…what “HA” Gone Will Mean for Hawaii Tourism, Alaska Airlines, Southwest Airlines & The Aloha Spirit

The acquisition of Hawaiian Airlines by Alaska Air marks a major milestone in the aviation industry.

What about flying to Paradise?

With this deal, Alaska Air aims to expand its reach and establish a stronger presence in the lucrative Hawaiian market, also connecting Hawaii with new large domestic and international markets.

This strategic move will allow Alaska Air to tap into the growing tourism industry in Hawaii, attracting both leisure and business travelers.

The acquisition is expected to bring synergies and operational efficiencies, benefiting both airlines and their customers.

Together, Alaska Air and Hawaiian Airlines will create a formidable force in the Pacific region, offering enhanced connectivity and a wider range of travel options.

Alaska Airlines will pay $18.00 per Hawaiian Airlines Share, making it a 1.9 billion Dollar sale for an airline that many said is the spirit of Aloha, and represents the magic of Hawaii, its culture, and hospitality.

Will the magic in the air be all lost gradually in another giant airline merge?

Alaska Airlines will acquire Hawaiian Airlines in a $1.9 billion deal, the companies announced today.

Hawaiian Airlines And Alaska Airlines boards approved this deal. Now it is to regulatory approvals.

The deal is expected to close in the first quarter of 2024, but it will take up to a year to align all aspects of this merger. The combined organization will be based in Seattle.

The CEO of Alaska Airlines

CEO Ben Minicucci, the CEO of Alaska Airlines will be in charge of this new merged airline.

He explains on his LinkedIn

At Alaska Airlines, our purpose is creating an airline people love. For me personally, I can honestly say that I love this airline for what it stands for, what we do, and how we do it. We have an amazing group of people who live our values every day and distinguish our company from so many others.

Alaska Airlines + Hawaiian Airlines: Local Care, Global Reach. Our two airlines are powered by incredible employees, with 90+ year legacies and values grounded in caring for the special places and people that we serve. This is an exciting next step in our journey to elevate the travel experience and expand options for guests.

Alaska Airlines and Hawaiian Airlines have an image

Both Alaska Airlines, but more so Hawaiian Airlines are known for enhanced cabin service on their routes, but the special Hawaiian hospitality will be difficult to make Alaska style.

“We have a longstanding and deep respect for Hawaiian Airlines, for their role as a top employer in Hawaii, and for how their brand and people carry the warm culture of aloha around the globe.”, Minicucci said.

Peter Ingram, Hawaiian Airlines’ president, and CEO, responded: “Since 1929, Hawaiian Airlines has been an integral part of life in Hawaii, and together with Alaska Airlines we will be able to deliver more for our guests, employees, and the communities that we serve.

The Hawaiian Airliines old Monopoly

Hawaiian Airlines had an almost monopoly on the interisland market in the Aloha State, when Aloha Airlines went out of business.

Hawaii, Island Air closed in 2017 it had a stand in the business and visitors industry for 37 years. 13% of the Interisland Airline traffic with codeshare and frequent flyer program agreements on United Airlines.

Hawaiian Airlines has always been the real elephant in the Hawaii aviation room. They already had a share of more than 80% in 2017 of all interisland flights when Island Air was operating.

After Hawaiian Airlines survived Aloha Airlines years before and kept growing, kept increasing ticket prices, and many insiders think helped to push the popular Superferry as the only ferry service between Hawaiian islands out of the market, it became the monopoly in the Hawaiian interisland air market for a while.

When Aloha Airlines later Island Air and Superferry were gone it meant a big gain for Hawaiian Airlines, higher airfares until COVID hit, and fewer choices for the visitors and kamaaina to keep the islands together as one State.

Southwest Airlines enters Hawaii

In 2019 this monopoly was destroyed when Southwest Airlines entered the market bringing a new option for travelers. Southwest Airlines aggressively expanded travel to many alternative US Mainland markets for Hawaii and interisland.

With the Hawaiian Airlines Alaska Airlines merger, Hawaii will not have a major home airline, even though Alaska Airlines said it would have a key hub in Honolulu.

