After the US Department of Justice (DOJ) decided to let the Alaska/Hawaiian merger review period pass without saying a word, it seemed like the merger was a done deal. But then, something curious happened. The US Department of Transportation (DOT) kept delaying handing out its fairly standard approval. It clearly wanted something, and now we know what it was.
After Alaska and Hawaiian agreed to DOT’s demands, the approval was given, and Alaska can now officially say — in the immortal words of the Perfect Strangers theme song — nothing’s gonna stop me now.
DOJ is the department tasked with reviewing mergers for antitrust violations. That was always the big hurdle. But DOT just allows the transfer of international route authorities. Still, Sec Buttigieg clearly wanted to stretch his department’s authority and try to extract some concessions. The headline of the press release says it all.
USDOT Requires Alaska and Hawaiian Airlines to Preserve Rewards Value, Critical Flight Service as Merger Moves Forward
This is an attempt to show that DOT is doing something good, when it reality it probably significantly overstepped its bounds. For Alaska, however, it had to make more sense to agree to these mostly hollow promises instead of trying to take this to court. I don’t blame the airline one bit.
The agreement is publicly filed in the docket with only a few commercially-sensitive redactions, so we have a good idea of what Alaska is agreeing to do here. This agreement lasts for six years, and that’s a lifetime in this industry. So, what will Alaska do? Let’s see if I can put some themes together.
Keep Flying Routes With Limited or No Competition
Specifically, the government says that the new combined airline has to keep flying every route that each airline flies independently where there is either no other competition or only one other airline providing competition.
Not only does the new airline have to keep flying the routes, but it has to schedule with the “intent to operate at least 90 percent of the number of flights or 90 percent of the number of seats operated on such route by the Combined Carrier in the year-to-date period through August 31, 2024.”
Which routes are included? If we’re looking at the 12 months ending August 31, it’s all from Honolulu and Kahului to the West Coast. Specifically, it’s from each of those airports to Portland, San Diego, San Francisco, San Jose, and Seattle.
Of those, Portland from both Honolulu and Kahului along with San Diego from Kahului are only served by Hawaiian and Alaska today. In Honolulu – San Diego and San Jose from both Honolulu and Kahului, Southwest is the third carrier. In Seattle to Honolulu and Kahului, it’s Delta. Lastly, in San Francisco from both Honolulu and Kahului, it’s United.
This is in no way onerous. These are bread-and-butter markets for Hawaiian, and there is little to no chance the airline would want to walk away. Seeing the wording here, it looks like they can switch to smaller 737s instead of A321neos if they want and still maintain the number of flights, so they have good flexibility.
Maintain the Interisland Market
Alaska had to agree to a variety of rules around the interisland market. First, it has to maintain flying at a level “similar to” the flying it had on December 2, 2023. That’s the day Alaska announced it would buy Hawaiian. This is a pretty nebulous requirement, but it’s not going to be hard to achieve.
The airline also has to agree to maintain all of Hawaiian’s existing interline agreements at current or more favorable rates. The primary concern here was giving other airline customers access to Hawaiian’s interisland network. Since Hawaiian is the only game in town that partners with other airlines — as of now — this was important.
Alaska also has to maintain the interline agreement with Mokulele to smaller Hawaiian islands on Essential Air Service routes or with any airline that takes over the service. Alaska further has to continue its “longstanding commitment to and support for” the EAS program.
All of this is important for Alaska and Hawaiian to maintain anyway. Hawaiian has a lot of seats in the interisland market, and it needs to fill those. The interline agreements are hugely helpful and provide no real downside for the airline. Alaska also has a strong interline partner strategy, so it would be very strange if these were to be cut off at Hawaiian.
Oh — one last thing on this — Alaska has to agree in Honolulu to not sign agreements that “indirectly exclude or unjustly discriminate against a carrier that is a new entrant or smaller competitor.” Basically, DOT is making sure that if there are new entrants, Alaska won’t try to block them by squatting on space. Would Alaska rather keep new entrants out? Sure. But this is not a serious issue.
Help DOT Push Its Loyalty Goals
As we know, DOT wants to throw its weight around when it comes to loyalty programs, so this was a great opportunity to force the issue. That, at least, was the conspiracy theory I threw out on last week’s The Air Show, and it sure looks less crazy now. (Unrelated… this week on The Air Show, we talk about the Boeing strike. Have a listen.)
But since I was right, it’s time to push my next conspiracy theory that this has been in the works for years….
