Alaska Air Group, Inc. (NYSE: ALK) and Hawaiian Holdings, Inc. (NASDAQ: HA) announced today that they have reached an agreement under which Alaska Airlines will acquire Hawaiian Airlines for $18.00 per share in cash, for a transaction value of approximately $1.9 billion, inclusive of $0.9 billion in Hawaiian Airlines net debt. The merged firm will provide consumers with additional destinations as well as a broader range of important air service alternatives and access throughout the Pacific region, the continental United States, and beyond. The purchase is projected to provide a more stable foundation for development and competitiveness in the United States, as well as long-term job possibilities for employees, sustained investment in local communities, and environmental responsibility.

Alaska carriers and Hawaiian Airlines share a profound commitment to caring for their workers, passengers, and communities as carriers founded in the 49th and 50th United States, which are singularly reliant on air travel. This merger will build on the 90+ year legacies and cultures of these two service-oriented airlines, preserving both beloved brands on a single operating platform, and protecting and growing union-represented jobs and economic development opportunities in Hawai’i, with a combined network that will provide more options and added international connectivity for travelers through airline partners such as the oneworld Alliance.

“This combination is an exciting next step in our collective journey to provide a better travel experience for our guests and expand options for West Coast and Hawai’i travelers,” Ben Minicucci, CEO of Alaska Airlines, said in a statement “We have a long and deep respect for Hawaiian Airlines, for their role as a top employer in Hawai’i, and for how their brand and people carry the welcoming culture of aloha around the world.” Our two airlines are driven by outstanding workers who have 90+ year legacies and beliefs that are rooted in caring for the distinctive locations and people we serve. I am thankful to the more than 23,000 Alaska Airlines personnel who have been pleased to serve Hawai’i for more than 16 years, and we are completely committed to investing in Hawai’i communities and sustaining the comprehensive Neighbor Island service that Hawaiian Airlines guests have come to expect. We are excited to extend this stewardship as our airlines join forces to provide unrivaled value to consumers, workers, communities, and owners.”

“Since 1929, Hawaiian Airlines has been an integral part of life in Hawai’i, and together with Alaska Airlines, we will be able to deliver more for our guests, employees, and the communities that we serve,” said Peter Ingram, President and CEO of Hawaiian Airlines. “With Alaska Airlines, we are joining an airline that has long served Hawaii, has a complementary network, and a shared service culture.” We will be able to accelerate investments in our guest experience and technology with the added size and resources provided by this deal with Alaska Airlines, while keeping the Hawaiian Airlines name. We are especially thrilled that this all-cash deal provides significant, immediate, and compelling value to our stockholders. Hawaiian Airlines and Alaska Airlines can work together to offer our distinctive brands of hospitality to more parts of the world while continuing to serve our treasured local communities.”

Alaska Airlines and Hawaiian Airlines’ combined 54.7 million annual passengers will benefit from complementary networks and more options.

The mix of complementing domestic, international, and freight networks is positioned to increase competition and improve choice for West Coast and Hawaiian Islands customers through:

Maintaining outstanding brands: The combined airline will maintain both the industry-leading Alaska Airlines and Hawaiian Airlines brands while integrating into a single operating platform, allowing passengers to enjoy the exceptional service and hospitality of each while maintaining the operational reliability, trust, and guest satisfaction for which both companies have been consistently recognized.

A better product offering for a wider spectrum of customers: The merger preserves and expands high-quality, best-in-class product offerings with price points to make air travel more accessible to a wide range of consumers across a range of cabin classes, including more choice between Alaska Airlines’ high-value, low-fare options and Hawaiian Airlines’ international and long-haul product on par with network carriers.

Passengers traveling throughout the Continental United States, the West Coast of the United States, and across the Pacific will benefit from more choice and increased connectivity across both airlines’ networks, with service to 138 destinations, including non-stop service to 29 top international destinations in the Americas, Asia, Australia, and the South Pacific, and combined access to over 1,200 destinations via the oneworld Alliance.

Hawai’i residents will benefit from increased service and convenience as the combination triples the number of destinations in North America that can be reached nonstop or via one stop from the Islands, while maintaining robust Neighbor Island service and increasing air cargo capacity.

