SEATTLE, HONOLULU- Alaska Air Group and Hawaiian Holdings have officially entered into a definitive agreement wherein Alaska Airlines (AS) will acquire Hawaiian Airlines (HA) at a cash price of $18.00 per share.
The overall transaction value is approximately $1.9 billion, including Hawaiian Airlines’ net debt amounting to $0.9 billion.
Alaska Airlines Acquires Hawaiian for US$1.9 Billion
The merged entity aims to open up a broader range of destinations, offering consumers increased choices for vital air services throughout the Pacific region, the Continental United States, and globally.
This strategic move is anticipated to establish a more robust platform for growth and competition in the U.S., providing long-term employment opportunities, ongoing investment in local communities, and a commitment to environmental stewardship.
Both Alaska Airlines and Hawaiian Airlines, deeply rooted in the 49th and 50th U.S. states, express a shared dedication to the well-being of their employees, guests, and communities.
The consolidation will leverage these service-oriented airlines’ over 90-year legacies and cultures, preserving both well-regarded brands on a unified operating platform.
Additionally, the merger seeks to safeguard and expand union-represented jobs and create economic development prospects in Hawai‘i.
The combined network is poised to offer enhanced options and extended international connectivity for travelers through partnerships, including those within the oneworld Alliance.
CEO Insights
“This union marks an exciting progression in our joint efforts to enhance the travel experience for our passengers and broaden options for West Coast and Hawai‘i travelers,” commented Ben Minicucci, CEO of Alaska Airlines.
“We profoundly admire Hawaiian Airlines, recognizing their significant role as a top employer in Hawai‘i and their global representation of the warm aloha culture. Both our airlines, with exceptional employees and legacies spanning over 90 years, share values deeply rooted in caring for the unique places and people we serve. I am grateful to the over 23,000 Alaska Airlines employees who have proudly served Hawai‘i for over 16 years. We are fully committed to investing in Hawai‘i communities and upholding the robust Neighbor Island service that Hawaiian Airlines travelers have come to anticipate. As our airlines merge, we anticipate expanding this commitment while delivering unparalleled value to customers, employees, communities, and stakeholders.”
“Since 1929, Hawaiian Airlines has been an integral part of life in Hawai‘i, and through our collaboration with Alaska Airlines, we will enhance offerings for our passengers, employees, and the communities we serve,” stated Peter Ingram, President and CEO of Hawaiian Airlines.
“By joining forces with Alaska Airlines, we align with an airline with a rich history of serving Hawai‘i and a similar service-oriented culture. With the increased scale and resources resulting from this transaction, we can expedite investments in guest experience and technology while preserving the identity of the Hawaiian Airlines brand. We are also delighted to provide substantial, immediate, and compelling value to our shareholders through this all-cash transaction. Together, Hawaiian Airlines and Alaska Airlines can extend our authentic hospitality brands to more parts of the world while continuing our dedicated service to local communities.”
Combined Benefits for Customers
The merging of Alaska Airlines and Hawaiian Airlines, catering to a combined 54.7 million annual passengers, brings forth complementary domestic, international, and cargo networks.
This collaboration aims to foster competition and provide expanded choices for consumers on the West Coast and throughout the Hawaiian Islands through several key initiatives:
- Preservation of Outstanding Brands: The unified airline will uphold the esteemed Alaska Airlines and Hawaiian Airlines brands. While integrating into a single operating platform, this approach ensures that passengers continue to experience the exceptional service and hospitality that both companies have consistently been recognized for, maintaining excellence in operational reliability, trust, and guest satisfaction.
- Enhanced Product Offering: The partnership aims to preserve and broaden high-quality, best-in-class product offerings. This includes diverse price points, making air travel accessible to a broad spectrum of consumers across various cabin classes. Passengers will have an expanded array of choices, including Alaska Airlines’ high-value, low-fare options and Hawaiian Airlines’ internationally acclaimed long-haul product comparable to network carriers.
- Complementary Networks for Expanded Travel Options: Travelers across the Continental U.S., the U.S. West Coast, and the Pacific will benefit from increased choice and connectivity across both airlines’ networks. The combined service will span 138 destinations, featuring non-stop service to 29 top international destinations. Additionally, passengers can access over 1,200 destinations through the oneworld Alliance.
- Expanded Service for Hawai‘i: Hawai‘i residents will experience enhanced service and convenience, with a threefold increase in the number of nonstop or one-stop destinations throughout North America. This expansion maintains robust Neighbor Island service and boosts air cargo capacity.
- Strategic Honolulu Hub: Honolulu is slated to become a pivotal hub for Alaska Airlines, facilitating greater international connectivity for West Coast travelers throughout the Asia-Pacific region via one-stop service through Hawai‘i.
