minicucci said buying Hawaiian will help it compete against the four biggest U.S. airlines. That is exactly the same argument JetBlue made to defend its purchase of Spirit — and that didn’t stop the Justice Department from suing.
Henry Harteveldt, a travel analyst for Atmosphere Research Group, said the fact that Alaska is not buying a low-fare airline like Spirit could improve the chances that regulators will let the purchase of Hawaiian go through.
PREVIOUS AIRLINE MERGERS
The federal government raised few objections to a slew of mergers that consolidated power in the industry. American Airlines, Delta Air Lines, United Airlines and Southwest Airlines control about 80% of the domestic air-travel market, and all of them grew significantly through mergers between 2008 and 2013.
Under President Joe Biden, the Justice Department seems to be showing some buyer’s remorse that previous administrations didn’t block some of those mergers.
IMPACT ON TRAVELERS
Airfares rose faster than inflation for a time after the initial wave of consolidation, but that trend has cooled. The average fare today for a flight within the United States is 35% lower than in 2000 when adjusted for inflation, according to the Transportation Department. However, fees have grown sharply and partly offset lower fares.
The industry trade group, Airlines for America — both Alaska and Hawaiian are members, as are the largest U.S. carriers — insists that competition is robust.
Copyright
© 2023 The Associated Press. All rights reserved. This material may not be published, broadcast, written or redistributed.
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