Alaska Airlines’ acquisition of Hawaiian Airlines cleared a major hurdle Monday, after the airlines said the Justice Department ended a review of the merger without challenging it on antitrust grounds.
The approximately $1.9 billion deal, the first major U.S. airline merger in nearly a decade, is set to expand Alaska’s operation and solidify its position as the country’s fifth-largest airline. The combined company would still be small relative to the four large airlines that dominate U.S. air travel, commanding roughly half the market share of United Airlines.
The airlines said they would wait to proceed with the merger until receiving final approval from the Department of Transportation.
Gov. Josh Green of Hawaii, which relies heavily on Hawaiian Airlines, praised the deal and thanked the Justice Department for taking the state’s needs into account in its review.
“I am confident that by the joining of these two airlines, a stronger company will emerge and offer more travel options for Hawai’i residents and local businesses,” he said in a statement.
The milestone reached Tuesday is a coup for Alaska and Hawaiian, which succeeded where others failed. Under President Joe Biden, the Justice Department has taken a strong stand against big mergers and acquisitions. JetBlue Airways and Spirit Airlines this year abandoned their plans to merge after the department successfully sued to prevent the deal, citing Spirit’s low fares among other things.
The Transportation Department said in a statement that it was reviewing Alaska’s acquisition of Hawaiian but that it would only grant approval “if it is in the public interest.” It is not clear how long it would take the department to complete its review.
When Alaska and Hawaiian announced the deal in December, Alaska’s CEO, Ben Minicucci, said the combination would help his airline grow by expanding its presence in tourist destinations and to Asia, where it currently does not fly. It will also give Alaska access to more planes and pilots and other skilled workers.
Alaska is well regarded within the industry. It recently reported a profit for the three months that ended in June, a sign that it had done a better job than other airlines that reported losses or lower profits amid a glut of seats going into the summer. The airline has also been adding more premium seats, which are in high demand and are generally more profitable than standard economy ones.
Midsize airlines like Alaska and JetBlue are limited in how quickly they can grow because many airports do not have enough gates available and manufacturers like Airbus and Boeing have not been able to produce planes fast enough. Finding and training pilots has also been a challenge. As a result, such airlines have been eager to merge with or buy other companies.
Together, Alaska and Hawaiian will be able to enmesh their networks, allowing them to sell flights connecting more destinations. Hawaiian flies between Hawaii and major airports in the continental United States, Japan, South Korea, Australia and New Zealand. The two airlines serve 138 destinations.
The deal would be the first major U.S. airline merger since 2016, when Alaska acquired Virgin America after a bidding war with JetBlue. In that deal, Alaska absorbed Virgin, but this time it plans to retain Hawaiian as a stand-alone brand.
A string of mergers and acquisitions in recent decades have contributed to tremendous consolidation in the airline industry. The four dominant carriers — Delta Air Lines, American Airlines, Southwest Airlines and United — account for more than two-thirds of the U.S. airline market, according to federal data, based on a commonly used metric that takes into account revenue, number of passengers and distance flown. Together, Alaska and Hawaiian have nearly 8% of the U.S. market. United, the fourth-largest U.S. airline, has 16% and Spirit, the sixth-largest, has 5.1%
In averting a Justice Department lawsuit, Alaska and Hawaiian may have benefited from how they overlap — and how they don’t.
In arguing against the merger of JetBlue and Spirit, the Justice Department asserted that JetBlue would abandon Spirit’s low-cost approach, eliminating a carrier that many travelers rely on for the kind of affordable fares that JetBlue typically does not offer. Alaska and Hawaiian, by contrast, offer similar services at similar prices.
The airlines also compete on relatively few routes. Alaska and Hawaiian compete directly on only a dozen of their combined 350 routes, according to an analysis of routes provided by Cirium, an aviation data firm. The dozen routes connect Honolulu or Maui with airports on the West Coast.
The combination would nevertheless reduce competition in Hawaii. Hawaiian alone operated about 35% of all flights into the state in the year that ended in July, while Alaska operated 8%, according to Cirium. The combined airline would also operate a majority of flights on a few routes where neither Alaska nor Hawaiian had more than 50% market share on their own.
Alaska operates a fleet of Boeing and Embraer planes. Hawaiian flies Boeing and Airbus jets.
Alaska would retain its Seattle headquarters and be led by Minicucci.
This article originally appeared in The New York Times.
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