DALLAS - Alaska Air Group has agreed to buy rival Hawaiian Holdings in a US$1.9 billion (S$2.5 billion) cash and debt deal, challenging the Biden administration’s aggressive stance on mergers that has already derailed one partnership between carriers.

Alaska will pay US$18 per share in cash in a deal that includes about US$900 million of Hawaiian’s debt, according to a statement Sunday. The offer is a significant premium to Hawaiian Holdings’ US$4.86 closing share price on Dec 1.

The deal could provide a valuable lifeline to Hawaiian, whose stock has tumbled more than 52 per cent this year. The company has been hurt by the slow return of tourism between Asia and Hawaii following the Covid-19 pandemic and a ramp up in growth in the Hawaii-to-mainland US market by Southwest Airline. Alaska Air Group will be the parent holding company, with Alaska Airlines and Hawaiian Airlines continuing to operate under their separate brands.

Alaska is taking on the acquisition despite the US Justice Department filing a record number of challenges last year to corporate combinations and a pending antitrust challenge to a separate airline deal. A federal antitrust lawsuit over JetBlue Airways’ US$3.8 billion cash takeover of Spirit Airlines is nearing a close.

“We believe the facts will prevail that this is pro-competitive and pro-consumers,” Alaska chief financial officer Shane Tackett said in an interview. Alaska and Hawaiian Airlines overlap on 12 routes, or 3 per cent of their total seats, he said. “They are very complementary businesses.”

US regulators earlier this year succeeded in breaking up an alliance in the northeastern United States between JetBlue and American Airlines Group, after a federal judge found the partnership gave the carriers too much power in certain markets and harmed consumers by raising fares and limiting choices.

The deal could “improve fares, though increase complexity by adding long-haul operations from Hawaii to US cities and into Asia,” Bloomberg Intelligence analysts George Ferguson and Francois Duflot wrote in a note. “Overlap appears ...