Alaska-Hawaiian Deal Doubts Mount After JetBlue-Spirit Blocked

Traders are increasingly skeptical whether Alaska Air Group Inc.’s proposed $1.9 billion acquisition of Hawaiian Holdings Inc. will go through, after a judge blocked the merger between JetBlue Airways Corp. and Spirit Airlines Inc. on antitrust grounds.

Hawaiian shares dropped as much as 3.1% to $13.06 on Wednesday, after a nearly 2% decline Tuesday following the US judge’s ruling. The stock reached almost $5, or roughly 28%, below Alaska’s $18-per-share cash offer — the widest gap since the tie-up was announced last month. The market is pricing in around a 65% chance of the transaction closing successfully, compared to about 70% before the Tuesday court decision, according to two merger-arbitrage specialists.

The JetBlue-Spirit ruling represents a major win for the Biden administration, which has taken a more aggressive stance on consolidation in the airline industry. The Justice Department is also reviewing the Alaska-Hawaiian merger, a combination that would capture more than half of Hawaii’s airline market.

“Odds of a successful Alaska-Hawaiian merger may drop in the wake of the JetBlue-Spirit rejection,” Bloomberg Intelligence’s Francois Duflot said in a report. Melius Research’s Conor Cunningham echoed that view and said blocking the deal has negative implication for the sector.

Read more: Spirit Extends Slide as Judge Blocks JetBlue Merger: Street Wrap

However, traders may not want to give up on the tie-up just yet.

At JPMorgan Chase & Co., for example, analyst Jamie Baker is more positive about the deal outcome.

“Not a single material point raised by the court, in our opinion, in ruling against the JetBlue/Spirit merger directly applies to the Alaska deal to buy Hawaiian,” he said in a report.

The judge’s focus on preserving deep-discount models doesn’t apply to Alaska and Hawaiian, and Alaska plans to preserve Hawaiian as a separate subsidiary, not eliminate it as JetBlue planned for Spirit, he said.

--With assistance from Mary Schlangenstein.

To contact the reporter on this story:
Yiqin Shen in New York at yshen358@bloomberg.net

To contact the editors responsible for this story:
Eric J. Weiner at eweiner12@bloomberg.net

Mark Tannenbaum

© 2024 Bloomberg L.P. All rights reserved. Used with permission.