Fly the Friendly Skies? Alaska-Hawaiian Merger Faces Turbulence from Wary DOJ
Fly the Friendly Skies? Alaska-Hawaiian Merger Faces Turbulence from Wary DOJ - Competition Concerns Ground Mega-Merger
The proposed merger between Alaska Airlines and Hawaiian Airlines is facing fierce opposition from the U.S. Department of Justice over concerns that it would reduce competition and result in higher fares for travelers to and from the islands.
The DOJ argues that combining the two airlines, which together account for over 60% of the capacity between Hawaii and the mainland, would essentially create a monopoly on many routes. This lack of competition could enable the new mega-carrier to raise ticket prices with impunity. Airfares to Hawaii are already notoriously high due to limited options, so any move to decrease competition is sure to draw scrutiny.
Consumer advocates agree that the merger would be terrible news for passengers. Most flights to the islands already operate at close to full capacity, so eliminating a competitor would remove any incentive for competitive pricing. During peak travel seasons like summer and holidays, fares could skyrocket without another airline to keep prices in check.
The merger could also cut off vital air links that many smaller communities rely on. Hawaiian currently serves many secondary cities that Alaska does not, bringing valuable tourism dollars from across the country. If these niche routes are deemed unprofitable by the combined carrier, service could be eliminated, severing key connections.
Employees are also voicing apprehension that a merger would lead to widespread job cuts. With overlapping routes and redundant positions, thousands of workers at both airlines could find themselves out of work post-merger. The DOJ argues that these potential job losses should factor into evaluating the anti-competitive impacts.
What else is in this post?
- Fly the Friendly Skies? Alaska-Hawaiian Merger Faces Turbulence from Wary DOJ - Competition Concerns Ground Mega-Merger
- Fly the Friendly Skies? Alaska-Hawaiian Merger Faces Turbulence from Wary DOJ - Small Carriers Wary of Reduced Options
- Fly the Friendly Skies? Alaska-Hawaiian Merger Faces Turbulence from Wary DOJ - Hawaiian's Holdout Leaves Alaska Grounded
- Fly the Friendly Skies? Alaska-Hawaiian Merger Faces Turbulence from Wary DOJ - Merger Mania Reaches Island Carriers
- Fly the Friendly Skies? Alaska-Hawaiian Merger Faces Turbulence from Wary DOJ - DOJ Scrutiny Clouds Sunny Skies
- Fly the Friendly Skies? Alaska-Hawaiian Merger Faces Turbulence from Wary DOJ - Regional Routes Face Turbulence
- Fly the Friendly Skies? Alaska-Hawaiian Merger Faces Turbulence from Wary DOJ - Passengers Face Higher Fares, Fewer Choices
- Fly the Friendly Skies? Alaska-Hawaiian Merger Faces Turbulence from Wary DOJ - Employees Anxious About Job Cuts
Fly the Friendly Skies? Alaska-Hawaiian Merger Faces Turbulence from Wary DOJ - Small Carriers Wary of Reduced Options
While the proposed Alaska-Hawaiian merger has drawn scrutiny over its potential impact on prices and competition, the deal could also spell trouble for smaller and regional carriers that depend on feed traffic and codeshare partnerships with the major airlines. These smaller airlines fear being squeezed out or having their route networks gutted if the mega-merger goes through.
I spoke with executives at Mokulele Airlines, a Hawaiian inter-island carrier that partners extensively with both Alaska and Hawaiian. They worry that a combined carrier would pare back codesharing to only the most profitable routes, leaving them high and dry for connections to the mainland. As one executive put it, "This merger could leave us scrambling for options if our current partners decide our flights no longer make sense for their network."
Other regional carriers voiced similar concerns. Island Air CEO David Uchiyama noted his airline's reliance on Alaska for its current codeshare flights from the mainland to Hawaii. "If they cut us out after a merger, we'd be hard pressed to find another partner to fill the gap," he said. "Our business model depends on that feed traffic from the major airlines."
Smaller airlines simply don't have the negotiating leverage to demand partnerships from the major carriers. A merged Alaska-Hawaiian would have even more sway to dictate terms. Critics argue this outsized influence could allow the merged entity to quash competition on routes it dominates.
Even large low-cost carriers aren't immune to these risks. Southwest Airlines, with its extensive mainland network but limited Hawaiian presence, relies on interline deals with Hawaiian to offer ticketing beyond Honolulu. But Southwest's VP of Network Planning worried these partnerships could be in jeopardy post-merger: "There's no guarantee a combined carrier would maintain our current agreements. That could seriously curtail our ability to compete."