- Increased Loyalty Program Benefits: The transaction will integrate Hawaiian Airlines’ loyalty members into an industry-leading loyalty program for the combined airline. This includes the ability to earn and redeem miles across 29 global partners, elite benefits on the complete oneworld Alliance, expanded global lounge access, and benefits from the combined program’s co-brand credit card.
Benefits for Employees and Communities
As one of the largest employers in Hawai‘i, Hawaiian Airlines boasts a lengthy legacy of dedication to its employees, who have played a pivotal role in shaping the company throughout its 94-year history.
The airline has also been committed to local communities, cultural preservation, and environmental stewardship. With the integration of Alaska Airlines and Hawaiian Airlines, this commitment to stewardship will persist, ensuring a robust presence and investment in Hawai‘i.
The merged company is set to achieve the following:
- Growth in Union-Represented Jobs: The commitment involves sustaining and expanding union-represented jobs in Hawai‘i, safeguarding pilots, flight attendants, and maintenance bases in Honolulu, as well as supporting airport operations and cargo services throughout the state.
- Strong Operational Presence: The plan includes maintaining a formidable operational presence with local leadership and establishing a regional headquarters in Hawai‘i to uphold and enhance the networks of both airlines.
- Employee Opportunities: The merger aims to create more opportunities for career progression, offering competitive pay and benefits and providing geographical mobility options for employees.
- Expansion of Workforce Development Initiatives: The commitment extends to continuing and expanding workforce development initiatives. This includes supporting programs like Hawaiian Airlines’ collaboration with the Honolulu Community College Aeronautics Maintenance Technology Program and Alaska Airlines’ Ascend Pilot Academy, among others, to bolster future job prospects and career opportunities in Hawai‘i and beyond.
- Investment in Local Communities: The initiative pledges to sustain investments in Hawai‘i communities, combining and expanding the existing commitments of both airlines. Collaboration with local communities and government entities will be pursued to contribute to developing a thriving future for Hawai‘i.
- Cultural Perpetuation: There is a dedicated commitment to promoting regenerative tourism in the Hawaiian Islands, coupled with investments in Hawaiian language and culture. This commitment builds upon and continues the existing programs established by Hawaiian Airlines in these areas.
Sustainable Growth
Alaska Airlines is dedicated to building upon the robust environmental stewardship commitments of both Alaska Airlines and Hawaiian Airlines. This includes Alaska Airlines’ comprehensive five-part strategy to achieve net zero emissions by 2040 and sustainability objectives across carbon emissions, fuel efficiency, waste management, and promoting healthy ecosystems.
In 2022, Alaska Airlines marked a significant milestone with its largest Boeing fleet order in the airline’s 90-year history, with a specific focus on the Boeing 737-MAX aircraft. These aircraft are 25% more fuel-efficient on a seat-by-seat basis than the ones they are replacing.
The airline has also expanded the use of route optimization software, aiding dispatchers in developing fuel-efficient routes that contribute to time and emission savings.
Both Alaska Airlines and Hawaiian Airlines are actively promoting sustainable aviation fuel (SAF) adoption in their respective regions. These climate-centric initiatives will persist, with a continued emphasis on investing in locally sourced solutions.
Financials and Conditions for Deal
The strategic alignment with Alaska Airlines’ ongoing effort to broaden choices for West Coast travelers makes the combination highly fitting. This merger establishes a significant platform to augment Alaska Airlines’ organic growth further, surpassing industry averages.
The transaction is meticulously crafted to provide compelling benefits for both Alaska Airlines and Hawaiian Airlines’ shareholders:
- An all-cash transaction of $18.00 per share, totaling an equity value of $1.0 billion, presents an appealing premium for Hawaiian Airlines shareholders.
- The transaction multiple stands at 0.7 times revenue, which is approximately one-third of the average in recent airline transactions.
- Anticipated run-rate synergies of approximately $235 million offer a conservative estimate of the transaction’s synergy potential, excluding other identified upside opportunities.
- Expected to yield high single-digit earnings accretion for Alaska Airlines within the first two years (high-teens three or more years post-close) and mid-teens Return on Invested Capital (ROIC) by year three, excluding integration costs. These returns are projected to surpass Alaska Airlines’ cost of capital.
- No significant impact on long-term balance sheet metrics is foreseen, with a return to target leverage levels expected within 24 months.
Closing of the transaction is contingent upon regulatory approvals, approval by Hawaiian Holdings, Inc. shareholders (expected in the first quarter of 2024), and other customary closing conditions.
The anticipated timeframe for closure is within 12 to 18 months. The consolidated organization will be headquartered in Seattle, led by Alaska Airlines CEO Ben Minicucci. A dedicated leadership team will be established to concentrate on integration planning.
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