Beginning in December, Alaska Airlines will be providing transportation to more than 120 locations in the United States, Canada, Mexico, Belize, and Costa Rica, and upcoming routes to the Bahamas and Guatemala.

Hawaiian Airlines, in business for 96 years, holds the title of the largest airline in the state, offering approximately 150 daily flights between the Hawaiian islands. Additionally, it provides nonstop flights connecting Hawaii to 15 major U.S. cities, as well as serving American Samoa, Australia, Cook Islands, Japan, New Zealand, South Korea, and Tahiti.

Official Joint Statement & Press Release by Alaska Airlines and Hawaiian Airlines:

SEATTLE and HONOLULU – Alaska Air Group, Inc. (NYSE: ALK), and Hawaiian Holdings, Inc. (NASDAQ: HA) today announced that they have entered into a definitive agreement under which Alaska Airlines will acquire Hawaiian Airlines for $18.00 per share in cash, for a transaction value of approximately $1.9 billion, inclusive of $0.9 billion of Hawaiian Airlines net debt. The combined company will unlock more destinations for consumers and expand choice of critical air service options and access throughout the Pacific region, Continental United States and globally. The transaction is expected to enable a stronger platform for growth and competition in the U.S., as well as long-term job opportunities for employees, continued investment in local communities and environmental stewardship.

As airlines rooted in the 49^th and 50^th U.S. states, which are uniquely reliant upon air travel, Alaska Airlines and Hawaiian Airlines share a deep commitment to caring for their employees, guests and communities. This combination will build on the 90+ year legacies and cultures of these two service-oriented airlines, preserve both beloved brands on a single operating platform, and protect and grow union-represented jobs and economic development opportunities in Hawai‘i, with a combined network that will provide more options and added international connectivity for travelers through airline partners including, the oneworld Alliance.

“This combination is an exciting next step in our collective journey to provide a better travel experience for our guests and expand options for West Coast and Hawai‘i travelers,” said Ben Minicucci, Alaska Airlines CEO. “We have a longstanding and deep respect for Hawaiian Airlines, for their role as a top employer in Hawai‘i, and for how their brand and people carry the warm culture of aloha around the globe. Our two airlines are powered by incredible employees, with 90+ year legacies and values grounded in caring for the special places and people that we serve. I am grateful to the more than 23,000 Alaska Airlines employees who are proud to have served Hawai‘i for over 16 years, and we are fully committed to investing in the communities of Hawai‘i and maintaining robust Neighbor Island service that Hawaiian Airlines travelers have come to expect. We look forward to deepening this stewardship as our airlines come together, while providing unmatched value to customers, employees, communities and owners.”

“Since 1929, Hawaiian Airlines has been an integral part of life in Hawai‘i, and together with Alaska Airlines we will be able to deliver more for our guests, employees and the communities that we serve,” said Peter Ingram, Hawaiian Airlines President and CEO. “In Alaska Airlines, we are joining an airline that has long served Hawai‘i, and has a complementary network and a shared culture of service. With the additional scale and resources that this transaction with Alaska Airlines brings, we will be able to accelerate investments in our guest experience and technology, while maintaining the Hawaiian Airlines brand. We are also pleased to deliver significant, immediate and compelling value to our shareholders through this all-cash transaction. Together, Hawaiian Airlines and Alaska Airlines can bring our authentic brands of hospitality to more of the world while continuing to serve our valued local communities.”

Complementary Networks and Greater Choice for Alaska Airlines and Hawaiian Airlines’ Combined 54.7 million Annual Passengers

The combination of complementary domestic, international, and cargo networks is positioned to enhance competition and expand choice for consumers on the West Coast and throughout the Hawaiian Islands through:

