Alaska Airlines can move forward with its acquisition of Hawaiian Airlines. The US Department of Transportation issued its approval of the transaction, pending compliance with several conditions the carriers agreed to. That separate agreement dictates forward looking policies on operational capacity, loyalty, and customer rights, with a six-year horizon.
Prohibiting Capacity Cuts
The combined carrier will be prohibited from cutting capacity in markets where Hawaiian and Alaska overlap today. The DOT agreement mandates they maintain 90% of the flights or total seats in service for the twelve months ending 31 August 2024.
The airlines will be permitted to reduce capacity if a new competitor enters any of those overlapping markets with a level of service equal to the scheduled capacity offered by Hawaiian as of December 2023. The agreement also includes a carve out for the DOT to allow a cut if the airlines can prove a change in market conditions that leads to unprofitable flying or low load factors. While that seems like a somewhat easy burden to claim, the DOT will ultimately be the arbiter of such requests.
A review of schedule data from Cirium suggests a dozen affected routes, connecting Maui and Honolulu in the islands with Seattle, Portland, San Francisco, San Jose, Los Angeles, and San Diego on the mainland.
Within the islands the requirements are more strict, with the agreement mandating “robust passengers service and air cargo capacity among the Hawaiian Islands” at levels Hawaiian operated in December 2023. There is no carve out for underperforming routes mentions in that paragraph of the agreement.
The combined carrier will also be required to maintain its interline services with other US airlines “on terms and conditions no less favorable to the other carrier than the terms contained in Hawaiian’s interline agreements” as of 15 September 2024. United Airlines expressed concern about losing that access.
Alaska Airlines is expected to support continuing Essential Air Service connectivity in Alaska, while the new carrier must also maintain its agreements with Mokulele or any successors on similar EAS routes within the islands. Moreover, the DOT expects that any new EAS operator with connections at one of the new carrier’s hubs will be accommodated with interline service. If Alaska Airlines declines such a request it must justify that to the DOT.
Dictating Loyalty Program Policies
The DOT also mandated several specific conditions around loyalty, while tipping that the newly combined carrier plans to launch a new program as part of the combination. Until that new program launches members will be able to move miles between HawaiianMiles and Mileage Plan at a 1:1 ratio. Miles will also not be allowed to expire, nor can earning rates be decreased.
Most interesting, however, is the requirements that the company “maintain the value of each unredeemed HawaiianMiles mile at the value earned prior to closing.” That clause follows another paragraph which prohibits any actions that could be seen as a loss or devaluation of the program, including changes to redemption rates.
When the new program launches the conversion rate will also be 1:1. Those points will never expire and any existing elite status will be maintained in the new program. The new program will also see a mandated minimum value of points, though the benefit of this requirement is less clear.
For one thing, the DOT and carriers redacted the value. But it is defined as the number of points required for redemption on a fully refundable award ticket relative to the dollar price of a fully refundable revenue ticket in the same cabin of service. That leaves some room for the carrier to manipulate the value, as few travelers ever book fully refundable fares.
It explicitly does not apply to “Saver” fare redemptions, nor does it impact bookings on partner airlines. The airlines also received permission to drop the value to travelers if the remuneration they receive from credit card partners. Finally, the carrier agrees that in the new program awards will not have change or cancel fees, at least for travel on carrier-operated flights.
Customer Service Focus
The DOT also mandated that Hawaiian update its customer service plan, aligning it with the level of Alaska Airlines. This includes guaranteed adjacent seats for children 13 or younger with an accompanying adult, rebooking on partners in the event of a “controllable significant delay,” and either points or a travel credit for 3+ hour delays within the carrier’s control.
Hawaiian will also be required to allow one carry-on and two checked bags to all service members and accompanying passengers, as well as waiving change fees when rebooked due to military orders.
Enforcement
The parties agree that any potential violation will be granted a 14-day response window. After that period, the FAA may pursue civil action or other penalties, with each day of noncompliance to be considered a separate violation.
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