Mid-tier U.S. airline Alaska Airlines Inc. has agreed to acquire Hawaiian Airlines Inc., a small regional U.S. airline, for $1.9 billion, according to the company’s announcement on Sunday.

The agreed-upon price is $1.9 billion, meaning Alaska Airlines will purchase Hawaiian Airlines’ stocks for $18 per share. This marks an increase of 270 percent from the airline company stock, which was priced at $4.86 per share as of December 1, 2023. The deal includes $900 million in debt owed by Hawaiian Airlines, bringing the actual cash spent by Alaska Airlines to $1 billion. The two companies have agreed to operate independently.

Alaska Airlines is believed to be acquiring Hawaiian Airlines at a relatively high price to survive in the concentrated U.S. domestic market. The decision to set a high price is likely due to the judgment that Hawaiian Airlines is currently undervalued due to a significant drop in its stock price.

In the North American aviation industry, the four major players—American Airlines Group Inc., Delta Air Lines Inc., Southwest Airlines Co., and United Airlines Holdings Inc.—hold 80 percent of the U.S. domestic market. The remaining 20 percent is held by Alaska, JetBlue Airways Corp., and Spirit Airlines Inc., but the major players carry more than treble the passengers.

Mid-tier companies have been striving to increase their size to stay alive in this market. JetBlue attempted to acquire Spirit Airlines in 2022 but is currently facing a lawsuit from the U.S. Department of Justice due to monopoly concerns. Alaska Airlines has a decent cash flow, with an accumulated net profit of $139 million as of the third quarter of 2023, but Hawaiian Airlines has been recording losses, seeing its stock price drop by 52 percent in 2023 alone.

Once Hawaiian Airlines is acquired by Alaska Airlines, it is expected to increase its market share in the western United States and Hawaii, as well as expand into the Asian market, including Japan and South Korea. Industry insiders see a relatively high possibility that U.S. aviation authorities will approve the merger review of the two companies, who overlap in 12 routes out of a total of 1400.

By Lee Duk-joo and Chang Iou-chung

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