Home Markets The ruling between JetBlue and Spirit does not mean the end of the merger between Alaska and Hawaii

The ruling between JetBlue and Spirit does not mean the end of the merger between Alaska and Hawaii

by SuperiorInvest

Alaska and Hawaiian Airlines aircraft take off at the same time from San Francisco International Airport (SFO) in San Francisco, California, United States, on June 21, 2023.

Tayfun Coskun | Anadolu Agency | fake images

President Joe Biden’s Justice Department managed to stop two airline connections in court in recent months. That doesn’t necessarily spell doom for Alaska Air plan to buy Hawaiian Airlines.

U.S. District Court Judge William Young on Tuesday sided with the Justice Department and blocked JetBlue Airways‘$3.8 billion acquisition attempt Spiritual airlinessaying that eliminating the budget airline known for its rock-bottom fares would “hurt cost-conscious travelers” who rely on those cheap tickets.

The decision immediately raised questions about whether a combination of Alaska and Hawaii would suffer a similar fate in an antitrust lawsuit. Hawaiian’s stock plummeted in the minutes after the ruling was handed down, though it eventually recovered.

“We would be lying to ourselves if we thought that the probability of the merger’s success has not been reduced after [Tuesday’s] ruling,” Deutsche Bank airline analyst Michael Linenberg wrote in a note Wednesday.

However, the stumbling blocks that brought down the deal between Spirit and JetBlue may offer clues as to how Alaska and Hawaii might pass muster before regulators or in court. The Justice Department did not immediately respond to a request for comment on whether it plans to challenge Alaska and Hawaii’s proposed agreement.

“The court in the JetBlue case was clearly concerned that this merger was eliminating a low-priced airline,” said Herbert Hovenkamp, ​​a law professor at the University of Pennsylvania Carey Law School and a specialist in antitrust law.

“What that says about Alaska-Hawaii, its advisors [and] Lawyers will have to make sure they can avoid those problems,” he said.

JetBlue and Spirit jointly said they disagreed with the decision and were considering next legal steps, which could include an appeal.

Read more CNBC airline news

Different types of treatment

Alaska and Hawaii executives have expressed confidence in their nearly $2 billion deal, which includes Hawaiian debt.

“The decision involving other airlines does not affect our plans to combine with Hawaiian Airlines,” an Alaska Airlines spokeswoman said in a statement Thursday. “Our agreement combines two airlines with complementary networks and we believe the transaction will enhance competition and expand choice for consumers.”

A Hawaiian Airlines spokesperson said the airline believes the combination with Alaska “offers compelling benefits to our employees, guests, communities and all stakeholders,” but declined to comment on the deal with JetBlue.

Alaska agreed in December to buy Hawaiian, which was reeling from a sharp drop in bookings in the wake of the Maui wildfires, increased competition in its home market from South west and a slow recovery in travel to Asia.

JetBlue maintained that it needed to buy Spirit to better compete with the largest airlines, which control about 80% of domestic capacity, a dynamic that resulted from years of megamergers.

In the case of JetBlue and Spirit, Young took issue with dozens of overlapping routes. The airlines had offered divestitures to solidify the deal, but to no avail.

While the combination of Alaska and Hawaii won’t be easy for regulators, the two deals are quite different.

Alaska and Hawaiian said in an investor presentation last month that they would have less than 3% overlap in their combined networks, which would include more than 1,300 daily flights.

“From a competitive standpoint, I think that lands very, very well,” Alaska CEO Ben Minicucci said on a Dec. 3 call with analysts after announcing the merger.

JetBlue had planned to remodel Spirit’s bright, cramped yellow planes to look like its own, offering fewer seats, more legroom and other amenities.

Alaska, by contrast, has said it plans to keep the Hawaiian and Alaska brands separate. Alaska dropped the Virgin America brand after purchasing that airline in 2018.

“In our view, not a single material point raised by the court in ruling against the JBLU/SAVE merger applies directly to Alaska’s agreement to purchase Hawaiian,” JPMorgan airline analyst Jamie Baker wrote after Tuesday’s ruling. .

Justice Department Challenge

However, that doesn’t mean the Justice Department won’t launch the initiative.

Biden’s Justice Department is already two to two against airline deals, after an independent U.S. District Court judge in May sided with the Justice Department in undoing the JetBlue partnership with american airlines in the northeastern United States, an alliance that won government approval during the final days of the Trump administration.

That deal allowed JetBlue and American to coordinate routes and schedules in the Northeast, where they argued congested airports and airspace made it difficult to compete against larger rivals.

The Justice Department successfully argued that the partnership was anticompetitive, and the airlines ended the deal last year, although American announced it would appeal the decision.

Still, the department just scored another victory in court, which Hovenkamp said may “encourage them to try to challenge [Alaska-Hawaiian] also.”

Minicucci said last month that the airlines expect the deal to take between 12 and 18 months to close. Some analysts, however, say the Justice Department’s victory against JetBlue-Spirit will cast a shadow over the Alaska deal.

“The reality is, even if you think everything is going to be fine, the likelihood of a deal being reached has to be lower than it was” before the JetBlue-Spirit ruling, said Conor Cunningham, an airline analyst at Melius. Research.

Don’t miss these CNBC PRO stories:

Source Link

Related Posts