Justice Department Steps Up Scrutiny of Hawaii-Alaska Merger

HONOLULU — As the extended deadline for federal antitrust regulators to review the proposed $1.9 billion merger of competitors Alaska Airlines and Hawaiian Airlines nears, there are mixed signals.

The Justice Department’s formal review period for the proposed merger was originally scheduled to end on Aug. 5. But that was pushed back to 12:01 a.m. ET on Thursday after both airlines agreed to a 10-day extension from the Justice Department.

Hawaiian and Alaska need DOJ approval to complete the proposed merger, which was announced Dec. 3 and includes $900 million of Hawaiian’s debt. The delay has given the DOJ and state attorneys general more time to decide whether to block the deal or allow it to proceed, and has left investors nervous.

The wait is almost over. Brian Hanna, a trial lawyer with the Justice Department’s antitrust division who was involved in a lawsuit to block the $3.8 billion merger of JetBlue and Spirit, has filed a motion notifying the U.S. District Court in Hawaii of his intention “to appear before this court on behalf of the United States and to pursue the interests of the United States.”

U.S. District Court Judge Micah W.J. Smith issued an order Monday allowing Hanna to appear and practice before the court. A DOJ spokesman did not immediately respond to a request for comment, but it is generally understood that the DOJ has a range of options available to it, from granting full regulatory clearance to setting conditions in a consent decree to seeking additional time to consider the case and challenging the merger in court.

The merger of Alaska Airlines and Hawaiian Airlines requires the approval of the Justice Department, which has taken a hard line against consolidation in the airline industry under the Biden administration. In 2023, the Justice Department, along with the attorneys general of the Commonwealth of Massachusetts, New York State and the District of Columbia, filed a civil antitrust lawsuit to block the merger of JetBlue and Spirit.

The nation’s top law enforcement official, Attorney General Merrick B. Garland, said in a press release: “As our complaint alleges, the merger of JetBlue and Spirit would lead to higher fares and fewer choices for tens of millions of travelers, with the greatest impact felt by those who rely on so-called ultra-low-cost carriers to fly. Companies in every industry should understand now that the Department of Justice will not hesitate to enforce our antitrust laws and protect American consumers.”

In Hawaii on Monday, Chief District Judge Derrick Watson dismissed a lawsuit that sought to block Alaska Airlines’ plan to buy Hawaiian Airlines on the grounds that the merger would result in higher fares, lost jobs and fewer flights, and would hurt Hawaii’s economy.

Alaska Airlines said in a statement: “We are pleased with the court’s decision in this case. We continue to believe that this proposed combination will expand benefits and choices for consumers in Hawaii, the continental United States and around the world. We remain committed to working through the regulatory review process.”

The lawsuit was filed in April on behalf of eight passengers: Warren Yoshimoto, Kristin Barroga, Sean Kettley, Carolyn Fjord, Don Freeland, Don Fry, Bill Rubinsohn and Clyde Stensrud. The passengers, including three Hawaii residents, were represented by antitrust lawyers Joseph Alioto and Tatiana Wallace of the Alioto Law Firm in San Francisco and Terence O’Toole, Andy Lautenbach and Kukui Claydon of the Starn, O’Toole, Marcus and Fisher Law Firm in Honolulu.

Watson’s dismissal order said the passengers had no legal basis for their action, adding that they “do not allege any personal connection with either airline that could credibly demonstrate a specific or particularized harm.”

Alioto, the consumer lawyer, said Watson dismissed the case without prejudice, so he plans to file “a new case and a motion for a temporary injunction prohibiting the acquisition.”

There is rampant speculation among investors that Hanna’s arrival could mean the DOJ plans to block the merger of Alaska Airlines and Hawaiian Airlines. But Alioto said he expects the DOJ to propose a consent decree on Thursday “to preempt a private lawsuit that seeks to prevent the takeover altogether.”

“The idea that the government should try to dictate what business should be about is absurd,” he said.

Alioto opined that if the acquisition is approved, Alaska would control “over 40 percent, and in some cases 50 percent, of the flights from Hawaii to the mainland and from the mainland to Hawaii.”

He added that the merger would also mean Alaska would immediately “buy its way in” and capture about “70 percent of the interisland market.”

“The natural result of a takeover is that prices increase, workers are laid off en masse and production and capacity are reduced — that happens with every takeover, and it’s unthinkable that this would happen to such an important industry in Hawaii,” Alioto said.

Hawaiian and Alaska, which are small carriers compared to the four largest U.S. airlines, argue that the merger will benefit customers by allowing travelers to reach more destinations, and there are only 12 overlapping routes between the airlines.