Strategic Honolulu hub: With one-stop service through Hawai’i, Honolulu will become an important Alaska Airlines hub, offering increased international connection for West Coast travelers across the Asia-Pacific region.

Increased loyalty program benefits: The transaction will provide Hawaiian Airlines’ loyalty members with enhanced benefits through the combined airline’s industry-leading loyalty program, such as the ability to earn and redeem miles on 29 global partners and receive elite benefits on the full complement of oneworld Alliance airlines, expanded global lounge access, and benefits of the combined program’s co-brand credit card.

Providing Significant Benefits to Employees and Communities in Hawaii

Hawaiian Airlines, one of Hawai’i’s top employers, has a long history of devotion to its workers, who have influenced the firm during its 94-year existence, as well as to local communities, culture, and the natural environment. Alaska Airlines and Hawaiian Airlines, as an integrated corporation, will continue this stewardship and retain a significant presence and investment in Hawai’i. The united firm will be responsible for:

Maintain and expand union-represented jobs in Hawaii, including sustaining pilot, flight attendant, and maintenance bases in Honolulu, as well as airport operations and cargo throughout the state.

Maintain a strong operational presence in Hawai’i with local leadership and a regional headquarters to serve the merged airlines’ network.

Employee prospects include additional opportunities for professional progression, competitive salary and benefits, and regional mobility.

Continue and expand access to workforce development initiatives, such as Hawaiian Airlines’ partnership with the Honolulu Community College Aeronautics Maintenance Technology Program and Alaska Airlines’ Ascend Pilot Academy, among others, to support future jobs and career opportunities in Hawai’i and beyond.

Investment in local communities: Continue to invest in Hawai’i communities by integrating and increasing the commitments of the two airlines, and collaborate with local communities and government to develop a dynamic future for Hawai’i.

Preservation of culture: Hawaiian Airlines is committed to fostering regenerative tourism in the Hawaiian Islands and investing in Hawaiian language and culture, while continuing and expanding on existing initiatives.

Developing a More Sustainable Combined Airline

Alaska Airlines is committed to building on the strong environmental commitments of both Alaska Airlines and Hawaiian Airlines, including Alaska Airlines’ five-part path to net zero emissions by 2040 and sustainability goals in carbon emissions and fuel efficiency, waste, and healthy ecosystems. In 2022, Alaska Airlines placed its largest Boeing fleet order in its 90-year history, focusing on the Boeing 737-MAX aircraft, which are 25% more fuel-efficient per seat than the aircraft they replace, and continued to expand use of route optimization software to assist dispatchers in developing routes that save fuel, time, and emissions. Both airlines are working hard to expand the market for sustainable aviation fuel (SAF) in their respective regions. These climate-focused initiatives will continue, as will investments in local sourcing.

A compelling strategic and financial rationale that generates enormous value creation

The transaction matches Alaska Airlines’ strategy goal on expanding alternatives for West Coast customers and establishes an essential new platform to support Alaska Airlines’ above-industry organic growth. The deal is intended to provide shareholders of Alaska Airlines with excellent value creation while providing shareholders of Hawaiian Airlines with a compelling premium.

Hawaiian Airlines stockholders will benefit from a compelling premium of $18.00 per share for a total equity value of $1.0 billion in an all-cash transaction.

A transaction multiple of 0.7 times revenue is about one-third of the average for recent airline deals.

The projected run-rate synergies of approximately $235 million represent a conservative assessment of the transaction’s synergy potential; they exclude further recognized upside opportunities that might be achieved.

Alaska Airlines is expected to achieve high single-digit profits accretion within the first two years (high teens three+ years) post-close and mid-teens ROIC by year three, excluding integration expenses, with returns above Alaska Airlines’ cost of capital.

There will be no meaningful impact on long-term balance sheet measures, and the company expects to return to target leverage levels within 24 months.

Conditions for Closing

Both boards have approved the transaction deal. The transaction is subject to regulatory clearances, shareholder approval from Hawaiian Holdings, Inc. (which is expected in the first quarter of 2024), and other usual closing conditions. It is projected to be completed within 12-18 months. Alaska Airlines CEO Ben Minicucci will run the merged firm from its Seattle headquarters. To focus on integration planning, a dedicated leadership team will be formed.

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