Original image via Jon Ostrower
Just kidding. Let’s take the tinfoil hats off this week.
The basics here involve keeping the HawaiianMiles program intact as is until they create the new combined program. I can’t imagine Alaska would have bothered tweaking that program anyway since it will be gone soon enough. DOT also wants Alaska to allow 1:1 transfers between the two programs. That must have been the plan anyway.
In the new loyalty program once it’s combined, it gets a little stickier. Some of the requirements are irrelevant. The airline has to keep a 1:1 ratio when moving miles in the new program, and it can’t have miles expire. Status has to stay consistent until the end of the program year when the change happens.
This is where I start to get confused. Alaska has apparently agreed that it will “ensure that all miles in the new combined loyalty program can be redeemed on fully refundable award tickets at no less than xx per mile on flights operated by the Combined Carrier.” The actual dollar amount is redacted, but the point is that there will be a ceiling on the number of miles tied to the selling price of a fully refundable ticket.
Alaska does not have a revenue-based program today, so this is strange. I assume the idea is that this number is higher than what Alaska does today, so it just prevents big devaluations. The program can keep being mileage-based if Alaska wants, but it just can’t get too pricey. But in a nod to the importance of credit card programs, DOT says that Alaska can alter this if the amount of money paid for miles by a credit card partner drops.
Another tangible restriction is that Alaska can’t have change or cancel fees on award tickets. They don’t have them today, but six years is a long time to guarantee it won’t change.
Then, firmly tying this agreement to DOT’s loyalty efforts, the department magnanimously agrees that if it puts out a rulemaking on loyalty programs that is less onerous than this, Alaska can abide by the new rules instead.
But Wait, More DOT Goals
This isn’t just about DOT’s loyalty goals. It has also made Alaska further comply with the Customer Service Dashboard requirements where airlines get green checks for doing what DOT wants.
The bulk of the work is just making sure Hawaiian aligns policies with what Alaska already does. No problem there. But Alaska wil make two changes to satisfy DOT.
First, it will provide at least one free standard carry-on and at least two free standard checked bags for military members. Second, it will waive change fees for service members who have to reschedule due to a military order.
Alaska already allows 5 checked bags for free, and anyone can bring a standard carry-on. And as for change fees, I guess that applies to Saver basic economy fares? There may be some corner cases here that aren’t covered, but this is all going to have a minor impact at most.
In the end, Alaska did not have to give up much to seal the deal with DOT, but DOT can crow about it as if it extracted incredible concessions. In the end, the deal is done and everyone seems happy. Now the hard integration work begins.
62 comments on “Alaska and Hawaiian Finalize the Merger After Agreeing to Largely Hollow DOT Conditions”
Can someone please explain to me the difference between this acquisition, and the JetBlue/Spirit? I honestly am baffled at how the Feds like to apply laws differently.
The whole notion that one was a ULCC and the other wasn’t doesn’t make sense to me. A business can change its model whenever it wants, so I never really understood that argument.
Also, congrats to AS and HA!
A lot more route and general network overlap between JetBlue/Spirit which would reduce competition on a lot of routes. The only real overlap between AS/HA is a few west coast – Hawaii flights, which is why they agreed maintain service on those.
The ULCC vs. non-ULCC doesn’t really make sense to me either, but I don’t think it really mattered to the DOJ.
Had Spirit disappeared, a lot of working class and poor people would have to go back to riding Greyhound because Frontier would have raised prices because of no competition.
JetBlue didn’t want to merge with Spirit. They wanted Spirit’s planes and pilots so they could grow their own brand faster.
The court didn’t like that a ULCC was going away, and that’s not the case here.
But it probably only delayed the inevitable when Spirit fails.
AviationNerd – This is pretty different. There is FAR less overlap between AS/HA than there was for B6/NK. B6/NK also operates in highly congested areas where new entrant access is very difficult. That’s not the case for AS/HA. Lastly, the business model difference is key. AS/HA have the same basic business model. B6 actively noted that it was going to convert NK to the B6 model, removing seats and increasing fares. Sure, anyone can change a business model, but it’s probably not great to say you’re going to make these changes and then get government approval.
Your assertion is controversial at best. I guess it’s all how you slice it, but I would still say your route overlap characterization is blatantly untrue.