Preserving outstanding brands: The combined airline will maintain both industry-leading Alaska Airlines and Hawaiian Airlines brands while integrating into a single operating platform, enabling the remarkable service and hospitality of each to be enjoyed by passengers with continued excellence in operational reliability, trust and guest satisfaction for which both companies have been consistently recognized.
An enhanced product offering for a wide range of consumers: The combination preserves and expands high-quality, best-in-class product offerings with price points to make air travel accessible to a wide range of consumers across a range of cabin classes, including greater choice between Alaska Airlines’ high-value, low-fare options and Hawaiian Airlines’ international and long-haul product on par with network carriers.
Complementary networks expand travel options: Passengers traveling throughout the Continental U.S., U.S. West Coast and across the Pacific will benefit from more choice and increased connectivity across both airlines’ networks, with service to 138 destinations including non-stop service to 29 top international destinations in the Americas, Asia, Australia and the South Pacific, and combined access to over 1,200 destinations through the oneworld Alliance.
Expanded service for Hawai‘i: For Hawai‘i residents, the combination will expand service and convenience by tripling the number of destinations throughout North America that can be reached nonstop or one stop from the Islands, while maintaining robust Neighbor Island service and increasing air cargo capacity.
Strategic Honolulu hub: Honolulu will become a key Alaska Airlines hub, enabling greater international connectivity for West Coast travelers throughout the Asia-Pacific region with one-stop service through Hawai‘i.
Increased loyalty program benefits: The transaction will connect Hawaiian Airlines’ loyalty members with enhanced benefits through an industry-leading loyalty program for the combined airline, including the ability to earn and redeem miles on 29 global partners and receive elite benefits on the full complement of oneworld Alliance airlines, expanded global lounge access and benefits of the combined program’s co-brand credit card.

Delivering Substantial Benefits for Employees and Communities in Hawai‘i

As one of Hawai‘i’s largest employers, Hawaiian Airlines has a long legacy of commitment to its employees, who shaped the company over its 94-year history, and to local communities, culture, and the natural environment. As an integrated company, Alaska Airlines and Hawaiian Airlines will continue this stewardship and maintain a strong presence and investment in Hawai‘i. The combined company will drive:

Growth in union-represented jobs: Maintain and grow union-represented jobs in Hawai‘i, including preserving pilot, flight attendant, and maintenance bases in Honolulu and airport operations and cargo throughout the state.
Strong operational presence: Maintain a strong operations presence with local leadership and a regional headquarters in Hawai‘i to support the combined airlines’ network.
Opportunities for employees: Provide more opportunities for career advancement, competitive pay and benefits, and geographic mobility for employees.
Expansion of workforce development initiatives: Continue and expand access to workforce development initiatives, including Hawaiian Airlines’ partnership with the Honolulu Community College Aeronautics Maintenance Technology Program and Alaska Airlines’ Ascend Pilot Academy among others, to support future jobs and career opportunities in Hawai‘i and beyond.
Investment in local communities: Continue to invest in Hawai‘i communities, combining and expanding the two airlines’ commitments, and work with local communities and government to build a vibrant future for Hawai‘i.
Perpetuation of culture: Committed to promoting regenerative tourism in the Hawaiian Islands and investing in Hawaiian language and culture, continuing and building upon Hawaiian Airlines’ existing programs.

Becoming an Even More Sustainable Combined Airline

Alaska Airlines is committed to building upon both Alaska Airlines’ and Hawaiian Airlines’ strong commitments to environmental stewardship, including Alaska Airlines’ five-part path to net zero by 2040 and sustainability goals in areas of carbon emissions and fuel efficiency, waste, and healthy ecosystems. In 2022, Alaska Airlines made its largest Boeing fleet order in its 90-year history, focused on the Boeing 737-MAX aircraft, which are 25% more fuel-efficient on a seat-by-seat basis than the aircraft they replace, and continued to expand use of route optimization software to help dispatchers develop routes that save fuel, time, and emissions. Both airlines are actively working to advance the market for sustainable aviation fuel (SAF) in their respective geographies. These climate-focused efforts will continue, including continued investment in local sourcing.

Compelling Strategic and Financial Rationale, Generating Outsized Value Creation

The combination fits strategically with Alaska Airlines’ sustained focus on expanding options for West Coast travelers and creates an important new platform to further enhance Alaska Airlines’ above industry-average organic growth. The transaction is designed to deliver attractive value creation for Alaska Airlines’ shareholders while providing a compelling premium for Hawaiian Airlines shareholders.

