USDOT Requires Alaska and Hawaiian Airlines to Preserve Rewards Value, Critical Flight Service as Merger Moves Forward
Enforceable, upfront terms require Alaska and Hawaiian to protect value of rewards, preserve critical flight service, ensure Honolulu hub access, enhance customer benefits, and lower costs for military families
Tuesday, September 17, 2024
WASHINGTON – Today, the U.S. Department of Transportation secured binding, enforceable public-interest protections from Alaska Airlines and Hawaiian Airlines prior to the close of their merger. The protections, necessary for the Department’s consideration of the airlines’ needed approvals, are aimed at preventing harms to the traveling public, rural communities, and smaller airline competitors. As the merger moves forward, Alaska and Hawaiian are required to protect the value of rewards, maintain existing service on key Hawaiian routes to the continental United States and inter-island, preserve support for rural service, ensure competitive access at the Honolulu hub airport, guarantee fee-free family seating and alternative compensation for controllable disruptions, and lower costs for military families.
“Our top priority is protecting the traveling public’s interest in this merger. We have secured binding protections that maintain critical flight services for communities, ensure smaller airlines can access the Honolulu hub airport, lower costs for families and service members, and preserve the value of rewards miles against devaluation,” said U.S. Transportation Secretary Pete Buttigieg. “This more proactive approach to merger review marks a new chapter of DOT’s work to stand up for passengers and promote a fairer aviation sector in America.”
On July 15, 2024, Alaska and Hawaiian filed a transfer application requesting that DOT allow them to combine and operate international routes under one certificate – authorization required to provide air transportation as a merged carrier. The two airlines also filed an exemption application asking DOT to permit them to operate under common ownership prior to the requested transfer, which would allow them to close the deal. DOT may approve a transfer or grant an exemption if it is in the public interest, based on criteria laid out in statute. Public interest criteria include preventing unfair, deceptive, predatory, or anticompetitive practices, ensuring consumers in all regions have access to affordable service, and maintaining service for small communities and isolated areas.
By locking in terms from Alaska and Hawaiian upfront, DOT is establishing a more proactive approach to the Department’s merger review process that prioritizes protecting the public interest from the outset, based on the Department’s clear legal authorities and responsibilities. For the first time, DOT is requiring airlines to agree to binding, enforceable public-interest protections in order to permit the airlines to close their merger.
The protections for Alaska and Hawaiian travelers are effective as of the issuance of the exemption order and the closing of the merger and address a broader range of harms than previously considered under prior deals. They include the following:
- Protecting the value of rewards: Alaska and Hawaiian agreed to the first-ever rewards protections against devaluation that ensure that consumers will receive the rewards, benefits, and status they have earned. Specific rewards protections include:
- No expiration for miles earned under current programs: All HawaiianMiles miles and Alaska Mileage Plan miles earned prior to conversion into the new combined loyalty program must not expire.
- Transfer miles at 1:1 ratio: Rewards members can transfer HawaiianMiles miles to and from Alaska Mileage Plan miles at a 1:1 ratio prior to the launch of the new combined loyalty program. Each outstanding HawaiianMiles and Alaska Mileage Plan mile must be converted into a mile in the new loyalty program at a 1:1 ratio, resulting in all members having the same number of miles before and after conversion.
- Maintain value of miles: The combined airline must not take any actions that would devalue HawaiianMiles miles, must maintain the value of each unredeemed HawaiianMiles mile earned prior to the merger closing, must honor all active HawaiianMiles promotions from prior to the merger closing, and must continue to award HawaiianMiles miles at the same or greater value. The combined airline must maintain a minimum dollar value for all miles in the new loyalty program, measured by the guest-facing value of miles redeemed for carrier-operated flights.
- Match, maintain, or increase status: Under the new combined loyalty program, the combined airline must match and maintain the equivalent status levels that HawaiianMiles members hold under the HawaiianMiles program, match and maintain status levels and conferred benefits that are equivalent to Alaska’s Mileage Plan program, and match or increase status and conferred benefits as necessary to ensure members of each existing loyalty program are treated no less favorably relative to status, including by matching or increasing members’ elite status in the new combined loyalty program, for the remainder of the applicable program year.
- No new junk fees: The combined airline must not impose change or cancellation fees on rewards redemption tickets for travel on carrier-operated flights.
- Maintaining critical inter-island and continental routes: Hawaii’s rural island communities are uniquely dependent on the passenger and cargo services provided by Hawaiian Airlines. The combined airline must maintain robust levels of service for critical Hawaiian inter-island passenger and cargo service and for the key routes between Hawaii and the continental United States at risk of a loss of competition.
- Preserving support for essential air service in Alaska and Hawaii: The combined airline must preserve its support for Essential Air Service in Alaska's and Hawaii’s small, rural communities where such service is a lifeline to health care, education, and economic well-being.
- Ensuring competitive access to Honolulu hub airport: The combined airline is barred from directly or indirectly taking actions that would discriminate against new airline entrants or smaller competitors’ access to airport infrastructure as part of new or existing investments at the Daniel K. Inouye International Airport in Honolulu, a key vacation destination and hub for the State of Hawaii.
- Guaranteeing fee-free family seating: Hawaiian Airlines must join Alaska Airlines in guaranteeing adjacent seats for children 13 or under and an accompanying adult at no additional cost for all fare types.
- Providing alternative compensation for delays and cancellations caused by the airline: Hawaiian Airlines must join Alaska Airlines in providing a travel credit or frequent flyer miles when, due to circumstances within the control of either airline, a flight is cancelled and they wait three hours or more for a new flight, or a flight is delayed by three hours or more from the scheduled departure time.
- Lowering costs for service members and their families: The two airlines must lower costs for the nation’s military and their families, a significant population in both Alaska and Hawaii, by waiving certain fees. Both airlines will update their customer service plans to provide at least one free standard carry-on and at least two free standard checked bags for service members and their accompanying spouse and children. They will also waive change fees for service members and their families who reschedule flights due to a military order or directive.
On the basis of these protections, DOT has granted the airlines’ exemption, which spans the pendency of Department’s transfer review. The exemption allows Alaska and Hawaiian to close the deal and consummate their merger on the condition that they remain separate and independently operated until DOT has ruled on their transfer application. If the transfer is approved, the protections will remain in effect for six years.
