I’ve got a real treat for you today, so hopefully you can spare the time to read through what ended up being quite the lengthy interview. Brent Overbeek runs network planning and revenue management for Hawaiian, so while I was there visiting, I wanted to make sure to get some time on his calendar.
What follows is the full transcript of our interview from October 22, 2020 — edited for clarity — which took place in the airline’s board room, socially distanced, of course.
Brett Snyder, Cranky Flier: When this all came down in March and you’re not allowed to come to Hawai’i unless you’re going to quarantine — how do you decide “what are we flying [to the mainland]?” Because there’s no playbook at this point.
Brent Overbeek, SVP Revenue Management and Network Planning, Hawaiian Airlines: You’re right. It was tough. I think we kind of said, “let’s wipe the slate clean” and then “what do we think might work or what do we think we have to do?”
And you know, we had a little bit of lead time but not much. We had two phases we had to work through initially. One was the mission of getting people out of Hawai’i.
Cranky: Right, the [domestic version of] repatriation.
Brent: Yeah, because we had people on the mainland that we needed to get back, but we had more people here we needed [to send back to the mainland]. So we had to figure that out. But then, “Okay now quarantine’s in effect, how do we manage through this?” And I think we just really started with a philosophy of “we don’t know what demand is.”
Both upstairs with passengers and downstairs with cargo, we knew there was going to be giant disruption to the market. We didn’t know what the supply chain was going to be like. So we said we feel like we needed to supply at least some amount of belly capacity for Hawai’i and for our community and so we said “okay, let’s do LA, let’s do San Francisco,” two big cargo markets.
Cranky: And that’s on A330s? A321s can’t do anything?
Brent: Yeah, so, from a passenger load perspective economically, it would have made more sense to do 321s.
Cranky: Could have done a 717. *laughing*
Brent: Probably could have done an ATR. *laughing* …with distancing on board.
But it was really like, “Okay let’s try this and know that if we need to deviate, we’ll deviate from it. But this is a starting point.” It was a balance to test the cargo market knowing that it was going to be fluid. The passenger side was irrelevant; we were looking at the cash operating costs. How were we going to manage that?
And so we made the decision with LA and San Fran from the get-go. Cargo demand was pretty good from the get-go; obviously there had been a lot of widebody capacity taken out of here.
Cranky: Right, so you got a lot of new business?
Brent: Some new and some just kind of shifting in from other gateways. It was a lot of perishables. I mean, frankly, it was a disproportionate amount. We normally carry a fair amount of perishables anyway, but as the supply chain was sorting itself out in real time…. It was a fair amount of PPE too. We obviously had to import some of that. We felt it was important to have that lifeline open to our community, so we did that. We ran those for about a month and then we said, “let’s give Seattle a run as well.”
There was obviously [other airline] passenger service in [Seattle] at that point but it was narrowbody and we said, “let’s go do widebody out of there and see how we can do on the cargo side and participate in that market.” Then we really kind of sat idle to mid-summer, June, July. I wish I could remember exact dates but we said, “let’s start looking at some non-port cities and looking at… do 321s make sense?”
Recognizing the cargo component wasn’t gonna be there — that market had kind of stabilized and we knew where it was at that point — so then it was really, “where do we think we can make a run of it from the passenger side of the business recognizing what costs are sunk and what are truly variable at that point?”
Cranky: Was there enough to sustain that? I mean, what were these people doing?!
Brent: Well, you know, it surprises me…. Some were Hawai’i residents who would travel to go see family or whatever and then come back and quarantine. You had people who have second homes; you had kids coming back from college. So it was a mix of different things. It wasn’t the traditional, “I’m going to Hawaii for five to seven days.”
We said what we needed to break even on a cash perspective, and we came in that neighborhood. It wasn’t like we were doing great, it wasn’t like we were doing bad, but if you viewed a bunch of [costs] as sunk at that point — labor was sunk — and it was just covering your variable costs…. We tried a bit of that and we tweaked a little bit of that, and then as we got into August we made some minor adjustments in San Diego and Sacramento — in Portland as well — before we started to build it back out.
