Despite executives at both Alaska Airlines and Hawaiian Airlines saying their merger will greatly benefit passengers, investors have had a lukewarm response to the two companies joining forces.
The stock price for Alaska Airlines fell by 14% immediately following Sunday’s announcement that it acquired Hawaiian Airlines while Hawaiian Airlines’ stock price jumped more than 200%.
Experts say investors are responding to the uncertainty the $1.9 billion merger will bring as combining airlines is a complex task and may be subjected to legal challenges by the federal government.
Last month, the U.S. Justice Department brought JetBlue to court in an attempt to block its merger with Spirit Airlines. Federal officials argue that by eliminating Spirit, JetBlue and other airlines could artificially increase prices for plane tickets.
However, experts also agree that the merger makes strategic sense as Alaska and Hawaiian’s fleet will increase to 365 planes and together, they will serve some 54.7 million passengers annually. Although their operations will still be far behind the “Big 4” airlines, experts think they’ll be in a better position to compete.
According to Sunday’s announcement, the merger will benefit passengers with an expansive destination network and greater rewards. By the numbers, the merger will give Alaska and Hawaiian customers access to non-stop service to 138 destinations, including 29 outside the U.S., and connections to more than 1,200 around the world.
Exactly why Hawaiian’s stock price soared and Alaska’s didn’t is that the company has been struggling since the Maui Wildfires disrupted tourism in the area.