Hawaiian Airlines Parent Soars 180% on Alaska Airlines Deal. It Can Go Higher.

The Hawaiian jump can be explained by the 270% premium Alaska is paying, based on Friday’s closing price. However, the shares are still trading below the deal price of $18, perhaps reflecting concerns that the Biden administration will scrutinize the merger on antitrust grounds.

Hawaiian stock hasn’t traded at $18 since May 2022. The shares have taken a battering this year—down 53% since January––on earnings hits from the Maui wildfires and engine problems. 

Investors tempted to cash in on Hawaiian’s potential upside, even from Monday’s levels, should mindful of the Justice Department’s eagerness to tackle what it perceives as a lack of competition in the airline industry.

Justice officials are fighting the proposed $3.8 billion merger of
JetBlue Airways
and
Spirit Airlines
and has already succeeded in forcing JetBlue to abandon its alliance with
American Airlines
in the Northeast.

A ruling in the JetBlue-Spirit case could set a precedent for the Alaska-Hawaiian merger. The Alaska-Hawaiian deal would give the new entity more than a 50% market share in the Hawaiian air market.

However, Alaska CEO Ben Minicucci said just 12 of the combined 14,000 flights operated by the two airlines overlap. He added that the airline officials haven’t spoken to the government yet regarding the proposed merger.

The deal itself “makes good common sense” for both airlines, TD Cowen analyst Helane Becker said in note Monday.

“For Alaska, it enables international growth in the Asia Pacific region, which is one of the faster growing markets in the world,” she said. “For Hawaiian, it enables their passengers to fly to more places on the U.S. mainland on a non-stop or one stop basis vs multiple stops now,” Becker added. 

Becker said regulatory approval wasn’t a certainty, particularly given the Justic Department’s battle over the JetBlue-Spirit merger.

Write to Callum Keown at callum.keown@barrons.com