A major aviation merger takes off as “combine to compete” arguments trend up

At merging altitude… The airline of glaciers and wilderness may join with the airline of pineapples and resort beaches. Alaska Airlines said it would buy Hawaiian Airlines for $1.9B, creating a carrier that could service 138 destinations, and further consolidate an already compacted industry. Hawaiian’s stock nearly 3X’d yesterday — but the deal’s expected to encounter a harsh landing.

• Ohana means family: This year, Hawaiian sold 22% of all flights into the Aloha State. That would increase to 38% in the merger, double the market share of the next closest competitor, United Airlines.

• May not fly: Government agencies haven’t been kind to airline deals lately. The DOJ sued to block JetBlue from buying Spirit (closing arguments will be heard today) and last year stopped an American Airlines-and-JetBlue alliance in the Northeast.

• Wingspan: 80% of the domestic airline market is dominated by four carriers (American, Delta, United, Southwest). If the acquisition happens, Alaska’s market share would grow to 8%+. (FYI: Alaska took over Virgin America in 2016.)

Get big to go big… Alaska argues that merging will let it compete with the bigger airlines. This combine-to-compete argument can be heard across the M&A landscape. Grocery giants Kroger and Albertsons have said their proposed combo is necessary to challenge Amazon and Walmart. A rumored health-insurance merger between Cigna and Humana would create a $140B powerhouse that could rival leader UnitedHealth. But regulators say that creating more giants hurts labor competition, which leads to wage stagnation.