Merger to create 10th biggest US airline follows coming together of Colombia's big two

Airline mergers are moving ahead as competition concerns take second place to survival instincts amid the financial crisis following 11 September. Just days after Colombia cleared the way for its two largest carriers, ACES and Avianca, to combine, Aloha Airlines and Hawaiian Airlines announced their plan to merge.

The motivation is the same in both cases - the desire to create a single viable airline in the face of dramatically reduced traffic. Aloha and Hawaiian expect antitrust approval for their merger in the first half of the year, although it will eliminate competition in the vital inter-island market.

The merger of privately-held Aloha and publicly-traded Hawaiian will create a carrier with annual revenues of around $1 billion, making it the 10th largest US airline.

Former Continental Airlines president Greg Brenneman will head the new company, Aloha Holdings, which will be publicly traded as Hawaiian Airlines.

"The merger will create a flagship carrier for Hawaii that will not only allow continuation of inter-island services, but also provide the financial muscle and staying power needed to bring more visitors to Hawaii," Brenneman says. Both carriers say there has been a dramatic reduction in visitors to Hawaii since 11 September.

Brenneman's Texas-based private equity firm TurnWorks will hold 20% of the new carrier, while Airline Investors Partnership, which owns 53% of Hawaii, will hold 28%.

Aloha's owners will also hold around 28%, with the remaining 24% of the combined carrier being held by Hawaiian's public shareholders.

The merger is expected to generate savings of around $90 million a year from the consolidation of operations and elimination of excess aircraft.

Arguing that it has become uneconomical to maintain dual inter-island operations, the carriers have made commitments on inter-island fare-pricing in a bid to win government approval.

ACES and Avianca, meanwhile, plan to begin combining operations later this month, after finally receiving authorisation from the Colombian civil aviation authority, Aerocivil, almost a year after they first announced plans to merge.

Source: Flight International