“Twenty-eight routes in Hawaiian’s network link the state of Hawaii with the U.S. mainland. Alaska serves 12 of these routes, equating to an overlap of 43% of Hawaiian’s Hawaii-mainland U.S. network and a 25.5% overlap of Hawaiian’s overall network. Meanwhile, Alaska’s Hawaii-mainland U.S. network spans 24 routes, meaning Hawaiian currently serves half of them.”
https://aviationweek.com/air-transport/airports-networks/network-analysis-alaska-hawaiian-union
Concerning business model stuff, the judge that ruled against the Jet Blue Spirit merger said himself the merger was going to be “pro-competitive” for consumers. You say “removing seats” like it was some kind of nefarious conspiracy. There’s only so much room inside of a A321 fueslage. As far as I know, no one has developed physics-defying technology that lets you keep 228 seats on an A321 AND magically give everyone the same leg room as Jet Blue. Antitrust law, even case law predicated on the consumer welfare standard doesn’t preclude businesses from differentiating their product offerings or charging more for a superior product, such as a bigger seat with more amenities. The judge himself acknowledged these facts. Antitrust law does not give preference crappy low-cost products. “Low Cost” is a bit of a misnomer in the case of Spirit, since Spirit relies on deceptive and sharp business practices to sell tickets and has the highest ancillary revenue numbers in the industry. The low prices are a mirage.
From the decision, judge’s words –
page 102 & 103 : “The Defendant Airlines have demonstrated that an expansion of all aspects of JetBlue’s business — including network,
fleet, and loyalty program — would allow for more vigorous competition with the Big Four, which carry most passengers in the country. The size of an airline, the number of routes it serves, the number of options it offers to consumers — all of these aspects add to an airline’s relevance to consumers, and were JetBlue to become more relevant, it would immediately place more pressure on its greatest competitors, the Big Four. This pressure would benefit consumers. The Defendant Airlines have also demonstrated that the product JetBlue offers, though more expensive on average, is higher quality, and provides consumers with an enhanced flying experience. Were JetBlue to expand via the proposed acquisition, not only would that product become more widely available to more consumers, but the increased revenue available could also allow JetBlue to innovate further and create an even stronger customer experience.
Overall, the Defendant Airlines have successfully met their relatively low burden to rebut the Government’s prima facie case.”
There was no legal basis for blocking Jet Blue Spirit. Only political.
The difference is Alaska-Hawaiian plays politics better than Jet Blue, Johnathan Kanter at DOJ antitrust has already collected two scalps, both from Jet Blue coincidentally or not, and the political winds have drastically shifted in recent months. Kanter at DOJ is now auditioning to save his job come January because the next president is going to be more corporate and pro-business no matter which of the two current candidates wins the White House. Same story with Buttigieg at DOT. Guy is ex-McKinsey, he is very corporate and big business friendly Democrat just like Harris. Trump would almost definitely axe both, but Harris might keep or promote both if they can signal a willingness to play ball.
ULCC vs. LCC. – Yup! Excellent point. Smart man. Antitrust law (actual law as written, not case law) doesn’t preference one over another or even try to pick a winner based on price structure. Antitrust law only concerns itself with preserving competition and limiting market concentration BUT the right-wing ideology of “consumer welfare principle” or “consumer welfare standard” is a different story, hence the mention of case law. Like you said “A business can change its model whenever it wants”. The progressive crusaders who wrote antitrust law in the late 19th and early 20th century were wise enough to realize this important fact, Robert Bork and the Chicago school not so much. Johnathan Kanter realized the significance of this point too, and claimed his goal at DOJ antitrust was to “bury the Consumer Welfare Principle”, until he actually got the antitrust enforcer job and was looking for an expedient cudgel to kill the pro-competitive B6/NK merger that might appeal to a Regan appointee judge.
The last four years have made an absolute mockery of antitrust enforcement and has shown how arbitrary, capricious, contradictory and political antitrust law is, especially as applied to airlines, but mostly Jet Blue. Alaska is 2 for 2 with acquisitions the last eight years while Jet Blue is 0 for 2 with another loss in the NEA over the same time frame.
You can blame DOJ all you want, but ultimately it’s on the judiciary.
They’re the ones who believed the arguments and sided with DOJ.
“Ultimately” is doing a lot of work in your statement, but yes, mostly true. The important question is did the DOJ apply equal scrutiny by going to court to block AS/HA merger? Nope! Maybe the courts would have been persuaded again? We’ll never know because the DOJ inexplicably waived this merger through. Courts can’t block mergers that aren’t contested by regulator. DOJ gave AS/HA complete and total pass after some foot dragging, and like you very accurately and astutely summarized, DOT only extracted “hollow concessions”.