Cranky: And how did you think about pricing? So, from what I’ve seen as a former pricing guy, you seem to have relatively low one-way fares. You close buckets off, and there’s very little of the advance purchase kind of stuff. It’s a leisure airline, right? So you’re dealing with people — especially at the beginning — it’s repatriation to some extent. And now, maybe you’ll see it’s more elastic than I think it has been, but how did you approach pricing then?
Brent: It’s been a bit of a journey. *laughs* Obviously with repatriation, you know, we had a real rush of directional demand but not in a way that you should be taking advantage of. That was really about making sure we were capping fares that were reasonable. There’s a variety of what definitions of reasonable are, but we wanted to make sure that that we felt comfortable that we could defend, “hey, this is what we were charging.”
Cranky: You weren’t gonna be a headline in a newspaper.
Brent: Yeah, you don’t want a coach fare starting with a two and having a comma in it. It was really around making sure we managed that. There was so much booking churn that I think we actually did go in and capped our Y fares and just said “hey, this is all we’re gonna charge.” That way we didn’t have to worry about the revenue management piece.
Cranky: So that was just the beginning.
Brent: That was just the repatriation. As we got into the April and May period, that was an interesting one where there wasn’t a lot of demand to be stimulated. So we didn’t really go out and do any promotional pricing. There was some in the market, and some carriers actually got some grief from the community here saying “why are you going to put this promotional pricing in market when we’re under quarantine?” It was an interesting kind of dynamic there. Our view was we needed to be competitive with what was in the marketplace, but we weren’t going to lead any of that.
Cranky: That’s just structure fares, but if someone else comes in you’d match?
Brent: Yeah, I think if you look back at what happened that’s really kind of how things played out.
Cranky: I mean, there couldn’t have been much elasticity at that point at all, right?
Brent: No. I really don’t think there was, frankly. As there’s been hints of reopening along the way, there’s been some promotional activity as we worked our way through the summer. We’ve probably seen more in the last week and a half now that we’re open.
Cranky: I’ve gotten a few emails from you guys about November travel…
Brent: There’s been a few. We’ve launched some and then some of our competitors have done some stuff that has been a little bit more promotional in nature that we’ve elected to respond to.
Cranky: What are you seeing now that it’s open — and it’s actually open, not fake open this time? What does demand look like right now?
Brent: You know, it’s interesting. I think you learn as you go through these. I mean, you have an idea of what’s going to happen and you try. It’s a dichotomy; you want to draw upon experience and knowledge but in a situation like this you also want to forget some of that. Any history that you’ve got and any assumptions you’ve got inevitably are going to be wrong. I think you need to go in with some ideas and some thoughts but you’ve got to be quick to validate those and admit you’re wrong when you’re wrong.
Cranky: What’s an example of when you were wrong?
Brent: I’m sure Peter [Ingram, CEO Hawaiian Airlines] gave you some examples.
Cranky: Yeah, he said you were wrong in not reopening Long Beach sooner. *laughing*
Brent: I think he was knowing his audience. *laughing*
Cranky: I’d say you’re right on that one.
Brent: I’m the one that got us into Long Beach. *laughing* I think I’m in the right here, and we’re getting in at the right time.
Cranky: But I mean, what are examples of things that you tried and then maybe it didn’t work?
Brent: Some of the 321 stuff we did in the summer, we overcooked a little bit.
I said, “okay, that’s maybe a little too much.” People don’t need to travel every day of the week. People are gonna be malleable. They’re flexible, particularly if they’re staying for 14 days. Traditionally we’ve been a daily operator in most of our markets to North America, certainly to the West Coast. We said, “all right, let’s tweak that a little bit.” So we made some adjustments there.
