Biden administration faces new challenge as proposed airline merger threatens competition

The ongoing debate surrounding airline consolidation and its impact on consumers has been reignited with another proposed airline buyout. Alaska Air Group’s announcement of its intent to acquire Hawaiian Airlines for $1.9 billion has raised concerns and is expected to face scrutiny from the Biden administration, which has been vocal about its opposition to mergers.

This proposed deal comes on the heels of the Justice Department’s opposition to JetBlue’s proposal to acquire Spirit Airlines, indicating a growing scrutiny of airline mergers, regardless of their size.

Alaska’s offer of $18 per share for Hawaiian Airlines represents a significant premium over Hawaiian’s recent stock price. Struggling to recover from the pandemic and facing new competition, Hawaiian has experienced financial challenges, having incurred losses of $159 million this year.

Alaska has stated that Hawaiian will continue to operate as a standalone brand, a departure from the typical absorption that follows such acquisitions in the airline industry.

Both Alaska and Hawaiian serve distinct customer bases, with Alaska being the fifth-largest U.S. airline, primarily known on the West Coast, and Hawaiian Airlines being heavily reliant on traffic between Asia and Hawaii.

While both airlines are considered more traditional in terms of fares, they have maintained strong reputations for on-time flights, with Hawaiian often leading the industry in this regard.

With the Biden administration’s track record of challenging airline mergers, the Alaska-Hawaiian deal is set to face another test to preserve competition in the industry.

The Justice Department has previously demonstrated willingness to intervene in airline mergers in an effort to maintain a competitive landscape. In light of regulators’ concerns about the concentration of traffic between Hawaii and the mainland, the fate of the Alaska-Hawaiian deal remains to be seen.

Previous airline mergers have significantly consolidated the industry, with four major carriers now controlling about 80% of the domestic air-travel market. This has raised concerns about the impact on consumers, although airfares have dropped significantly when adjusted for inflation.

Despite assertions from industry trade groups that competition remains strong, the ongoing consolidation in the airline industry continues to be a topic of contention.


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