DOT Approves Alaska-Hawaiian Merger With Protections For Frequent Flyers

The US Department of Transportation (DOT) secured binding protections from Alaska Airlines and Hawaiian Airlines concerning loyalty programs and air service, clearing the way for the two carriers to merge.

Alaska-Hawaiian Merger Approved After Loyalty Program Concessions To DOT

After the Department of Justice declined to challenge the merger, the only thing standing in the way was the US Department of Transportation. Now, the DOT has also signed off after securing several binding concessions from Alaska and Hawaiian.

Alaska and Hawaiian agreed to protect their frequent flyers from devaluations under the following conditions:

• 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.

Beyond loyalty programs, the carriers agreed to retain inter-island connectivity, essential air service in Hawaii and Alaska, lower fees for military members, guarantee family seating, and compensate for delays:

• 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.

US Transportation Secretary Pete Buttigieg explained:

“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.”

I love that the Transportation Secretary is actually discussing protecting rewards miles against devaluation. I doubt that the previous Transportation Secretary, Elaine Chao, had any clue what a devaluation even meant.

View From The Wing sees this as pure electioneering, calling some of the requirements “petty and milquetoast.”

I respectfully disagree. It’s true that many of the concessions likely would have happened anyway, but guaranteeing them is key. Alaska has a penchant for devaluating award pricing without notice and we’ve seen recent award pricing inflation when buying “anytime” seats on its own metal.

Since airlines are in the game of selling miles, putting some brakes on the ability to “bait and switch” (particularly, devaluing without notice or adding junk fees) strikes me as a better solution than simply warning people to earn and burn as quickly as possible since we never know what the price will be tomorrow.

But even if this was just an election-year stunt for the “Biden-Harris Administration,” I will take it over the previous round of airline mergers that left consumers far worse off.

CONCLUSION

As a condition of the merger, Alaska and Hawaiian must preserve the value of their frequent flyer programs and maintain essential air service and other connectivity. Even if Alaska and Hawaiian would have voluntarily committed to most of this, a transparent guarantee encourages accountability, just like a visible award chart versus an invisible one. That’s something to celebrate.

image: Alaska Airlines

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