Alaska Airlines’ proposed acquisition of Hawaiian Airlines met a critical milestone Friday when a “substantial majority” of shareholders of the local airline, which dates back to 1929, approved the deal.
The boards of directors for both air carriers on Dec. 2 approved Alaska Airlines’ purchase of Hawaiian Airlines in a $1.9 billion deal, which includes $900 million in Hawaiian debt. However, the blessing of Hawaiian stockholders was necessary to complete the transaction, which is expected to take 12 to 18 months.
Following a special virtual stockholder meeting held Friday afternoon, Hawaiian Holdings Inc., parent company of Hawaiian Airlines, announced the preliminary approval and said it would file the final voting results, as tabulated by an independent inspector of elections, on a Form 8-K with the U.S. Securities and Exchange Commission. If the merger is approved, Hawaiian shareholders are set to receive a premium of $18 in cash per share. Hawaiian Holdings closed at $14 a share Friday.
Hawaiian Airlines President and CEO Peter Ingram said in the statement, “Stockholder approval of our transaction with Alaska is an important milestone toward combining our airlines. Together, we will bring stronger competition to the U.S. airline industry, deliver more value to our guests and the communities that we serve, and provide greater job opportunities for our employees.”
The airlines now must focus on obtaining needed approval from competition authorities, including the U.S. Department of Justice and state attorneys general. They also will have to figure out how to integrate the two companies, especially technologies and workforce, at a time when Alaska’s flight attendants have authorized a strike vote.
Getting those approvals could prove challenging with the Biden administration taking a hard stance against airline consolidation. To be sure, the U.S. Department of Justice recently sued to block a deal for JetBlue Airways to take over Spirit Airlines. Following a nonjury trial, U.S. District Judge William Young sided with the Justice Department to block the $3.8 billion merger, which had been approved by Spirit Airlines shareholders.
JetBlue and Spirit appealed, but a U.S. appeals court is not expected to hear arguments until June, causing concern that the ruling will not meet a July 24 deadline for the merger agreement.
Hawaiian and Alaska officially have filed with the U.S. Justice Department for antitrust clearance. Ingram and Ben Minicucci, Alaska Airlines president and CEO, maintain that their situation is vastly different from that of JetBlue and Spirit. They said their deal doesn’t involve a low-cost carrier, their operations have little overlap and that customers will benefit from expanded travel options and services.
Ingram and Minicucci have characterized the proposed merger as pro-consumer and pro-competitive because it allows them to compete more effectively in an industry dominated by larger carriers Delta, United, American and Southwest, which together make up 80% of the U.S. market.
If the merger goes through, the two airlines will keep their separate identities. But Alaska, which was the nation’s fifth-largest airline before the deal, will expand to a fleet of 365 narrow- and wide-body airplanes that enable guests to reach 138 destinations through the combined networks, and more than 1,200 destinations through the Oneworld Alliance, which harnesses the collective power of member airlines.
The leaders have said Honolulu would become a key hub for the combined airline, which would allow Hawaii residents expanded service to the mainland, while creating new connections to Asia and the Pacific for travelers across the U.S.
An Alaska Airlines spokesperson said Friday in a statement, “We’re pleased the Hawaiian Airlines shareholders see the value of this combination, which expands benefits and choice for guests in Hawaii and across the West Coast. You can learn more about the benefits at localcareglobalreach.com.”
Still, not everyone agrees that the merger is beneficial. Deann Owen filed a lawsuit Jan. 10 in the U.S. District Court of the Southern District of New York against Hawaiian Holdings and the company’s board of directors.
The case, which is still proceeding, alleges violations of the Securities and Exchange Act of 1934 related to the defendants’ efforts to sell the company to Alaska Air Group Inc. through merger vehicle Marlin Acquisition Corp. Owen’s suit, which demands a jury trial, claims the sale process is unfair and would result in irreparable injury.
Among Owen’s claims is that “the definitive proxy statement fails to adequately disclose why the company board was willing to settle on a purchase price of $18 per share of company common stock after the initial offering was at a purchase price of $20 per share of company common stock.”
Another claim is that the definitive proxy statement “fails to adequately disclose why no market check was conducted for other possible strategic alternatives, including the possibility of an investment by a potential equity partner.”
Owen’s suit also alleges that Hawaiian insiders are the primary beneficiaries of the proposed transaction, not the company’s public stockholders, such as herself. Moreover, she claims that the board and the company’s executive officers “are conflicted because they will have secured unique benefits for themselves from the proposed transaction not available to plaintiff as a public stockholder of Hawaiian.”
If the merger gets DOJ approval, there also will be much work to do in integrating the companies, including various technologies and its union workforce.
On Feb. 13, local flight attendants, including those from Alaska and Hawaiian, picketed at Daniel K. Inouye International Airport as part of a Worldwide Day of Action to demand fair contracts. That same day, Alaska Airlines flight attendants voted to authorize a strike.
Dissatisfaction among flight attendants is mounting nationwide and in Hawaii, where flight attendants for Alaska and Hawaiian airlines have delayed a merger endorsement.
The Association of Flight Attendants-CWA, which represents 6,800 flight attendants at Alaska Airlines and 2,200 at Hawaiian Airlines, has said support is dependent on whether demands made by Alaska and Hawaiian union leadership are met. Key demands include a merger protocol agreement with detailed protections for all flight attendants.
Ingram and Minicucci have said they are committed to maintaining and growing the combined airline’s union-represented workforce in Hawaii.
Until the transaction is approved, Hawaiian and Alaska continue to operate separately. Hawaiian has said that its plans for this year are focused on further strengthening its business and enhancing its guest experience with better technology, debuting a new flagship aircraft — the Boeing 787-9 Dreamliner — and the continued expansion of its network.
On Feb. 8, Hawaiian became the world’s first major carrier to deploy Starlink’s high-speed, low-latency broadband internet, which it debuted aboard Airbus A321neo N228HA, which flew from Honolulu to Long Beach, Calif. The speed of the service allows gaming, streaming and other popular connected services even while crossing the Pacific Ocean.
Will Seidel, director of Starlink engineering at SpaceX, said in a statement, “Starlink’s self-designed aviation terminal installed on Hawaiian’s aircraft allows each plane to receive strong, fast internet signals from the satellites orbiting above Earth. The terminal will seamlessly switch connections from satellite to satellite as planes cross the Pacific, providing an uninterrupted internet experience for passengers.”
Hawaiian said it is working with Starlink to roll out the technology across its long-haul fleet, including its new flagship Boeing 787-9 Dreamliner aircraft.
Hawaiian earlier this week took delivery of its first Boeing 787-9 Dreamliner, which will be placed into service April 15 on an inaugural flight from Honolulu to San Francisco, followed by Honolulu-Los Angeles on May 15 and Honolulu- Phoenix on May 16. The airline plans to have three 787s delivered in 2024.
Hawaiian is advertising that these fuel-efficient planes “travel at a lower cabin altitude pressurization with enhanced filtration and turbulence sensors, resulting in a more comfortable flight, while the spacious interior features electronically dimmable windows and extra large overhead bins.”