HONOLULU (KHON2) — Alaska Airlines’ buyout of Hawaiian Airlines is delayed again and experts say it could signal a potential challenge from regulators.
The U.S. Department of Justice has again extended how long it will scrutinize the proposed $1.9 billion airline merger.
According to a filing today with stock regulators, the DOJ and the airlines have agreed to stretch the review period which would have expired this coming Monday, Aug. 4, to Aug. 15.
Always Investigating asked Bill Baer, the only person who has ever led antitrust enforcement at both the DOJ and the Federal Trade Commission, about his take on the latest delay.
“Thatʻs not unusual as you get to the end of one of these very extensive merger reviews,” said Baer, who headed the DOJʻs Antitrust Division from 2013 to 2016 and was director of the FTCʻs Bureau of Competition from 1995 to 1999 and is now a visiting fellow at the Brookings Institution.
“It doesnʻt tell us anything about what the outcome is going to be, although the fact that they are still in discussions suggests to me that the Justice Department is looking very seriously at the proposed merger, and may well — we donʻt know, but it may well — file a challenge.”
In March, the airlines entered into a timing agreement with federal antitrust regulators not to complete the merger any sooner than 90 days after a “substantial compliance” with a second-round of information the DOJ wanted in order to decide if it will concur with, or challenge, Alaskaʻs buyout.
“If the parties are in negotiations, itʻs not unusual for (extensions) to happen,” Baer said. “But this looks to me, as an outside observer, like weʻre getting close to the end game.”
Which way that game leans remains to be seen.
“At the end of these investigations, the merging parties, in this case Alaska and Hawaiian, will often come in and meet with senior officials of the Antitrust Division and explain why they think this is a good deal for citizens of Hawaii and for consumers who travel on both airlines to and from the islands,” Baer said.
Hawaiian Airlines declined to comment about the delay, but Alaska Airlines said in a statement:
“We continue to believe this combination will enable a stronger platform for growth and competition in the United States, long-term job opportunity for employees, and continued investment in local communities and environmental stewardship. We will continue to cooperate with the DOJ in this review process.”
As for the length of time it is taking to get DOJ buy-in on that point of view, Baer said, “The fact that the investigation is still going on suggests that there could be a legal challenge where the Justice Department would go into a federal district court and argue that, on balance, this deal is bad for consumers, itʻs bad for competition, and ask the court to enter an injunction prohibiting the merger from going forward. We donʻt know thatʻs what going to happen here, but that possibility clearly remains on the table.”
Part of the proposed deal includes Alaska acquiring nearly $1 billion in Hawaiian Airlines debt.
Just last week, Hawaiian filed with stock regulators a disclosure that it was exchanging $1.2 billion worth of “loyalty notes” for nearly $1 billion in new notes at an annual interest rate of 11% but freeing up hundreds of millions in cash liquidity in the process.
Hawaiian Airlines President and CEO Peter Ingram addressed this in its quarterly financial results call Tuesday, saying, “While we are optimistic that the merger will achieve regulatory clearance in due course, these steps provide a meaningful liquidity runway into 2029.”