All-cash transaction of $18.00 per share for a total equity value of $1.0 billion provides a compelling premium for Hawaiian Airlines shareholders.
Transaction multiple of 0.7 times revenue, approximately one third the average of recent airline transactions.
Approximately $235 million of expected run-rate synergies reflect a conservative estimate of the transaction’s synergy potential; these exclude other identified upside opportunities that could be realized.
Expected to generate high single digit earnings accretion for Alaska Airlines within the first two years (high-teens three+ years) post-close and mid-teens ROIC by year three, excluding integration costs, with returns above Alaska Airlines’ cost of capital.
No anticipated material impact on long-term balance sheet metrics, with return to target leverage levels expected within 24 months.

Conditions to Close

The transaction agreement has been approved by both boards. The acquisition is conditioned on required regulatory approvals, approval by Hawaiian Holdings, Inc. shareholders (which is expected to be sought in the first quarter of 2024), and other customary closing conditions. It is expected to close in 12-18 months. The combined organization will be based in Seattle under the leadership of Alaska Airlines CEO Ben Minicucci. A dedicated leadership team will be established to focus on integration planning.

Advisors

BofA Securities and PJT Partners are serving as financial advisors and O’Melveny & Myers LLP is serving as legal advisor to Alaska Airlines. Barclays is serving as financial advisor and Wilson Sonsini Goodrich & Rosati, Professional Corporation is serving as legal advisor to Hawaiian Airlines.

Microsite and Multimedia Assets

Additional information about the transaction is available at a new joint website at localcareglobalreach.com and investor materials can also be found at investor.alaskaair.com and news.alaskaair.com.

INVESTOR CONFERENCE CALL AND PRESS CONFERENCE

Alaska Airlines and Hawaiian Airlines executives will discuss the transaction on a conference call. An investor presentation about the transaction will be referenced on the conference call and is being posted on the joint website referenced above.

Alaska Airlines and Hawaiian Airlines will be joined by local leaders at a joint press conference in Honolulu today, December 3, 2023, at 3:00 p.m. Hawai‘i Standard time.

About Alaska Airlines

Alaska Airlines and our regional partners serve more than 120 destinations across the United States, Belize, Canada, Costa Rica and Mexico with new service to the Bahamas and Guatemala beginning in December. We strive to be the most caring airline with award-winning customer service and an industry-leading loyalty program. As a member of the oneworld Alliance, and with our additional global partners, our guests can travel to more than 1,200 destinations on 29 airlines while earning and redeeming miles on flights to locations around the world. Learn more about Alaska at news.alaskaair.com and follow @alaskaairnews for news and stories. Alaska Airlines and Horizon Air are subsidiaries of Alaska Air Group.

About Hawaiian Airlines

Now in its 95th year of continuous service, Hawaiian is Hawaiʻi’s biggest and longest-serving airline. Hawaiian offers approximately 150 daily flights within the Hawaiian Islands, and nonstop flights between Hawaiʻi and 15 U.S. gateway cities – more than any other airline – as well as service connecting Honolulu and American Samoa, Australia, Cook Islands, Japan, New Zealand, South Korea and Tahiti.

Consumer surveys by Condé Nast Traveler and TripAdvisor have placed Hawaiian among the top of all domestic airlines serving Hawaiʻi. The carrier was named Hawaiʻi’s best employer by Forbes in 2022 and has topped Travel + Leisure’s World’s Best list as the No. 1 U.S. airline for the past two years. Hawaiian has also led all U.S. carriers in on-time performance for 18 consecutive years (2004-2021) as reported by the U.S. Department of Transportation.

The airline is committed to connecting people with aloha. As Hawai’i’s hometown airline, Hawaiian encourages guests to Travel Pono and experience the islands safely and respectfully.

Hawaiian Airlines, Inc. is a subsidiary of Hawaiian Holdings, Inc. (NASDAQ: HA). Additional information is available at HawaiianAirlines.com. Follow Hawaiian’s Twitter updates (@HawaiianAir), become a fan on Facebook (Hawaiian Airlines), and follow us on Instagram (hawaiianairlines). For career postings and updates, follow Hawaiian’s LinkedIn page.