The Department of Justice allowed the period of time to lapse for it to object and file suit against Alaska Airlines closing its deal to acquire Hawaiian Airlines.
It appears that they’re deferring to the Department of Transportation on approval. And DOT is taking time and – it appears – considering what conditions it will extract from Alaska.
Justice deferring to DOT is the most common process in airline mergers, though since the Trump administration DOT approved the partnership between American Airlines and JetBlue the Biden DOJ needed to sue to unwind it. (We’re still likely months away from a decision on appeal in that case, though the partnership was unwound by a district court judge in the meantime.)
United has gone to DOT with its complaints about the deal. While they likely can’t stop it they appear to be asking for the government to require Alaska to continue existing partnerships with mainland-based airlines.
- United can fly between the Hawaiian islands if it wishes. They could also, presumably, partner with Southwest Airlines. There’s really no lack of competition on routes between the Hawaiian islands. Fares are low and so are passenger loads.
- But it prefers to carry passengers overwater to Hawaii and sell connecting tickets between the islands on Hawaiian, and at preferred negotiated pro-rating of fares.
- And it would like the federal government to order Alaska to continue allowing it to do so.
Since conversations with DOT staff on pending matters must be disclosed, to avoid their being considered ex parte and improper, the Attorney General of Hawaii’s conversation has been filed on the docket that they “spoke with Mohsin Syed, Chief of Staff for DOT Secretary Pete Buttigieg, and Brian Stansbury, Deputy General Counsel for DOT” about the deal. (HT: Enilria)
- The State of Hawaii, and in particular the Governor, have been publicly supportive
- Alaska Airlines has provided reassurances about their plans for Hawaiian Airlines
- The Attorney General would like to make those binding, it appears
Commitments from Alaska to a state aren’t binding under the Airline Deregulation Act, unless there’s an explicit quid pro quo (such as a contract for air service). However, such commitments could be required by DOT as a condition of approval.
Attorney General Lopez and DOT discussed the commitments made by Alaska Airlines for the future of Hawaiian Airlines and to Hawaii consumers and the enforceability of those commitments. Attorney General Lopez stressed the importance of protecting the interests of the people of Hawai’i in connection with this merger.
The issues laid out by Hawaii are:
- “Affordable inter-island travel” and “preserving inter-island flights at an affordable price” so presumably commitments on service, perhaps including number of seats when the carrier retires Boeing 717s, as well as frequencies. They probably don’t want fewer flights or smaller planes like regional jets since reduction in seats could drive up fares.
- “[C]oncern that Alaska Airlines would repurpose Hawaiian Airlines Airbus jets and use
them to replace Boeing jets on routes that do not serve Hawai’i.” Hawaii uses Airbus A330s for long range flying both from the mainland to Hawaii and on international routes from Honolulu. They use A321neos for flying between Hawaii and the mainland.Alaska Airlines probably does want to move Airbus A330s to Seattle and operate international flights there rather than Honolulu. And if they looked at the combined flying between the West Coast and Hawaii on both Alaska and Hawaiian, and decided to reduce it, that might mean moving some Airbus A321s into mainland domestic service.
The discussion of Airbus versus Boeing is something of a euphemism here. We don’t even know that Alaska will keep the Airbus fleet, having just finally disposed of the planes they picked up in their Virgin America acquisition. Instead they’re talking about wanting to ensure that Hawaiian’s fleet operates current Hawaiian routes, which on its face is a bit absurd but there could be certain service guarantees imposed as an approval condition.
With DOT still to approve the deal, the opportunity for parties to get their wish lists in appears to be now. Approval so far has been helped by Hawaii’s supportive politicians. In exchange, Alaska has offered promises about what their stewardship of the brand and its routes will look like. It seems reasonable to expect some of those promises will be written into binding commitments by the federal government.
thanks for staying on top of this, Gary.
Hawaii (the state) is smart enough to get it in writing.
The DOT Is compiling all of the concerns and UA at least is speaking.
AS isn’t going to let the deal fall apart but whatever restrictions Hawaii asks for could change the profitability that AS thinks it can get out of the deal.
As the article talks about, it sounds like the concerns are less about United and codesharing and more about the State of Hawaii having their concerns legally bound. AS/HA have been cooperative so far with both the State of Hawaii and the federal government. I actually think not enforcing the codeshares creates more competition, not reduce it. My guess is that the DOT will enforce service levels and promises Alaska has already made but will not necessarily make them continue the codeshares when it’s all said and done. We shall see…….
I hope they don’t hurt hawaian airlines like they did with Jet Blue. The latter may not recover.
tato
the article is only about consultations between the state of Hawaii and the US DOT about issues Hawaii raised.
It doesn’t mean the DOT is not entertaining other issues – or not
@ Tim Dunn
This article is not ONLY about consultations raised between the state of Hawaii and the DOT. The record of discussion was added to the same docket as United’s discussion for the record. I never said the DOT was considering only these discussions publicly stated. Of course they are going to have their own concerns too, perhaps when it comes to codesharing. I simply stated my opinion based on the information released yesterday and today, It just so happens to differ from yours.
Also when it comes to holding you to your words you said in an article a week ago, “And it is amazing that the people who claim they read my work and writing continue to say that I thought either the DOT or DOJ will block this merger; I have never said it would be blocked.”
Earlier in the week though you said this on Seeking Alpha: “The DOT said shortly after the merger was announced that it would object. The DOJ might not be filing suit but the DOT will be the bad guy.”
Are you sticking to that quote that they will file suit or did you mean they will do something other than block? Where did you see that the DOT said that? You never gave a source even though you stated it as fact. You responded directly to me and another commentator about coming up with a common opinion in the article from yesterday. Which opinion of yours are you going with in this case?
I am not part of the federal or state governments or either airline, nor do I know anybody with direct sources of these talks. I am basing my opinion on the publicly gathered information from the internet just as you are. My opinion (guess) is just as good as yours.
being the bad guy doesn’t mean suing.
It simply means – which I believe will be the case – that the DOT will extract some sort of concessions.
AS won’t let the deal fall apart and what Hawaii wants and potentially the DOT could ask regarding codesharing with the mainland carriers would be well within the normal course of business as it exists now.
If AS thinks it needs something other than those events now, then Hawaii is justified in asking for it all to be put in writing.
And it is entirely possible that AS could have considered using a combination of mainline and regional jets to keep frequency up and get rid of the 717s. Hawaii also is fully justified in saying that the number of widebodies that HA has used for international ops should stay there – but it gets much harder to back that up given that HA is flying much less international than they did before and they are losing nearly equal amounts money on their international and domestic systems.
I suspect Hawaii is asking for guarantees on issues that AS knows about.
thanks for reading my Seeking Alpha work… I see no discontent between what I have said here or there.
If AS gets by w/ no concessions from either the DOT or the DOJ, then you can tell me I was wrong.
I don’t pretend to know what AS is thinking in terms of getting HA’s losses down but
When Hawaiian miles are finally transferred, they should add a bonus. Alaska did that for Virgin America Elevate miles
They should just let these two airlines merge without any conditions. There are no material antitrust issues. That should be enough. Mergers should not be used as an opportunity for governments — or competitors — to “get stuff.”