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Hawaiian Holdings (NASDAQ:HA) saw a significant increase in its stock value on Tuesday morning, rising by 11% following a crucial development in its merger with Alaska Air Group. The U.S. Department of Justice announced it would not challenge the $1.9 billion acquisition, giving a significant boost to the deal's progress.
Alaska Air Group initially agreed to acquire Hawaiian Holdings in December of last year. However, the merger's completion was not guaranteed, given the current regulatory climate, which has become increasingly cautious about airline mergers. Earlier this year, the Justice Department successfully blocked a similar attempt by JetBlue Airways to acquire Spirit Airlines.
The Alaska and Hawaiian merger faced fewer challenges because the two airlines have fewer overlapping routes compared to JetBlue and Spirit. On Tuesday, the Justice Department decided not to oppose the merger on antitrust grounds, marking a key milestone in the process.
If finalized, this would be the first airline merger to close since Alaska Air Group's acquisition of Virgin America in 2016.
Alaska Air Group (NYSE:ALK)referred to the Justice Department's decision as a significant milestone in its statement. Despite this progress, the merger still requires approval from the Department of Transportation, along with the completion of other closing conditions.
When the merger was first announced, the Justice Department was seen as a more significant obstacle than the Department of Transportation. With that hurdle now cleared, the likelihood of Alaska completing the acquisition has increased. However, with Hawaiian Holdings' shares trading close to the $18-per-share cash buyout price, the stock's immediate appeal may be limited for those looking to enter the market.
Alaska Air Group may become more appealing in the long term. The merger would provide the company with increased scale, enabling it to better compete with larger airlines and gain access to one of the most popular domestic vacation destinations. However, the focus for now will be on the integration process, which will require careful management moving forward.
