airport mergers: Hawaiian Airlines and Alaska Airlines - Navigating the Regulatory Landscape and Concessions

The merger between Hawaiian Airlines and Alaska Airlines is a significant event in the aviation industry, with both airlines operating extensive networks across North America and beyond. However, such a merger does not come without hurdles. The Department of Transportation (DOT) plays a crucial role in ensuring that any proposed merger upholds various regulations, particularly concerning essential air service (EAS) contracts and the protection of frequent flyers' miles. This article delves into the specific concessions Hawaiian Airlines had to make for its acquisition by Alaska Airlines to be approved.

Regulatory Approval Process for Airline Mergers

The regulatory process for airline mergers is meticulous and multifaceted. It involves not only federal agencies like the DOT but also the Federal Trade Commission (FTC) and state regulators.

The DOT and FTC assess the proposed merger's impact on market competition, ensuring that the post-merger entity does not gain an unfair advantage that could harm consumers. This scrutiny is essential, especially when the merger involves airlines that operate in geographically distinct but critical markets, such as Hawaii and Alaska.

Essential Air Service (EAS) Contracts

One of the primary concerns for the Department of Transportation was the maintenance of essential air service contracts. These contracts are crucial for preserving vital air service to remote or underserved areas. In the case of Hawaiian Airlines, there are several routes in Hawaii that are considered essential due to their small-market nature and limited transportation options.

Hawaiian Airlines agreed to honor these contracts, ensuring that the post-merger Alaska Airlines continues to offer these crucial services. This commitment is vital for maintaining air accessibility in remote regions of Hawaii, particularly for communities that rely heavily on air travel for essential services and emergency needs.

Custodial of Frequent Flier Miles

Another key issue was the protection of frequent flyer miles. The FTC expressed concerns that the merger could lead to the devaluation or "vaporization" of these miles, undermining the value and loyalty of long-term customers.

As a result, Hawaiian Airlines negotiated a 1:1 conversion rate for award miles. This agreement ensures that every mile accrued on Hawaiian Airlines remains valid and transferable under the Alaska Airlines system. Frequent flyers can continue to enjoy their loyalty benefits without fear of their accumulated miles being diluted or lost.

Impact on Remote Markets

Remote markets, such as Adak in the Aleutians, where Alaska Airlines currently operates, are particularly vulnerable during such mergers. These markets depend on air service for essential supplies and emergency responses. The contraction of these routes can have severe economic and social impacts.

Both airlines agreed to maintain current service levels for these remote areas. While Alaska Airlines has the capacity to use larger aircraft like the 737 on these routes, Hawaiian Airlines' use of smaller, more fuel-efficient aircraft, including prop planes, is crucial for maintaining affordability and accessibility. This hybrid approach ensures that smaller, less economically viable markets can still be served effectively.

Conclusion

The acquisition of Hawaiian Airlines by Alaska Airlines is a complex affair, with both airlines making significant concessions to secure approval from the Department of Transportation. These concessions include the continued maintenance of essential air service contracts, a 1:1 conversion rate for frequent flyer miles, and the commitment to serve remote markets. Such regulatory approval and communication help to ensure that both frequent flyers and remote communities are protected, while still allowing for the operational efficiencies and expanded service that a merger can bring.

For frequent flyers, the transition can be seamless if both airlines uphold their commitments. This cooperation also sets a positive precedent for future mergers in the aviation industry, emphasizing the importance of transparency and customer protection during such significant changes.

Keywords: Hawaiian Airlines, Alaska Airlines, Regulatory Approval, Airline Mergers, Frequency Flyers