[1/5]A Hawaiian Airlines plane sits idle on the runway at Daniel K. Inouye International Airport due to business downturn due to the novel coronavirus disease (COVID-19), April 28, 2020 in Honolulu, Hawaii, United States. . The photo was taken on April 28, 2020.Reuters/Marco Garcia/File Photo Obtaining license rights
CHICAGO, Dec 6 (Reuters) – A shortage of new aircraft, jet engines and pilots has left U.S. airlines with little choice but to pursue growth through acquisitions, making them targets of antitrust regulators. will be subject to
Alaska Airlines (ALK.N) has announced that Hawaiian Airlines (HA.O) will continue to do so even before a judge rules on a U.S. Department of Justice (DOJ) lawsuit aimed at blocking JetBlue Airways (JBLU.O). The company surprised analysts and industry insiders with its plan to acquire the company for $1.9 billion. ) proposed a merger with Spirit Airlines (SAVE.N).
But supply and labor constraints are so onerous that airlines like Alaska will continue to pursue deals, despite the Biden administration’s reluctance to further consolidate. American Airlines (AAL.O), United Airlines, Delta Air Lines and Southwest Airlines (LUV.N) currently control 80% of the domestic market, leaving little room for growth.
“This industry is always looking for angles,” said Addison Schonlund, a partner at consulting firm AirInsight. “If Alaskan doesn’t move Hawaiian, what’s going to stop someone else from moving there?”
The deal will provide Alaska (a domestic airline that primarily operates narrowbodies) with Hawaiian’s widebody aircraft, pilots and international network, opening the runway for growth in the long-haul international market. .
Alaska CEO Ben Minicucci said in an interview that now is the right time to do the deal, calling it a “great investment and a great step change” for the company. Ta.
Alaska Airlines told analysts on Sunday that operating long-haul international flights on its own would be much more expensive and much more difficult.
Courtney Miller, a consultant who advocated for a merger between the two airlines in 2019, said Alaska would likely require an investment similar to what Hawaiian Airlines is paying to start a small international operation. He said he was deaf.
He said a better option would be to take advantage of Hawaiian’s wide-body jet fleet and international network for long-haul international flights.
Boeing (BA.N) and Airbus (AIR.PA) both face supply chain issues, but the deal will help Alaska avoid long waits for new planes. It also reduces the need to hire and train pilots amid industry-wide staffing shortages, and allows the company to avoid competing for slots at international airports.
“The risk is much lower,” said Miller, who now runs the consulting firm Visual Approach Analytics.
Mergers and acquisitions create economies of scale, which help offset rising operating costs. But Alaska will face challenges on this front as it integrates Hawaii’s fleet, Schonland said.
The Seattle-based airline operates Boeing’s 737s, but Hawaiian Airlines’ fleet includes many Airbus jets, so the combined company will need separate parts for repairs. You will have to rely on a mechanic. Minicucci said the combined company would continue to operate a mixed fleet for the time being, but did not rule out a review of its aircraft mix.
Traditional airlines such as Delta Air Lines (DAL.N) and United Airlines (UAL.O) were able to ease inflationary pressures due to strong bookings for flights to Europe and Asia. But a slowdown in domestic travel demand is hurting revenue for domestic airlines, including those in Alaska.
Similar growth concerns led JetBlue to launch a hostile takeover of Spirit last year, with the aim of expanding its domestic footprint and capitalizing on the surge in leisure travel between the U.S. East Coast and the Caribbean.
But the deal faces the challenge of convincing antitrust regulators that it is pro-competition and pro-consumer.
William Kovacic, a former chairman of the Federal Trade Commission who now teaches at George Washington University Law School, said the Justice Department will likely carefully review the Alaska deal.
“They are approaching airlines with the view that merger policies have been too permissive and have allowed for too much concentration,” he said.
Reporting: Rajesh Kumar Singh; Editing: Nick Zieminski
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