I think AS/HA is a good merger that probably should have been approved after some concessions. Good for them. Jet Blue – Spirit was even less problematic based on the law, but was torpedoed for made-up idealogical or political reasons. There is no good argument for allowing AS/HA but not allowing B6/NK. Reeks of politics and corruption. Really simple.
My guess is the big difference is the Hawaiian politicians (who loom large within the Democratic Party) wanted the Hawaiian-Alaska merger, whereas I am not sure there were any politicians who wanted the B6-NK merger.
JetBlue should be on their knees thanking the Biden administration from preventing it. By now the combined carrier would be in Chapter 11. Airline mergers in general are difficult, and there wasn’t enough management talent in the industry (let alone at JetBlue) to make that one work. Here’s a giant fleet of aircraft that you, JetBlue, need to find JetBlue-type things to do instantly, in a market where there’s hardly enough things for the existing JetBlue fleet to do that make money. And every competitor gunning to put JetBlue in the ground before it can gain traction because as much as competitors don’t like Spirit, the idea of a successful JetBlue that’s twice as large as the existing one is completely unacceptable.
“JetBlue should be on their knees thanking the Biden administration from preventing it. By now the combined carrier would be in Chapter 11.”
Extremely common sentiment and correct perhaps, but that’s not the government’s prerogative. There were at least two material events at Spirit after the acquisition deal closed, P&W engine groundings plus the sale of 50 aircraft to leasing company, that would have opened the door for JetBlue to renegotiate a fair market value purchase price, but that opportunity was stolen from JetBlue by the DOJ’s extremely uneven and prejudicial antitrust enforcement actions.
To my knowledge all of the major legacy airlines still flying today are survivors of multiple bankruptcies and multiple mergers. In the airline biz, raw size and scale frequently seem more important for survival than year-end earnings.
And now you can expect the Alaska logo to change with the Eskimo to include a lay/s.
Wondering what you think will happen to HA operations at LGB. Popular take it that AS will be pulling out sooner rather than later.
Greg – I wouldn’t expect AS to pull out of Long Beach. Until the airline finds a way to fly from Orange County to Hawai?i, Long Beach remains a very desirable gateway to the islands from a large swath of geography. Not the same issue going up to the Pac NW.
Good to know since it wasn’t covered by the “thou shall not drop restrictions” as far as I could tell. If LGB would relax the commuter slot to allow the E175 it could be used it might make the airport more useful for the combine carrier.
That will happen about the same time as icebergs form in Long Beach harbor.
How are the loads from LGB to hawaii on HA airlines?
Pretty high. 91% for the first half of the year: https://www.longbeach.gov/globalassets/lgb/community-information/noise-abatement/monthly-reports/2024/activity/2024-06-june
So basically its there to stay. Since load factors are good enough for them to not consider pulling out of LGB. Good. Keep them there.
Hi Didnt the gov say AS could not pull out of existing routes? Did I read that wrong?
If AS has a price cap on award prices for 6 years, that can affect availability. A price control sounds good at first, but the law of supply and demand is not optional and the dollar inflation rate is not 0. It seems DOT lives in a vacuum.
It’s a price cap per refundable fare dollar, so if dollar prices on revenue tickets increase, reward prices can go up as well. Shouldn’t be too much of an issue.
This merger is a long term, not a short term play. In other words, 6 years means nothing.
What this merger does do is lock down the West Coast market for Alaska and by extension Oneworld.
When an airline has a clear schedule/network edge, these “fortress markets” (for lack of a better word) work very well for many airlines. Qantas in Australia, Delta in the deep south, Star Alliance in Central and Eastern Europe, etc etc.
I’m not an expert at this, but I would think that with Alaska/Hawaiian dominating that market, or potentially dominating it; also combining that with AA and Oneworld, that I would make it pretty hard for any new entrant to enter and succeed in Hawaii from the West Coast. If this makes sense what I’m saying. I’m only 19, so I do not know a lot about this stuff, and I am only thinking theoretically .
This definitely doesn’t sound too good for Southwest.
Don’t sell yourself short! One of the very positive points with this blog is that everyone has a voice – and at 19 you will see things that old fogies (like me!) don’t see! You make a good point, and it’s beyond my ability to comment constructively!
