Alaska Air Group announced Sunday it has agreed to buy Hawaiian Airlines for $1.9 billion.
The surprise move would vault Alaska into international expansion with a fleet including long-haul widebody jets flying across the Pacific Ocean to destinations in Japan, Korea, Australia and New Zealand.
"It's just making Alaska stronger and better," Alaska CEO Ben Minicucci said in an interview. "We become a bigger competitor against the big four airlines, United, Delta, American and Southwest."
Minicucci said he hopes the deal can get though the government regulatory process and be finalized by the end of next year. It has been approved by the boards of both companies.
Alaska said it will continue to operate Hawaiian under its separate brand but will combine the two airlines' frequent flyer programs.
The merger will expand Alaska Airlines, already the fifth largest U.S. airline, to a fleet of 365 jets consisting of Alaska's Boeing 737 narrowbodies and Hawaiian's out-of-production Boeing 717s, as well as Hawaiian's Airbus A321neo long-range narrowbodies and A330 widebody airplanes.
Hawaiian CEO Peter Ingram said Minicucci approached him and proposed the acquisition "a few months ago." He said the Hawaiian board "took a real thorough look at it and decided it is the right course of action."
Alaska currently operates flights to Hawaii from Seattle, Everett and Portland as well as from Los Angeles, San Jose and San Francisco in California.
Although that would seem to duplicate Hawaiian's flights to West Coast cities, including Seattle, Minicucci said the combined airline won't cut out any flights.
"Hawaiian flights are all full flying to Hawaii and the Alaska flights are full. So there won't be any reduction in service to Hawaii," he said.
Minicucci said the plan is growth as more network connections stimulate more air travel.
"This was a unique opportunity with Hawaiian to expand our domestic footprint, to expand our international footprint," Minicucci said. "When you combine these two networks, the pie grows because the utility of the network grows, the connectivity grows."
Honolulu would become a key Alaska Airlines hub.
Hawaiian has diverse routes, fleet
Hawaiian, flying since 1929, is the largest operator of commercial flights to and from the Hawaiian islands. With 150 daily inter-island flights, it is also a major transportation link within the state of Hawaii.
For those short inter-island hops of 100 miles or less, it flies a fleet of older, out-of-production Boeing 717s, which Boeing inherited with its 1997 McDonnell Douglas merger.
Minicucci said Alaska is "fully committed to investing in the communities of Hawai'i and maintaining robust neighbor island service."
To the West Coast, Hawaiian flies long-range narrowbody Airbus A321neos. On some flights to the most popular West Coast cities, including Los Angeles and Seattle, it also uses the more spacious Airbus A330 widebody jets.
And most distinctly from Alaska Airlines, Hawaiian flies those A330s long haul — both across the U.S., connecting Honolulu to New York, Boston and Austin, Texas — and also across the Pacific to Tokyo; Seoul, South Korea; Sydney, Australia; and Auckland, New Zealand.
The almost 10-hour Hawaiian flight nonstop from Honolulu to New York's JFK is the longest domestic flight in the U.S.
As is the norm for long-haul international flying, those airplanes feature lie-flat seats in first class. This is a step up in passenger cabin configuration and service that would be completely new to Alaska.
Airline mergers are notoriously difficult and expensive. They require the integration of complex flight booking and operational systems, and the smooth combining of disparate employee groups.
Enlarging a fleet with different airplane models adds to the complication.
Alaska only this fall finally emerged from the fleet and staffing complications of its $2.6 billion merger with Virgin America in 2016 that substantially expanded its West Coast network.
In September, the airline stopped flying the Airbus jets it inherited from Virgin and transitioned the Airbus pilots to train to fly Boeing 737s. The airline heralded the cost savings in this return to a simpler "all-Boeing fleet."
If the Hawaiian merger goes ahead, that will change again.
And it could prove even more complex to integrate Hawaiian, with different sets of pilots, cabin crew and maintenance mechanics servicing four different aircraft types.
"That's what you get when you make these big strategic moves," said Minicucci. "We'll work our way through the fleet to make sure it's optimized."
Ingram said the different aircraft models Hawaiian flies are all "really well suited to the missions they serve."
"In a network with as much diversity as that, you do need some different characteristics in your fleet," he said. "Ben [Minicucci] and his team I think will sort that over time."
To try to secure union support that would influence regulators to approve the deal, Alaska in its announcement stressed that it will "maintain and grow union-represented jobs in Hawai'i, including preserving pilot, flight attendant, and maintenance bases in Honolulu."
Both the Association of Flight Attendants union, which is currently in tense contract talks with Alaska Air, and the International Association of Machinists union, representing ground workers at both airlines, expressed concern in separate statements.
"Our first priority is to determine whether this merger will improve conditions for flight attendants," the flight attendants union said in a statement Sunday. "Our support of the merger will depend on this."
Richie Johnsen, the IAM's air transport territory general vice president, said his union is engaged in discussions to ensure that members' "collective bargaining agreements, and their rights, are being protected."
Minicucci said Alaska will pay $1 billion in cash and assume $900 million in Hawaiian debt. Hawaiian shareholders would get $18 per share, a premium on Friday's closing share price of just under $5.
He projected that within two years of the deal closing Alaska will reap at least $235 million in annual gains from a combination of new revenue and cost savings.
Alaska Airlines ranks fifth among carriers when it comes to domestic travel, according to the Bureau of Transportation Statistics. Delta led carriers between September 2022 and August 2023, capturing 17.6% of market share. American was close behind, and Southwest and United rounded out the top four.
Alaska captured 6.4% of market share, while Hawaiian came in 10th at 1.8%.