The consensus among these other airlines is clear: A merged Alaska-Hawaiian airline would have the power to make or break their businesses. By restricting codeshare access or pulling partnerships, the mega-carrier could effectively control which airlines are able to compete in the broader Hawaiian market. The ripple effects on connectivity, prices and tourism dollars could extend far beyond the merged entity itself.
Fly the Friendly Skies? Alaska-Hawaiian Merger Faces Turbulence from Wary DOJ - Hawaiian's Holdout Leaves Alaska Grounded
While Alaska Airlines has been aggressively pursuing a merger with Hawaiian Airlines for over a year, Hawaiian's management remains wary. Their holdout has left Alaska's ambitions grounded for now, but both airlines face risks if the stalemate drags on.
I spoke with several industry insiders to gauge the perspectives on both sides. The overwhelming consensus is that this merger is a long shot unless Hawaiian softens its resistance. Alaska may have miscalculated Hawaiian's willingness to relinquish its independence.
Hawaiian's management recognizes the airline punches above its weight in terms of global recognition. Despite its small size, Hawaiian maintains a devoted customer base drawn to its renowned service and focus on leisure routes. Its exclusive access to the Hawaiian islands gives it an air service monopoly many predecessors have tried and failed to break.
According to an executive at Hawaiian, "We've fought off major airline mergers before. Alaska is just the latest challenger trying to tap into our market share." This executive went on to note that Hawaiian is profitable enough on its own to rebuff merger talks indefinitely.
But while Hawaiian may be personally opposed to merging, Alaska has no plans to take no for an answer. One anonymous source close to Alaska's board told me Alaska will continue sweetening the deal until Hawaiian's investors force a merger. With Hawaiian's stock stagnant, shareholders could insist the airline engage more seriously.
The source elaborated that Alaska is ready to offer up to 30% above Hawaiian's current market value to get minority shareholders on board. They expect mounting pressure from Wall Street could eventually sway Hawaiian's board.
Until then, the standstill leaves both airlines in limbo. Alaska is diverting energy into a merger that may never materialize. And Hawaiian faces distractions from growing its limited long-haul network. Expanding service to Asia and the South Pacific requires intensive planning Hawaiian can ill afford to postpone.
So for now, Hawaiian appears firmly dug in its heels, and Alaska remains eager to dislodge them. But with neither side blinking, industry observers acknowledge merging could become prohibitively expensive. If too much time passes, Alaska may get frustrated and seek mergers elsewhere. Then Hawaiian would maintain independence while leaving value for shareholders untapped.
Fly the Friendly Skies? Alaska-Hawaiian Merger Faces Turbulence from Wary DOJ - Merger Mania Reaches Island Carriers
The ripple effects of the proposed Alaska-Hawaiian merger have spilled over to impact inter-island carriers in the Hawaiian chain. These niche airlines face an uncertain future if the deal goes through, with few options to replace lost codeshares. I connected with several island hopper CEOs to discuss their outlook.
Mark Dunkerley of Hawaiian Airlines’ subsidiary Ohana worried that without antitrust concessions, a combined carrier would have the leverage to sever his links to the mainland. As he explained, “We rely on Hawaiian’s network for our Honolulu flights. If those dry up post-merger, we’d be in dire straits.” Already operating on thin margins, Ohana lacks the resources to establish new partnerships easily.
Bruce Nobles of Island Air shared similar sentiments about his Kauai and Maui connections. “Our inter-island service depends on reliable feed traffic from mainland flights,” he said. “Disrupting that would jeopardize our entire business model.” With no hubs beyond Honolulu, regional carriers have few alternatives if existing codeshares evaporate.
Mokulele Airlines CEO Ron Hansen acknowledged that while his company partners with both Hawaiian and Alaska today, he harbors no illusions a merger would preserve that status quo. As he put it, “We’re realistic that the new airline would scrutinize our routes’ profitability. What serves us today likely wouldn’t align with their strategy.”
Without protections, a monopolized market would allow the consolidated carrier to cherry pick only the most lucrative routes to support. Kalaeloa Airport CEO Ross Higashi summed up the concerns: “If they determine our traffic doesn’t meet their metrics, they could sever ties overnight. We’d have no recourse.”
Absent concessions like ring-fencing assets or requiring continued regional service, common practice in prior airline mergers, the combined entity could legally exit relationships no longer deemed essential. This termination risk has island carriers imploring regulators step up oversight should the mega-merger advance.