I found it interesting that they are looking at (as we know) the value of frequent flyer accounts, and how easy it is for an airline to randomly devalue those points. I know we can expect more on that topic from CF, as well as the Feds
Southwest isn’t a new entrant West Coast-Hawaii anymore, nor West Coast in general; they’ll be fine. If anything, in markets where AS + HA + WN is too much capacity, AS/HA can e.g. swap HA A321neos or even A330s for the same number of 737s (down to MAX8/800). Or if there are AS/HA flights on top of each other on narrowbodies they can swap in two narrowbodies for a 330 or 787, potentially with upgauges elsewhere in the schedule to maintain 90% of seats…and those are in markets where AS/HA are either the only airlines or two out of three. So they can drop LAX capacity without restriction.
In short, this merger will result in fewer seats West Coast-Hawaii on routes where the two airlines compete, so that winds up as *more* opportunity for Southwest, not less. And it’s a competitive market as it stands (all three alliances plus WN) so…should be fine.
This does makes the credit card program for the combined entity a lot more attractive, as there’ll be long haul on AS/HA metal from at least Seattle (which is an awesome connecting point to Japan/Korea when Russian airspace isn’t closed), and Hawaiian cardholders will be able to spend their miles on something that doesn’t touch Hawaii.
Southwest in California (and in the past, Texas) was also a good example of these airlines dominating regions.
I anticipate some capacity and focus shifting to California, which allows Alaska to finally take up the good fight over an increasingly stale airline. You’re right, this is not great for SWA, nor any other non-Oneworld entrant in the west.
PS: Don’t undersell yourself. You’ll be surprised at how biased or how little the “knowledgeable” people know/are.
You already know more than the vast majority of humans out there ;)
I would bet good money that you already know more about airlines/aviation than 98% of the people out there, and can bore your friends/family to tears on the topic.
Age is nothing; critical thought and a deep curiosity & eagerness to learn are what matters IMHO.
It’s easy to assume that others have the same knowledge/background/experiences as they do, but many people (myself included) are surprised when that isn’t the case and realize that they knowledge/skills/etc that others do not (“Wait… Doesn’t everyone know that?”). As such, continue to learn but be proud (internally, without being arrogant) of what you know, and make the most of it.
You’ll be kicking tail before you know it, just wait.
As the great George Carlin said… “if you realize just how stupid the average person is & realize half of those are even stupider than that.” you’re doing just fine.
Yes, it’s scary.
To quote another comedian (Jeff Foxworthy), “If you ever want to feel good about yourself, all you have to do is go to a state fair.” (or, I would add, to the DMV or any other government office).
Very astute observation. SWA major loser on this one. West Coast to Hawaii now a battle between Alaska/One World and United. SWA minor player with dated product. Alaska will almost definitely be bringing Skywest and Horizon E175s to hammer Southwest on the thin money-losing inter-Hawaiian routes. SWA must have been hoping for HA bankruptcy and eventual inter-island monopoly. Now they have a beefy new competitor with deep pockets and cost efficient regional jets, which SWA has no answer for, AND premium amenity wide bodies which SWA has no answer for. Between Elliot Capital, Boeing problems and now this development I don’t envy the SWA brass these days. Very curious if they try to dig their way out of this hole with an acquisition of their own? I have suspicions Elliot Capital may be seeking to boost their ROI in such a manner.
I would not expect to see regionals flying within the islands anytime soon. The Hawaiian pilot contract does not permit it between the main Hawaiian cities, and I imagine this is a hill they will die on during negotiations. Alaska knows this and would be stupid to fight it. The 717s will most likely stick around until 737s take over, but it could be something else mainline.
Regionals could fly to places like Molokai, L?na?i, and Kapalua like ?Ohana did, but the E175s can’t operate there, so Alaska will just rely on Mokulele.
I have no Hawaii flying experience other than as a passenger, so thanks for that information. Makes sense as I had always heard the 717 inter-island day flying was the most senior and coveted in the company among pilots, or for the Honolulu locals anyway.
I don’t know if you recall the United-Continental merger, but Continental was the last major pilot group that held onto the 50 seat regional scope clause long after United had given it up. I don’t remember the exact timing, but not too long after the merger was announced, before the merger was approved and waaaay before a joint contract was reached, seventy-seat United regional jets began swarming the Continental hubs taking over the 50 seat CoEx routes. If the new AS/HA entity is stuck with island routes that they have to operate per DOT, but can’t fill up a 737 or 717, I suspect the two airline, two workgroup period will offer plenty of chances for contract arbitrage shenanigans with regional jets.
