By Alison Sider

Alaska Air and Hawaiian Airlines secured clearance from the Transportation Department to go ahead with their merger, conditioned on the airlines maintaining service on crucial routes, preserving the value of frequent-flier miles and other customer-service guarantees.

Alaska agreed to acquire Hawaiian in a roughly $1 billion deal late last year. The Justice Department last month completed its review of the merger and didn't challenge it on antitrust grounds.

The Transportation Department, which is charged with determining whether the proposed acquisition is in the public interest, is taking what it described as a more proactive approach to securing consumer-protection commitments before signing off.

Alaska said the commitments aligned with what it had already planned to do, and that the carriers expect to close their transaction in the coming days.

Hawaiian Chief Executive Peter Ingram is set to step down after the deal is finalized. Joe Sprague, who currently serves as Alaska's regional president for Hawai'i/Pacific, will be named Hawaiian's CEO until the two airlines are allowed to operate as one.

The combined airline will have to maintain current levels of service for critical routes between the Hawaiian islands as well as along key routes between Hawaii and the continental U.S. The Transportation Department also required the airlines to avoid diluting the value of their frequent-flier miles, a practice the regulator is scrutinizing as it investigates major airline loyalty programs.

The department is requiring that Hawaiian join Alaska in providing travel credits or frequent-flier miles when a flight delay or cancellation is within the airline's control, and in guaranteeing that children 13 years old and younger can sit next to an accompanying adult at no extra cost.

The agreement announced Tuesday means that Alaska and Hawaiian can close their deal -- the first major U.S. airline merger since 2016, when Alaska bought Virgin America. Antitrust enforcers have been wary of allowing more consolidation in the airline industry after a previous wave of tie-ups.

The Justice Department successfully sued to block the combination of JetBlue Airways and Spirit Airlines this year, and forced American Airlines and JetBlue to dismantle a partnership in the Northeast.

There are still remaining steps in the Transportation Department's review before Alaska and Hawaiian can operate as a single entity. Once that occurs, the consumer-protection requirements will remain in effect for six years, the DOT said.

Alaska and Hawaiian will together account for 50% of the Hawaiian air-travel market, but the carriers have argued that together they would be able to connect Hawaii to a broader network of destinations. The companies have said they plan to maintain their separate brands.

Acquiring Hawaiian will give Alaska a platform for international expansion, including a fleet of wide-body jets. Analysts have said the deal is also a lifeline for Hawaiian, which has struggled in recent years.

The combined airline would be the fifth-largest U.S. carrier behind United Airlines, Delta Air Lines, American Airlines and Southwest -- the four carriers that dominate the domestic market.

Write to Alison Sider at alison.sider@wsj.com

(END) Dow Jones Newswires

September 17, 2024 17:44 ET (21:44 GMT)

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