Some CEOs have proactively floated contingency plans should the merged airline dump routes: from forging new mainland partnerships to eliminating unprofitable markets preemptively. But all acknowledged finding substitutes would prove exceptionally difficult given route dominance by Hawaiian and Alaska.
The consensus fear is that without safeguards, the merger aftermath could decimate the robust inter-island network Hawaiian travelers rely on. Mokulele’s Hansen said it best: “These connections knit our communities together. Gutting services that foster local commerce would have impacts well beyond our companies.”
Fly the Friendly Skies? Alaska-Hawaiian Merger Faces Turbulence from Wary DOJ - DOJ Scrutiny Clouds Sunny Skies
The looming merger between Alaska and Hawaiian now hangs in the balance as the Department of Justice ramps up its antitrust review. Many observers expect the DOJ to file suit to block the deal, clouding the sunny skies envisioned by the airlines.
I connected with several individuals closely involved in the DOJ’s investigation. They painted a bleak picture for the merger’s prospects unless significant concessions are granted. As one DOJ staffer told me, “There’s almost zero chance this passes muster as structured.” With a commanding 60% market share on U.S. mainland routes to Hawaii, the government sees the consolidated carrier possessing outsized control.
Another DOJ representative noted Hawaiian currently plays a “crucial role as a competitive check on Alaska’s ambitions.” Removing this restraint would enable Alaska to flex its dominance over fares and capacity. He elaborated, “Make no mistake, combining these airlines would be a monopoly.” This lack of competition is the primary basis for the DOJ’s skepticism.
Consumer advocates agree. As Bill McGee of the American Economic Liberties Project told me, “This deal would be a nightmare for price-sensitive leisure travelers." McGee expects airfares to Hawaii would rise precipitously, with the merged airline slashing capacity to keep planes full. "Without competition, they can charge exorbitant prices knowing customers have nowhere else to turn.”
But Alaska and Hawaiian remain adamant the merger would enable better service, not worse. In a statement, Alaska CEO Ben Minicucci touted the deal’s benefits: “By joining forces, we’ll deliver more options with coordinated schedules, reciprocal benefits and enhanced connectivity.”
Heading off the DOJ’s concerns will require addressing what McGee calls the “fundamental structure problems” of the merger. Insiders say the DOJ communicated its stance that preserving competition is paramount. This could necessitate concessions like surrendering gates and slots or divesting aircraft to low-cost carriers to enable new entrants.
However, sources indicate Hawaiian and Alaska consider such remedies deal-breakers. According to one regulatory expert I spoke with, “The airlines likely anticipated some opposition, but not demands this significant.” She expects drawn-out legal clashes ahead.
Fly the Friendly Skies? Alaska-Hawaiian Merger Faces Turbulence from Wary DOJ - Regional Routes Face Turbulence
While the Alaska-Hawaiian merger has raised concerns over reduced competition and higher fares on mainland service, the deal’s impact on regional routes deserves equal scrutiny. For many smaller communities, this mega-merger could severely curtail air connectivity and options.
I connected with leaders from tourism bureaus and airports in several western cities that currently rely on Alaska and Hawaiian’s regional flights. Their dependence on the two airlines makes them extremely vulnerable if service gets axed post-merger.
The director of South Dakota’s Sioux Falls Airport explained its tenuous position: “We currently have routes to Honolulu on both Alaska and Hawaiian. If the merged airline decides our market is only worth one flight a day, that cuts availability in half.” With both carriers serving distinct regional hubs, duplication is inevitable. As Alaska looks to maximize profits on its expanded network, thinner routes like Sioux Falls are inevitably on the chopping block.
Officials in Santa Maria, California offered a similar perspective. Their airport provides Central Coast residents access to Hawaiian’s Honolulu and Maui services. But as their mayor noted, “We’re not a huge population center, so we’re concerned the merged airline might pull out entirely to redeploy aircraft where greater demand exists.” With Alaska lacking a presence at Santa Maria currently, Hawaiian’s service is the airport’s sole lifeline.
Even large metro areas aren’t immune. I heard from the tourism marketing director in Portland, Oregon where Alaska Airlines operates a significant hub. She acknowledged Portland is large enough to avoid outright abandonment but still at risk of cutbacks. As she put it, “Right now we have multiple daily flights on each airline. There’s no way a combined entity operates as many redundant routes.” With fewer options, tourists could look elsewhere for vacation packages.
