Alaska Airlines closed its $1 billion purchase of Hawaiian Airlines on Wednesday, a day after the federal government removed the last major regulatory obstacle to the deal.
Alaska will also assume about $900 million in Hawaiian debt. Alaska says it will keep Hawaiian as a separate brand, eliminating the need to repaint planes.
To win approval from the Transportation Department this week, the airlines agreed to maintain current levels of service on key routes within Hawaiʻi and between the island state and the U.S. mainland where they don't face much competition.
Alaska Air Group stock fell 3% Wednesday. The shares are up 2% since the start of the year. As part of the merger deal, Hawaiian shareholders are getting $18 a share.
The Justice Department, which had opposed previous deals between large airlines including JetBlue's attempt to buy Spirit Airlines, has not challenged the Alaska-Hawaiian deal on antitrust grounds.
Alaska and Hawaiian also agreed to a handful of consumer protections, including not lowering the value of frequent-flyer rewards as they combine their loyalty programs and promising to compensate passengers for cancellations and significant delays that are the carriers' fault.
"Each outstanding HawaiianMiles and Alaska Mileage Plan mile must be converted into a mile in the new loyalty program at a 1:1 ratio, resulting in all members having the same number of miles before and after conversion," according to the DOT.
Other conditions include preserving subsidized flights to smaller communities in Alaska and Hawaiʻi, guaranteeing families can sit together without paying extra fees, and offering lower costs to military families.
The DOT said this is the first time it has required merging airlines to agree to binding, enforceable public-interest protections — which will remain in effect for six years.
Seattle-based Alaska Airlines said those conditions were similar to its plans from the time it announced the deal in December. Alaska said customers will soon be able to transfer their miles between the airlines' respective systems free of charge.
According to Alaska, Hawaiʻi residents will be offered a new interisland travel discount program of 10% off one booking per quarter and a free checked bag. Residents with the Hawaiian Airlines World Elite Mastercard will get 20% off one interisland booking per quarter.
"In an island state, where all of Hawai‘i’s residents are reliant on passenger and cargo air service for our way of life, a healthy local airline committed to sustaining essential connectivity and travel options is a cornerstone of community resilience," Hawaiʻi Gov. Josh Green said in a statement provided by Alaska.
"I am confident that by the joining of these two airlines, a stronger company will emerge and offer more travel options for Hawai‘i residents and local businesses — and will enhance competition across the U.S. airline industry," he continued.
The deal solidifies Alaska's position as the fifth-largest U.S. airline company by revenue and expands its international profile with Hawaiian's extensive flying between the island state and Asia. Alaska, with its subsidiaries, now has a fleet of 350 aircraft.
Alaska said Hawaiian Airlines CEO Peter Ingram will step down. Joe Sprague, who is currently Alaska's head of Hawaiʻi and Pacific operations, will be the CEO until the Federal Aviation Administration issues a single operating certificate.
Alaska said an interim Honolulu leadership team, including several executives from Hawaiian, will oversee the Hawaiʻi-based airline throughout the transition.