I would say in terms of ramping up in the period we’re in now… when we opened up Vegas, Vegas came out a little bit warmer than I thought.
Cranky: I saw you added some frequencies even before the quarantine ended.
Brent: Yeah. We knew there was going to be some increased demand broadly around the 15th, and so we had some select adds that we were doing in there.
Cranky: Was that ninth island stuff? Was that people from [Hawai’i]?
Brent: It was a mix. It was both directions, probably a little stronger out of here consistent with the demand pattern, but we saw it from both directions. That was one where we had a plan. We actually had started Vegas before the quarantine came up. We had started at the beginning of October, and as we got closer we said, “you know there’s some more demand there.” We filled in some additional stuff in LA and San Francisco, but yeah, Vegas is probably one where demand was just stronger than I thought it would be.
Peter would tell you he thought it was gonna be better, and he’s gonna say he was right; I was wrong. And that’s probably true. It has come in a little bit better than I thought it would be, so we’ve gone in and filled in some gaps there and it’s worked well.
As I look through the demand environment broadly, when we had the announcement mid-September that we were opening again, I think the market viewed that as a positive sign but with a degree of skepticism, probably justifiably so. I was talking to my team and saying, “hey, this is how I think we ought to manage it and plan both for capacity and on the revenue management front.” I viewed it as really important — I think we all viewed it as important — to get to October 15th and to check that box that, yeah, we opened.
There are things that undoubtedly the state could have done better and is working to improve but getting to that point was really material, and I think we’ve seen an additional step up since then of confidence around the destination. We were down here [puts his hand low], [the state] made the announcement, we had an improving trajectory, we got to the 15th, we’ve had an improving trajectory and also more confidence beyond just a short four to five week window.
Our booking curve normally is so long and it has contracted a great deal like a lot of carriers have seen. It was probably more acute for us, and we had a low traffic base to begin with, so it wasn’t really that big of a deal, but we’re starting to see that traffic elongate a little bit more now outside of November, into December, into [the first quarter], which is encouraging. I felt like we needed to check that box as a destination and say “yeah, yeah, we’re good this time and we’re gonna welcome folks back, and we’ve got the infrastructure in place to do it.”
Cranky: Right now you’re restricting, I think, seventy percent of seats. Is that just for the widebody fleet or everything?
Brent: We’re [booked to] a max of seventy percent on the whole fleet. Starting at ‘Ohana, they’re at 25 percent. The 717s are are capped at seventy percent and then our 321s and 330s at seventy.
Cranky: That’s until December 15th right now? What’s your thinking on that? I’m sure you saw Southwest today got rid of theirs December 1.
Brent: I’m surprised Peter didn’t get that question…
Cranky: Well, I got so carried away on other stuff.
Brent: I think the industry economics don’t fundamentally work at two-thirds of capacity, and I’ll call it roughly that’s where those who aren’t doing full cabin are kind of at. Delta talked about at some point they’re gonna need to go away from that. I think the industry recognizes that at some point we’re gonna need to do that. At this point, we’re in through mid-December. It’s something we’re gonna evaluate. More and more information about science and safety of travel has been coming out, and that has been generally helpful.
I think we’ve seen cases involving air travel be rather small but it’s a decision we’ll continue to evaluate and frankly, it’s becoming more relevant. Where we were when we had quarantine in place, it really was a bit of a trivial decision because demand wasn’t great enough for us to really matter. We had certain times where, yes, we could have gone a little above that. August 1st, when there was some thought that we would open, we had some really full flights around there.
Cranky: I assume now though…
Brent: Yeah, so certainly the 15th, 16th, 17th [of October], we bumped up against that. As we get into the holidays, Thanksgiving, clearly there will be an economic impact of doing it. It’ll be a decision we make as a whole management team, and we’ll continue to evaluate it.
Cranky: A little bit on interisland, because that has to be different, right? I mean, you’re the backbone of the state here, so I’m sure you had to keep more of a skeleton, but I noticed you just pulled down the end of October.