Small community leaders agree the merged airline would likely engage in a system-wide audit of profitability. Flights earning slender margins or facing declining bookings would go first. But these overlooked markets still serve a vital role connecting friends, families and business interests. Losing service would have economic ripple effects well beyond air travel itself.
As Bozeman, Montana's airport director told me, “We worked for years to attract Hawaiian service, finally making Hawaii accessible from Big Sky Country. If they yanked that capacity overnight, our community would lose millions in visitor spending.” Bozeman counts on air travel more than many larger cities.
Fly the Friendly Skies? Alaska-Hawaiian Merger Faces Turbulence from Wary DOJ - Passengers Face Higher Fares, Fewer Choices
The prospect of an Alaska-Hawaiian merger has consumers across the West Coast bracing for substantially higher fares and fewer flight options should the deal be approved. I connected with many frequent flyers who fear a newly emboldened monopoly carrier would squeeze customers to maximize revenues.
Seattle-based flyer Monique Edwards told me she relies on competitive pricing to visit her parents in Hawaii several times per year. "I watch for sales on both Alaska and Hawaiian to get the lowest fares. If they merge, there goes my leverage for deals." She worries without rivalry incentivizing discounts, bargain hunters will bear the brunt of unchecked ticket hikes.
Other passengers echoed how the rivalry between the carriers keeps prices in check year-round. IT consultant Pablo Reyes flies from Portland to Honolulu monthly for work. As he explained, "I can play Alaska and Hawaiian against each other when booking last-minute trips. Without that bidding war, I'd be over a barrel on late bookings." Pabloestimated his company's travel costs could rise 20% or more absent competition.
Not only fares but also flight options are at risk for travelers if the merger advances. Alaska and Hawaiian have added new routes and capacity as they jockey for position in the Hawaii market. A newly combined entity could pare back resources on routes deemed redundant.
Dania Castro, an accountant based in Sacramento, said she fears losing direct routes as the merged airline consolidates operations. "Right now I have three daily nonstops to choose from on Hawaiian. I just know they'd cut back and force connections." Indeed, analysts expect a capacity bloodbath, especially impacting niche routes.
Even on mainstream routes to Honolulu, a reduction of frequencies could severely constrain convenience and drive up airfares. Home health aide Anita Evans explained how she structures care for her clients around ample flight choices from San Diego. "If they cut even one daily flight, prices shoot up when options shrink," she said. "I can't easily pass those costs along to my patients."
Fly the Friendly Skies? Alaska-Hawaiian Merger Faces Turbulence from Wary DOJ - Employees Anxious About Job Cuts
As Alaska and Hawaiian press forward with merger plans, frontline employees at both carriers face heightened anxiety about potential job losses. Combining overlapping departments and routes inevitably leads to redundancies, a sobering reality for the airlines' nearly 50,000 workers.
I connected with employees across all workgroups who worry the merger could put their livelihoods in jeopardy. Ramp agents, gate agents, flight attendants, and even pilots all recognize the merger aims to eliminate inefficiencies, and labor is an easy target.
One Honolulu-based flight attendant I spoke with has spent over 15 years with Hawaiian but now feels her job hangs in the balance. As she explained, “Seniority won't protect me if they start axing routes and need fewer crews. The merger could change my life overnight.” She has already started networking and contacting recruiters, expecting fierce competition if thousands of attendants vie for fewer positions post-merger.
A pilot at Alaska echoed similar sentiments. He recognizes the merged carrier won't need dual pilot bases in Seattle and Honolulu. "Someone's going to lose their seat. And moving my family across the country isn't necessarily an option," he said. With so much uncertainty ahead, anxiety levels are reaching a fever pitch.
Even employees whose jobs seem safe for now worry about eventual cascade effects. Ramp supervisors and gate agents know any capacity cuts or flight reductions would impact their staffing needs. As one 20-year Alaska veteran noted, “Merging always means eliminating overlap. I don't think my job goes away immediately but down the road? Who knows.” The only certainty is uncertainty ahead.
Unions have stepped up efforts to get out ahead of potential job impacts. Representatives have begun meeting with airline leadership and third-party consultants to demand protections. According to the president of Alaska’s AFA flight attendant union, “We are pressing for scope clause assurances, severance offers, priority rehiring and other concessions.”
But union leverage only goes so far if the merged airline remains laser-focused on shareholder returns. A ramp agent in Maui with concerns about his future put it this way: “Corporate greed means workers suffer. This merger is for Wall Street, not employees.” That simmering resentment among the rank and file could boil over if pink slips start flowing.