There will be much more narrow body and non-red eye flying opportunity for the senior Hawaiian pilots at the new merged entity so perhaps they will be persuaded to give up scope on the island routes? A mediator will probably force them to anyway if they try to take a hard line on the issue. It’s going to be extremely hard for the Hawaiian pilot group as the money-losing, acquired party with dim career prospects to block regional scope when the bigger, profitable, acquiring airline already allows regional flying. Hawaiian guys get to wall off island flying from regional jets in Honolulu but Alaska Pilots are SOL in all of their west coast hubs?? I can’t imagine management, the bigger Alaska pilot group voting block or an arbitrator will go for it. Guess we’ll see soon?
The 717 does go senior, but it’s all personal preference. It used to be more desirable since 717 pilots always came back to Honolulu every night.
It was a true day job that allowed pilots to be home with their families.
And of course, the flying within Hawai?i tends to be pretty on-time with good weather. It’s a good gig. But there are now some overnights on neighbor islands. And you do fly a lot. Some people love the longer flights, because then they can do fewer trips. There are senior people all over the network. I don’t think there has been any bad flying at that airline.
Scope is pretty strong at Hawaiian. In fact, that’s the main reason why ?Ohana with its ATR 42s shut down. During COVID with such a reduced schedule, Hawaiian was in violation of the percent of flying it could do with regionals, so it decided to walk away. (It wasn’t a huge financial performer anyway, but it probably wouldn’t have shut down when it did had it not been for that.)
While there will be two brands, Alaska and Hawaiian will merge all workforces. There will be only one contract, so there won’t be any arbitrage going on. I will be curious if those protections go away, but then again, these markets are really big. Think about it this way. Within Alaska in Q3 of last year, the biggest market was Anchorage – Fairbanks with 299 passengers per day each way. Honolulu – Kahului is 2121, Kona is 1520, L?hu?e is 1499, Hilo is 1381. These are huge markets that need bigger airplanes. Even Kahului – L?hu?e is 283, about the same size as Anchorage – Fairbanks during peak summer.
If there is opportunity for regionals, it might be more around connecting neighbor islands. But those don?t have more than one or two flights today on Hawaiian anyway. I just can?t imagine regionals in Hawai?i is that important of an issue to tackle right now.
I remember asking a loooong time ago (Ostrower at FlightBlogger time ago) who the first narrowbody-only carrier to go widebody might be. Alaska was maybe my third guess, though not by merger. Reality can be strange. I imagine the big three will throw a lot of resources into encouraging those planes to stay in Hawaii and not get comfy in Seattle.
Being locked into interisland service sounds like it creates a no-win situation for Southwest. I wonder if they’ll bail on that.
Alaska is part of oneworld, and AA wanted to make Seattle into an international gateway with AS feed but failed. I don’t think AA would mind in the slightest if AS started running long-haul out of SEA (and maybe even PDX) since AA seems to like pawning off as much long-haul as possible to partners. Would be super interesting to see an attempt to get SEA-HND going on an AS/HA 787. Heck, SAN might have some options as well.
Delta OTOH won’t be happy that AS can do long-haul on their own metal, but it’s not the worst thing for Delta to have to compete on long-haul out of SEA (which…I’d love to connect there across to the north Pacific rather than LAX).
Requiring high interisland service levels though…yeah, that’s going to hurt Southwest’s interisland ambitions. Now that WN can do redeyes, this may be the thing that pushes them to turn planes for redeyes rather than bouncing around interisland as much, leaving AS/HA with something much closer to an interisland monopoly again.
Biden administration documented and practices a “whole of government” approach to M&A that has FTC/DOJ handle core antitrust-&-competition issues such as overlap-&-concentration across routes, seats, gates, and slots while the other Agencies (eg DOT) handle matters over/above/outside the core antitrust-&-competition issues.
In this light, I think the term “Hollow” is being used relative to lack of remedies required by FTC/DOJ as compared to the limited scope of DOT “concerns” in the areas “outside the core antitrust-&-competition areas”. In general, any conditions applied by Agencies beyond the FTC/DOJ is the new norm of the Biden administration’s “whole of government policy”. DOT is probably an ideal Agency to practice this policy given its long-term broad-&-extensive operational-&-regulatory role in the Airline industry.
As to Alaska:Hawaiian, it bears some resemblance to Lufthansa:ITA in that strong positions (hubs, marketshare) in top markets (Hawaii, Italy/Rome/Milan) were added to the corporate parent’s network and P&L. It will be interesting to watch Alaska and Lufthansa progress in obtaining their desired synergies.
It will also be interesting to watch how Alaska evolves the use of the Hawaiian wide-body fleet (A330, B787) across the broader network.
