‘We’re Liking What We See’: How The Alaska-Hawaiian Merger Came Together
Hawaiian Airlines’ CEO said his company had to pay serious attention to an offer made several months ago by his counterpart at Alaska.
Alaska Airlines’ $1.9 billion deal to buy Hawaiian Airlines – an announcement that Hawaiian CEO Peter Ingram described on Sunday as the biggest in the island carrier’s history – started to take shape in January, as leadership at Alaska was exploring ways to boost growth over the next five years.
Behind closed doors, those leaders quickly honed in on the potential of acquiring Hawaiian, a similar operation whose fleet was also based outside the mainland, according to Alaska CEO .
“That鈥檚 when it began. We began looking at it piece by piece, and every board meeting we would come up and give an update – we’re liking what we see,鈥 Minicucci said in a joint on Sunday at Honolulu’s Kewalo Basin.
As part of its diligence, Alaska looked at Hawaiian’s international routes, its interisland routes, its flights to the West Coast, its cargo operations – “we looked at every part of the business,” Minicucci said. Eventually, they brought on outside advisers to help further decide whether the purchase would make sense.
Then, several months ago, Alaska’s board agreed to a price to buy Hawaiian, Minicucci said.
He then approached Ingram with an offer.
鈥淲hen Ben reached out to me with the proposal, we knew it was something we had to pay serious attention to,” Ingram said Sunday. Ingram and leadership at Hawaiian had to “think about whether this was the right thing for our shareholders (and) whether this was the right thing for all of the stakeholders in our business.鈥
The meeting of the two executives kicked off a series of secret negotiations over the past few months that culminated in the two companies’ boards approving the deal on Saturday — and then Sunday’s surprise announcement.
Ingram said they opted to break the news on Sunday because otherwise the companies would have had to announce the deal early Monday morning — when most of Hawaii was still asleep.
It still needs final approval from the U.S. Department of Justice, a process the executives say could take between a year and 18 months.
If it goes through, they plan to keep both the Alaska and Hawaiian brands while running them under a joint operation. What that approach would entail, exactly, remains to be seen. At a press conference Sunday, Minicucci and Ingram deferred several media questions about details such as how the two companies’ frequent flyer and loyalty programs would work until after the purchase gets approved.
Nonetheless, they said the merger makes sense for the two main carriers serving the two U.S. states that are detached from the mainland and uniquely dependent on air travel.
Ingram, meanwhile, said Hawaiian did not agree to the deal in response to any internal company distress.
鈥淲e鈥檙e not running away from anything. This is a great opportunity on a stand-alone basis,” he said. “We feel very good about the plan we have going forward. We feel very good about how we鈥檙e positioned. But this was a new opportunity – a better opportunity – and we decided to move forward with it.”
A Secret By Necessity
Hawaiian’s business – like most airlines’ – suffered steep losses during the Covid-19 pandemic. It has also seen problems pop up in recent years with its online and telephone reservation systems, as well as flight cancellations stemming from pilot shortages.
“I think we’ve addressed those things as we’ve gone along,” Ingram said Sunday. The merger, he said, is more about positioning the business to be competitive in the long term than addressing any of those recent issues. He further said that Hawaiian recently reclaimed its previous, longtime spot as the nation鈥檚 most on-time carrier for three of the last four months.
Ingram also said that he understood if some of his company’s employees were shocked and blindsided by news of the deal Sunday.
鈥淭his is a very emotional day, in some ways a difficult day for employees and it’s going to take a lot of people time to process that,” he said. However, the nature of the merger 鈥渞equires secrecy,” he said during the press conference.
Any time company officials have knowledge of a transaction that could affect the value of its stock price, they either have to disclose it or keep it entirely secret so no one can trade on it, he said. Now, they plan to reach out to employees about what lies ahead, he added.
Hawaiian, which has been in service for 95 years, is the island state鈥檚 biggest and longest-serving airline. It offers about 150 daily interisland flights as well as nonstop flights between Hawaii and 15 U.S. gateway cities. The airline also connects Honolulu and American Samoa, Australia, Cook Islands, Japan, New Zealand, South Korea and Tahiti. It employs some 7,000 people.
On Sunday, Alaska and Hawaiian officials said that all of Hawaiian’s 5,800 union-represented employees would keep their jobs. Most union employees at both companies are represented by the same unions, and their seniority would be blended together, Minicucci said.
have resulted in higher fares and fees to travelers, as well as reduced routes and downgraded flight amenities. On Sunday, however, the two airline executives said this merger would allow their carriers to better compete with the main four airlines that now dominate the market.
They called the deal “pro-consumer” and “pro-competitive.” Alaska and Hawaiian have a combined 1,400 flights and only 12 of them overlap, they said.
Those 12 flights among the two still-competing carriers looking to merge all serve the Hawaiian islands. But Minicucci said the prices to fly to and from Hawaii would remain competitive because other airlines still serve the local market.
Minicucci’s airline is the only carrier serving certain routes across Alaska, and company officials “do our best not to take advantage because we鈥檙e the only player,” he said Sunday.
鈥淲e want to offer a premium level of service at the lowest possible fare. We want to offer value at a fair price,” he added.
In a statement Sunday, Hawaii Gov. Josh Green said he and state Attorney General Anne Lopez “will be monitoring the merger/acquisition very closely.”
“Both Alaska Airlines and Hawaiian Airlines are very high-quality companies, but ultimately, I will be watching to make sure all of our state鈥檚 needs are met and all of our workers are cared for,” Green said.
