Alaska Air Group has announced its plans to acquire Hawaiian Airlines for a total sum of $1.9 billion in cash and debt. The proposed deal, revealed on Sunday, is still subject to approval by federal regulators, including the Justice Department, which has recently taken a hard stance against mergers deemed anticompetitive.

The decision to pursue the acquisition follows months of deliberation and strategic planning by Alaska Air Group's executives. However, the airlines' leaders now face the task of convincing regulators that this merger should be permitted to proceed. In recent times, the Justice Department, under President Joe Biden, has been actively challenging airline deals it views as potentially harming competition.

This move by Alaska Air Group echoes the Justice Department's strong opposition towards other recent acquisitions in the industry. Just last year, the department filed a lawsuit aiming to block JetBlue Airways' cash acquisition of budget carrier Spirit Airlines, valued at $3.8 billion. Their argument was centered on the potential negative impacts on consumers, such as higher fares, if Spirit Airlines were to be absorbed by JetBlue.

The Justice Department has also successfully intervened in the past to dissolve JetBlue's partnership with American Airlines in the U.S. Northeast. In both cases, JetBlue argued that such alliances were necessary for the airline to effectively compete with larger industry rivals and expand operations amid shortages of aircraft and pilots.

The dominance of American, Delta, Southwest, and United, which collectively control approximately 80% of U.S. airline capacity, was largely shaped by over a decade of mergers in the sector. In comparison, Alaska Air Group currently holds a share of over 5% of U.S. airlines' capacity, while Hawaiian Airlines commands less than a 2% share, according to Cirium data.

Hawaiian Airlines has been grappling with a series of challenges, including the Maui wildfires and increased competition in Hawaii from Southwest. Additionally, the slower recovery of certain long-haul Asia routes has presented further obstacles for the carrier.

While the Alaska-Hawaiian and JetBlue-Spirit deals exhibit different approaches, the former may still face hurdles with regulators. JetBlue's plans to revamp Spirit's aircraft and amenities, while phasing out the Spirit brand entirely, contrasts with Alaska's intention to maintain separate branding for both Hawaiian and Alaska Airlines, which are crucial for serving the remote states they operate in.

Although the Justice Department declined to comment on the Alaska-Hawaii deal, experts anticipate that regulatory obstacles may arise. "The starting point is one of skepticism," noted William Kovacic, a professor at the George Washington School of Law and former Chair of the Federal Trade Commission. He emphasized that the review process would focus on areas of competition between Hawaiian and Alaska, considering how the two airlines could have expanded independently if not for the merger.

Executives from both Alaska and Hawaiian have passionately defended the deal, highlighting minimal overlap and potential network expansions. The CEOs believe that the acquisition will grant them access to each other's networks, enabling Alaska to tap into Hawaiian's Asia-Pacific routes and expanding Hawaiian's presence with Alaska's nationwide network.

Alaska's Chief Financial Officer, Shane Tackett, expressed confidence in the uniqueness of their proposal compared to other mergers, highlighting their similar product offerings and limited network overlap. Tackett stated that the two carriers only share 3% of seats and 12 routes. In contrast to the argument put forth by the Justice Department in the JetBlue-Spirit lawsuit, experts noted that Alaska and Hawaiian do not possess the same market catalyzing potential.

The planned acquisition is expected to take 12 to 18 months to complete, extending beyond the upcoming presidential election and possibly into a new administration. Following the announcement, Hawaiian's stock price nearly tripled to $14.22 per share, albeit still below the proposed purchase price. Conversely, Alaska's shares experienced a 14.2% decline, closing the day at $34.08.