My conspiracy theory is Mayor Pete transferred gazillions of Amex MR to Hawaiian last month with the 20% bonus and now hus DOT is making sure those becomes the more “valuable” Alaska miles with a guaranteed no devaluation until all are redeemed!/s
The route conditions are unlikely to be challenged in court in this case but looks to me like DOT stands a good chance of losing if they were. They weren’t required by DOJ on competitive grounds and DOT doesn’t have jurisdiction over domestic routes. The route requirements don’t look like a big deal in this case but could be if DOT does more of this in the future.
Why was Alaska so adverse to keeping Virgin America’s Airbuses and relying on the dreadful MAX’s and now they will reincorporate Airbus aircraft in its fleet. What changed?
Baron – With Virgin, the Airbuses added no real value. With the exception of the small A321neo fleet which stuck around the longest, Alaska could use 737s to do all the missions of the other airplanes. There was no reason to bother keeping that small, separate fleet. With Hawaiian, the A330 widebody is not something Alaska can do with its own fleet. Over time, it may consolidate around the 787, but that would be down the line. The A321neo also served a helpful niche. It’s only slightly larger than the MAX 9, but it has much better range. That had limited utility for Alaska in the lower 48 (though it had some), but it becomes much more important when connecting the islands.
Also, weren’t the 737s largely owned by AS and the VX Airbuses largely on not-terribly-favorable leases which were expiring? That makes the Airbuses *much* easier to get rid of (or more expensive to keep) than the 737s in addition to the fleet standardization benefits.
Alex – Yes, true that the VX Airbuses were not on favorable leases. But I think that was probably just the cherry on top.
It’s only eight inches, but the A320/321 is bigger inside and more comfortable than 737 family. Higher ceilings, bigger overhead bins, bigger aisles, lavatories, etc. Seems like a plus to me for 5 plus hour flights.
Because all Airbuses stink of French worker body odor and Alaska doesn’t wish to offend its customers. Boeings are manufactured by people who bathe.
Spoken like a loser Cubs fan. Go White Sox 2025
Born on the South Side. Parents and grandparents from Bridgeport. Six in the blood and bone, my friend.
Sox, of course. Damn autocorrect.
Yankees rule! Cubs maybe the only game in town if the Sux pull up stakes & relocate to Nashville.
From the NYTimes Article with Alaska’s CEO, he mentioned they will almost certainly add are long-haul operations from Seattle. Delta’s long-haul international routes from SEA today are LHR, AMS, CDG, ICN, PVG, TPE (new), and HND.
Looking at LF data, it looks like LHR is losing a ton of $$, PVG is about breaking-even, TPE (new route) was doing well but with the new incoming capacity looks like it will be breaking-even, while the other routes do quite well (~high 80’s LFs).
What would Alaska’s long-haul opportunity be?
LHR is a clear opp. esp. if they can join the AA/BA JV – BA is the only one that can make SEA-LHR work profitably and has by far the top LFs (Delta’s already reduced frequency on this route before). HND would be as well but the AA/JAL JV would be a tougher argument and you’d need the slot – if they can get it, it would be a clear advantage. TPE is probably overserved, but if Starlux joins OneWorld as desired (and given Alaska’s current partnership w/ them), I could potential. SYD and MNL could be new markets perhaps with the former esp. attractive if they can join the Qantas/AA JV. Maybe try SE Asia?
Outside that though, what else? Paris, Amsterdam, and Seoul will be tough being SkyTeam hubs – seasonal flights to Paris I’m sure would work but yearlong Delta would have the advantage. PVG is probably breaking even (or slightly profitable), but we all know about the China lack of demand – maybe that changes?
At a first glance it looks like they have a clear path to weaken Delta internationally from SEA but will take hits on their own performance as well to do so which would be a risky proposition.
I don’t expect Alaska to pour a ton of resources into long-haul Seattle flying right away. Digesting HA will cost enough money as-is. That being said, transatlantic in the summer prints money, and AS clearly has a place to fly the planes in the winter (Hawaii), so we could see some experimentation there with seasonal markets. For year-round service, I’d definitely expect Sydney, Tokyo and London to be the first targets. But I wouldn’t be surprised much at all if the second round of adds looks more like PDX-Tokyo that’s potentially lower-risk, rather than jumping in SEA-AMS year-round against Delta. The long-term goal of course is to push Delta out, and any long-haul flying will really hurt DL’s profitability in SEA. But perhaps just as important is the threat of long-haul flying. Is “the writing on the wall” with AS long-haul network, even if they start off with a conservative approach?