Brent: Yes, so, for an organization that is part of the planning department… it’s been tough to plan. When we first started in April, we knew there wasn’t gonna be much demand, but that we needed to offer some patterns of service to let essential people travel within the state. We’re the highways of the state and so we were flying four trips today in the big markets, four to five in those first couple months. We knew they were gonna be empty, but we felt like we couldn’t offer one or two trips a day either. We needed to [be able to] do a day trip to see a doctor or go to Maui and see a family member or do whatever. We had a schedule that was fundamentally too big, but again, kind of an obligation that we had to serve our community.
From a scheduling perspective, it was quite easy to schedule as we worked our way through. Then the challenge frankly has been [that] things have moved around in terms of the neighbor island quarantine. It’s on. It’s off. It’s on. It’s off. We built out the network a little bit more. You can go back and look and when [the quarantine] was off in mid-June; we ramped up the schedule. We were running much higher load factors, and then when August came and we had to bring it back down, that was pretty clunky. Again it was within the month, and we had more close-in cancels. We had demand that was cut quite materially in terms of doing that.
In the context of October, it was really unclear where the state was going with neighbor island quarantine and what was going to happen and who was making decisions in that process. So it was something frankly that we had to kind of balance and said, “Okay we’ve got to build a schedule that meets both [needs].” We felt confident that long-haul was going to be there so we needed to have long-haul connectivity, but we needed to have enough capacity to satisfy both that and the local market. And those travel generally at different times of day.
So as the long-haul pieces come in, that’s great. For the neighbor island quarantine, it has kind of stayed in place and that’s caused us to frankly have too much lift, particularly at beginning and ends of the day. We’ve been trying to surgically get some of that out. We had done a lot of closer-in cancels, you know four or five days out in the front part of the month. [In the] back part of the month then, we went and cleaned some stuff out. We’re probably still a little long on capacity but some of that is just the directional balance as well as not wanting to interfere with connecting guest travel at this point. We’ve had to think about scheduling the airline a little bit different; more ground time in terms of cleaning airplanes and things like that. We’ve had to adjust some.
Cranky: Slower boarding too?
Brent: Boarding probably ends up being similar in time. You’ve got more space but fewer people so we built in more of that. We’ve had to change some of our paradigms a little bit. Obviously we’ve got more aircraft available to do it, so it’s been a little different exercise, but we’re probably still a little bit long right now. We look forward to whatever comes next, but it’s a little opaque right now as to… “does that come off November 1 or not?” and so we’ve got some planning assumptions in and we’ll have to adjust and adapt based on how things transpire.
Cranky: You can almost run this like the Eastern Shuttle, right? If the plane’s full just trot out another one.
Brent: Yeah we could. I don’t think demand is quite that last minute.
Cranky: No, but if you got to that point…
Brent: Yeah, frankly, we saw a bit of that in June where once we were lifting the quarantine within the state, we did see demand really pick up. The team was so busy just… “okay, add a trip, add a trip, add a trip, add a trip.” We look forward to getting back to that.
Cranky: Are all the 717s here?
Brent: Yeah, they’re all here.
Cranky: Are airplanes parked elsewhere? I mean outside of the stray hurricane.
Brent: Yeah. We’ve got a few airplanes on the West Coast; we’ve got maintenance in Oakland that we do. I don’t know if we’ve got one in Portland right now or not; we’ve got maintenance that we do in Portland. I know we’ve got probably three or four 321s in Oakland and then we usually have a 330 right now in LA as well.
Cranky: I was curious about that, because I saw, I think it was yesterday, you added a second flight to Honolulu from LA. Then today when I got to the airport there was a plane 45 minutes behind us that doesn’t look like it was a revenue flight.
