The Division of Transportation stated on Tuesday that it had taken a serious step in the direction of approving the merger between Alaska Airways and Hawaiian Airways, successfully permitting the 2 airways to shut the deal.
As a part of the step, the airways and the DOT additionally locked in some main protections for frequent flyers sitting on huge stashes of Alaska Mileage Plan or HawaiianMiles factors.
The DOT stated that it had accredited the airways’ “exemption” request, which might enable the carriers to function as two separate airways below the identical proprietor earlier than combining operations. In different phrases, Alaska Airways is evident to take possession of Hawaiian in accordance with the airways’ merger settlement.
Whereas that implies that the merger is a performed deal and can finally be cleared in full, the DOT nonetheless should approve the airways’ “switch request,” which might enable them to function as a merged airline below a single working certificates. That approval stays topic to quite a lot of necessities, DOT officers stated on Tuesday, and can depend upon the FAA’s overview and signoff on security and operational plans.
Approving the exemption request and permitting transactional a part of the merger to shut with the switch request nonetheless excellent permits the airways a larger diploma of regulatory certainty as they transfer ahead with the operational elements of the merger.
It is also an uncommon step.
Earlier than granting the approval, the DOT secured a number of commitments from the 2 airways which Transportation Secretary Pete Buttigieg characterised as “preserving air service” and “higher serving passengers.” The commitments, accompanying DOT’s approval, seemed to be unprecedented.
“That is the primary time that the [DOT} has required airlines to agree to binding, enforceable protections as a precondition before we would consider allowing a merger to move forward,” Buttigieg said during a press briefing Tuesday afternoon. “This new approach prioritizes the public interest from the outset.”
Under the agreement, the two airlines must preserve all current Essential Air Service routes, along with current levels of service within the Hawaiian islands, and between Hawaii and the continental U.S. The carriers are also prohibited from taking any actions that would harm competition at Honolulu’s Daniel K. Inouye International Airport (HNL).
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On the “better serving passengers” side, the two airlines agreed to a variety of consumer commitments requested by DOT, the agency said. These include guaranteeing that families with children can sit together without added fees and promising compensation for certain delays and cancellations. The airlines also promised to lower costs for traveling military servicemembers.
The airlines also agreed that they would not devalue either carrier’s frequent flyer miles as part of the merger, nor take away any benefits from each tier of elite status during the process of combining into a single program.
Members of Alaska’s Mileage Plan program and HawaiianMiles will be able to transfer miles between the two at a 1:1 ratio ahead of the launch of a combined program in the future, DOT said. The combined airlines are prohibited from devaluing HawaiianMiles miles that were earned before the merger closes, and must continue awarding miles under the program at the same rate or higher. The combined airline also has to maintain a minimum value for all miles in the new program as “measured by the guest-facing value of miles redeemed for carrier-operated flights.” It was not clear what that minimum value would be set at.
Both airlines also agreed to match and maintain status benefits across the two programs in order to avoid any level being devalued, DOT said, in order to “ensure members of each existing loyalty program are treated no less favorably relative to status, including by matching or increasing members’ elite status in the new combined loyalty program, for the remainder of the applicable program year” when the new program is launched.
The merger made its first major leap forward last month when it received implicit approval from the Department of Justice, which opted not to block it with an antitrust suit ahead of a key deadline. The airlines still needed to await DOT’s approval of the exemption request before closing the deal.
The $1.8 billion dollar combination will be the largest U.S. airline merger since Alaska Airlines bought rival Virgin America in 2016.
It stands in stark contrast from another recent merger deal that was ultimately blocked by DOJ.
In January, the DOJ won an antitrust suit blocking JetBlue’s planned acquisition of Spirit Airlines. During a monthlong trial in federal court in Boston last fall, the DOJ argued that the merger would hurt competition across the industry. DOJ similarly sued in 2022 — successfully — to block the Northeast Alliance between JetBlue and American Airlines, which saw the two airlines codeshare on each other’s flights and coordinate their route networks.
The combined Alaska-Hawaiian would be the fifth-largest in the U.S. in terms of fleet size, with 365 aircraft.