I definitely have a personal bias, but I’ve always wondered why no one operates a non-stop from CTS to a US destination. Obviously CTS-HND is a heavily trafficked route, and I have to imagine there has is got to be a reasonable amount of traffic that connects onward to the US. Portland and Sapporo are also sister cities, so PDX-CTS would be fun. I will say if AS ever did operate SEA/PDX-CTS, I can 100% guarantee my family would demand use of my 500k+ in MileagePlan miles to go back to Hokkaido ASAP.
But in general, I do think the natural play is to try and eventually use their mass in SEA/PDX to compete directly with DL into places like HND/NRT and ICN where they will already have experience from the existing HA HNL service. Also have to wonder if AS/HA can put a lower CASM product into the Pacific routes than AA, and if that causes Oneworld to favor them there. As far as going into the South Pacific to places like SYD, AKL, it seems like connect through HNL maybe makes more sense given the great circle routing.
Hawaiian flew CTS-HNL from 2012 until March 2020.
https://newsroom.hawaiianairlines.com/releases/hawaiian-airlines-suspending-sapporo-service
LAX to CTS!!! Maybe seasonal? Every winter I am forced to connect through HND or NRT for my annual powder pilgrimage.
A good way to drain some mileage balances is AS metal on new intercontinental SEA routes. Profitability would be all in mileage plan accounting but no doubt AS could fill the aircraft for a while.
Alaska is a different airline than Delta. First, think about who it is aligned with. And then also think about how these aircraft will not likely be as premium heavy, certainly not as premium heavy as BA. I would think if they can get Heathrow slots, that would be a smart first move. But then, I’d probably follow the corporate contracts. If Alaska can fill seats up front with corporates, it can probably fill seats in the back much more easily. (Maybe not Taipei since that has an insane amount of service now.) Alaska may also want to route these airplanes to do things like the redeye from the West Coast to JFK, giving flat beds for those who really want it. This doesn’t have to be a huge operation.
If it’s truly a long game, and Russian airspace reopens to US carriers, they can make Seattle to India work.
Off topic, but… Not sure how one would define it (in terms of distance and airports/geographies), but I’d be curious to know of the extremely long distance routes (pax origin to destination, even if stops/connections are required) with the most pax demand.
I know that LHR to SYD is a classic example (perhaps LHR to HKG and LHR to SIN as well, to a much lesser extent?), but I assume that routes from the US (Seattle, SFO/SJC area, etc) to India would be up there as well.
From a technology perspective, it will be interesting to see what happens. AS has been hosted on an archaic partition of Sabre for decades, and HA just cut over to Amadeus last year. It’s likely the powers that be at AS will choose to stick with Sabre, but since they’re going to have to perform a PSS migration regardless, hopefully they actually do their due diligence of what would be better for the future direction of the combined company. Both carriers have a huge number of interline partners.
> First, it will provide at least one free standard carry-on and at least two free standard checked bags for military members. Second, it will waive change fees for service members who have to reschedule due to a military order.
A minor point, but this treatment of the military really bothers me. We the taxpayers are the employers of military members. If they have work-related changes to travel itineraries or the need to check large numbers of bags because they’re moving somewhere and/or carrying work-related equipment, their employer should be covering their expenses. Airlines shouldn’t need to grant special waivers to absolve the military of the responsibility of properly covering its employees’ work-related expenses. And if military members are traveling with five checked bags for reasons that aren’t related to work or the need to transport military equipment, why are airlines subsidizing them and not, say, teachers or firefighters or nurses or [insert honorable, underpaid profession here]?
Re change fees: there aren’t change fees anyway, are there? So this only matters if airlines reinstate change fees, or does it mean military members can waive no-change restrictions on basic fares?
(I know this all came from a media furor over military members traveling on orders and being surprised that the rules apply to them and their employer, and poor communication that these were reimbursable expenses anyway.)
Alex – On change fees, I have to assume this means Saver fares, because it just wouldn’t apply anywhere else. Really a weird provision.
What merger do we think will be next? NK and? Or will NK fracture? B6 and?
Glad I got to fly HA this summer while they were still fully their own airline. I do wish that HA had been able to go on being their own thing, but in light of that not looking likely Alaska is still by far the best suitor to run the interisland network. Branding will be interesting to see how they harmonize or divide it on the fleet, and I hope they will preserve the local Hawaii product and onboard aspects just like how Alaska features a lot of PNW local products today