By David Shepardson and Mrinmay Dey
WASHINGTON (Reuters) -The U.S. Transportation Department said Tuesday it is reviewing Alaska Airlines' proposed acquisition of Hawaiian Airlines after it cleared a key review by the Justice Department.
The airlines filed a transfer application to combine under one certificate as part of Alaska's deal to acquire Hawaiian for $1.9 billion including debt. The Transportation Department said it "is reviewing the application and can only approve a transfer if it is in the public interest."
The announcement that the deal cleared the Justice Department review boosted shares of Hawaiian by 11.5% in premarket trade on Tuesday, while Alaska's shares were up 0.5%.
"This is a significant milestone in the process to join our airlines," Alaska Airlines said.
Alaska, the fifth largest domestic U.S. airline, had agreed last week to extend the review period of its proposed acquisition of Hawaiian, the 10th largest carrier, after announcing the deal in December.
"Today, the proposed merger of Alaska Airlines and Hawaiian Airlines cleared an important milestone. The regulatory review period for the U.S. Department of Justice has ended," Hawaii's governor Josh Green said.
The deal "will vastly expand the number of destinations throughout North America for Hawaii residents that can be reached nonstop or one-stop from the islands," Green added.
Last week, a U.S. judge dismissed a lawsuit that sought to block Alaska Airlines' plan to buy Hawaiian, a deal the consumer plaintiffs said would cut routes and raise prices.
Mergers and acquisitions in the aviation industry have faced tough scrutiny from U.S. regulators. Earlier this year, a federal judge blocked JetBlue Airways (NASDAQ:JBLU)' planned $3.8 billion acquisition of ultra-low-cost carrier Spirit Airlines (NYSE:SAVE).
The Justice Department also successfully sued to unwind JetBlue's U.S. Northeast partnership with American Airlines (NASDAQ:AAL) with another judge ruling the agreement violated antitrust law.