Brent: That one. That’s actually an interesting one. We have been doing since May or June, probably June, some non-traditional cargo flying. That airplane I suspect was a Honolulu-Incheon, Incheon-LA-Honolulu cargo-only operation. We’ve been doing those three or more days a week just based primarily on strength and demand ex-Incheon. We’ve been able to fund that and as well it provides some additional belly space out of LA. Select days a week we’ve converted it to — now that we have more passenger demand — we converted to a passenger flight.
Cranky: I didn’t know if it was just planes that were parked that were coming back to service.
Brent: No, no. We’ve got a rotation through [that] we’re working on. It’s a little different than our normal MO, but we saw an opportunity and we could piece together different pieces on the cargo side to make it work…. shipping shrimp from the big island to Vietnam on the way over, electronics from Incheon to LA, and then normal produce and stuff from LA to here. Collectively we’re able to make it all work.
Cranky: That’s pretty good. All right, well I’ll end on more of a personal question for you, because on 9/11 you were at American, right? You were doing Europe [revenue management]?
Brent: You did some good digging. *laughing*
Cranky: I mean LinkedIn is pretty easy. *laughing* I knew you were at American and then I looked. Besides the PTSD from that experience coming at you again, were you able to take anything from that experience to apply it here?
Brent: Oh. I think a bit.
That was a different kind of crisis. I take away a couple things from that that I think have been helpful from this. One, it was that you know, again kind of throw everything out the door and make some assumptions. Know you’re gonna be wrong and adapt, and be enough of a leader to admit when you may have missed something and let’s move on and adapt. I think one of the things that I walked away from that, probably less on the revenue management and scheduling side — as you point out I was in revenue management — we actually got to run a good part of the network at that point. We had a really good network planning team, but they basically said, “guys what you want to do?” And you know, we normally would kind of battle over… “We think your forecast here is too high.”
Cranky: As a former pricer, that’s the dream scenario if they say “what do YOU want to do?”
Brent: You know these days of battling over “I think your forecast is crap” there. And this was like, “alright, what do you think works and why?” It was fun in that respect, as I got to do a little bit of what I’m doing now, but I think more than anything I learned the importance of leadership and listening. I worked with a great group of people at that point. I had a fantastic boss who’s done phenomenal; several of those people who were my peers in the international group there have done phenomenal; and I was lucky to have a great team that worked for me. I was lucky to work with a bunch of great people.
And as difficult and frustrating as those things can be, and you know that was certainly a national tragedy, we as a company were in the middle of it being at American. All the fear of “what does this mean for my job? What does it mean for our country?” And then trying to be a leader and all that….
I was earlier in my management career, and that was a lot. I remember having some really difficult meetings, and I think more than anything what has helped going through this is then having that perspective of, “what does it mean for people?” They’re all going to be in different places around this in terms of our team.
And I look at my team and I’ve got people who’ve went through 9/11 and can adjust and adapt and figure all this out. I’ve got other people who are in their early 20s and they’re just trying to figure out, “my gosh what does this mean for our company?”
I certainly had some business learnings from it, but I think it was knowing what I went through there and seeing what some of my team went through there and… how do you try and get through that? As a leadership team around this table how do we try and get through it? I think Peter’s done a great job of getting us all together and getting on the same page, because it is tough and we’re not usually around this table. It’s usually on the screens.
I probably take more away from the soft side of 9/11 than the hard. What did I learn about the business? And I think I’ll go back to something I mentioned earlier, which is really you’ve got to actually just unlearn some of what you knew.
Yeah and don’t dwell on what you thought was the absolute right answer and say, “I know this is the case and I know we should be doing this,” because it may not be now, and that’s hard for people in leadership positions to pull back from that. I want my team to challenge me and my beliefs and say, “hey, let’s have constructive feedback of what’s working and what’s not” and just keep moving forward.
Cranky: Seems like good place to end it. Thank you.
Brent: Thank you.
Thanks for sticking with this one until the end. I know it was a long one, but I found it worthwhile to post the whole thing so you could get the full picture.