Airline merger is off
By Susan Hooper
Advertiser Staff Writer
Hawaiian Airlines said tonight that it is no longer going forward with the proposed $200 million merger with Aloha Airlines.
The airline said in a statement that it had been asked by TurnWorks, the Houston firm organizing the merger, to consider extending an April 18 "outside date for completing the merger." Hawaiian said it has decided not to extend the date.
Hawaiian spokesman Keoni Wagner said the statement means the merger is off.
The announcement comes amid growing opposition by employees, consumers and state lawmakers.
The airlines' 6,000 employees have worried about losing jobs and other changes the merger will bring to their work. Hundreds of thousands of customers have worried about possible service cuts and fare increases, since the merged airline will have a virtual monopoly on interisland air travel.
Groups such as the American Society of Travel Agents have opposed the merger, arguing it likely will lead to higher prices and poorer service. The Citizens for Competitive Air Travel, a group started by Hawaiian Airlines employees, says it has collected tens of thousands of signatures in opposition. Four lawsuits have been filed by disgruntled Hawaiian Airlines shareholders, charging the deal enriches insiders at the expense of the public stockholders. And several Democratic and Republican state senators have come out against the merger, arguing a near-monopoly airline would harm consumers and the state's economy.
Wagner said last night that one of the considerations for Hawaiian not going forward with the merger was "the expense of getting the deal done."
"When parties set a date like this in an agreement, it establishes a comfort zone in terms of how much time we think it will reasonably take to complete the deal, and beyond this time the expense necessary to continue the effort and I suppose the risk as time goes on ... that the transaction will not get done ... are some of the considerations," he said.
The airline said the parties had previously determined the April 18 date would not be met "for several reasons, including the expected time required in order to obtain the necessary regulatory approvals and reveiws with respect to the merger."
The federal Department of Justice and the state Attorney General's office have been conducting anti-trust reviews of the proposed deal.
John W. Adams, chairman of the Hawaiian board of directors, said the airlines had discussed an extension of the outside date but "no agreements could be reached and therefore Hawaiian has concluded not to extend the outside date."
The parties involved in the merger had previously characterized April 18 not as a date for completing the merger but as a date after which any of the parties could walk away from the deal.
A spokeswoman for TurnWorks said tonight that "TurnWorks is extremely disappointed." She had no further comment on Hawaiian's announcement.
Aloha spokesman Stu Glauberman said tonight, "Aloha is aware of the decision by Hawaiian Airlines and will issue comments on Aloha's position regarding Hawaiian's decision at the appropriate time."
Officials with TurnWorks, Hawaiian and Aloha announced the planned merger Dec. 19, saying it was necessary because the events of Sept. 11 and other economic conditions made it impossible for both carriers to continue to operate successfully in the Hawai'i market. Hawaiian and Aloha have each cut 20 percent of their routes and have laid off hundreds of workers. They also have received emergency federal aid money.
In November, the two carriers also received a federal antitrust exemption that allows them to collaborate on schedules and prices and share revenues to cope with the tourism downturn. Aloha reported a $1.25 million loss at the end of the third quarter Sept. 30. Hawaiian reported a $29 million profit.
The proposed merger, valued at $150 million to $200 million, would have created a new company, Aloha Holdings Inc., with annual revenues of about $930 million. Greg Brenneman, the former president and chief operating officer of Continental Airlines, would serve as chairman and chief executive of the firm.
Glenn Zander, Aloha's president and chief executive, and Paul Casey, Hawaiian Airlines' vice chairman and chief executive, both were scheduled to step down after the merger is complete.
The deal, which is subject to federal and state antitrust and other regulatory approvals, was expected to close in the first half of 2002.
In spite of any public opposition, however, analysts had said the fate of the merger rested largely with the antitrust review being conducted by the state attorney general's office and the U.S. Department of Justice. Unless Aloha or Hawaiian decided to back out, analysts said the antitrust lawyers had the only real power to stop the deal.
Antitrust experts said when the merger was announced that it has a good chance of winning approval at the federal level because of the relatively small size of the deal; the relatively relaxed attitude the administration of President Bush has taken toward antitrust issues; and the fact that the entire airline industry is struggling to stay afloat.
Officials involved in the merger had said since the announcement in December that they are confident they can win regulatory approval at the state level, in part because the current economic climate has made it difficult for two airlines to survive in the interisland market.
