Yesterday I gave you my rationale for why I loved the Alaska/Hawaiian merger back in 2019. But it’s 2023, so something has changed, right? Also, there’s an actual deal on the table to evaluate. So today I’ll get into more specifics about why I like this particular marriage today, not just in 2019.
Let’s start with the deal specifics.
- Alaska will pay $18 a share — or about $1 billion — which is about 4x what Hawaiian was trading for before the deal was announced. That means Alaska will pony up about $1.9 billion in total for Hawaiian, including the $900 million in net debt it will take on.
- Alaska will be the surviving entity with headquarters remaining in Seattle.
- The Hawaiian brand will live on in tandem with the Alaska brand, but everything under the hood will be a single operating airline.
- Alaska has agreed to sign a 100-year deal to keep POG juice on all Hawaiian-branded flights. (Ok, that’s not true… wishful thinking.)
A Good Deal for Both Airlines
From a Hawaiian perspective, this is likely the best possible outcome coming out of a very difficult time for the airline. It started when Southwest entered Hawaiʻi in March 2019. Then, COVID was horribly painful even compared to other airlines thanks to the airline’s geographic footprint. The twin recent hit of Pratt & Whitney engine issues grounding chunks of the A321neo fleet along with the fires in Lāhainā decimating demand have just continued the streak of pain. The airline has debt piling up, and it is running out of cushion.
On top of this, Hawaiian is getting ready to induct a brand new fleet, the Boeing 787-9, which will add complexity and accelerate growth at the airline during a time when growth doesnʻt really make sense. So, for Hawaiian to find a sugar daddy that will buy the airline at a level the stock hasnʻt seen for over a year has to be a welcome lifeline, if not a bittersweet one.
So why is Alaska willing to pay this? Itʻs really not all that much in the scheme of things. Alaska included these two slides in its investor presentation.
Alaska has the cash available, so it can make this happen with minimal impact to the balance sheet. That may be a notable premium over what Hawaiian was trading for, but if Alaska had made that bid two years ago it would have been laughed at for offering something less than the share price at that time. Hawaiianʻs stock has been so depressed that it created a real opportunity for both airlines to notch a win.
A Double Brand Strategy to Fit a Unique Market
Whatʻs probably the most unique thing about this whole deal is that both the Alaska and Hawaiian brands will survive. To be clear, this will be a single airline behind the scenes. There will be one operating certificate, and all employees in each workgroup will be integrated into a single workgroup. Presumably a current Alaska pilot could end up flying you from Honolulu to Līhuʻe while a current Hawaiian pilot could get you from Anchorage to Kotzebue.
We’ve seen separate brands with international groups like Air France-KLM, but those are also separate airlines and operating certificates across international borders. The only thing I can think of like this is when Southern Airways Express bought Mokulele and kept the Mokulele brand flying in Hawaiʻi. That, however, was easier because the networks of the two airlines didn’t touch. This is more complicated, but Alaska clearly thinks it’s worth it. I tend to think it’s right.
What this shows is that Alaska understands something very unique that only it and Hawaiian share in the US. When you are an airline that represents a place thatʻs hugely dependent upon air travel as a lifeline, you take on a completely different standing. Alaska knows this from how it operates in Alaska, so it fully understands what this means to the people of Hawaiʻi.
Yes, the people of Alaska hate Alaska and the people of Hawaiʻi hate Hawaiian, but it’s THEIR airline to hate. They also love their airlines, or at the very least they rely on them. Keeping the Hawaiian brand in Hawaiʻi will help from the beginning to show that Alaska takes its responsibility there seriously. It’s a gesture, yes, but it’s a meaningful one.
The devil here is in the details. Will this be divided by fleet type? Will it be by network? Will the physical onboard product be the same across the fleet or will it vary? There are so many ways to skin this cat. I’ve listened to a couple of calls by the airlines on the merger announcement, and my best guess at this point is that they have no idea how they’ll handle this just yet. They know they need to keep the two brands, but the actual plan will unfold over time.
One thing is clear. This is a big deal for pleasing the local government. Keeping the name, preserving jobs, and maintaining service are the most important factors. Alaska knows this and isn’t going to mess it up. If there’s anything Alaska could do to ingratiate itself even further, it would be the find a way back into Molokai and Lānaʻi. The airline would be celebrated as a hero if it could pull that off. (And I should note… the Embraer 175 requires less landing distance than a 717. Just saying….)
Throw in a return of nonstops from Hilo to anywhere on the mainland and the airline could do no wrong. Those may not make economic sense, but that’s the price of doing business in a place like Hawaiʻi or Alaska. Sometimes it’s worth the investment in the state in order to protect the business.
Will the Feds Fight It?
Even if Alaska and Hawaiian can get the state on board, considering the track record of the US Department of Justice (DOJ) as of late, it’s a safe bet that the administration will try to block this merger. It hates all airline combinations, and it has not hesitated to challenge them. So how does this look from that perspective? Not too bad, but there are issues.
As of now, the airlines overlap on 12 routes:
But here’s the thing. Of those routes, only three have no other competition. Kahului to San Diego along with both Honolulu and Kahului to Portland (OR) are the only routes with no other airlines. Delta covers Seattle, United handles San Francisco, and Southwest handles the rest. (Ok, EVERY airline handles LA.)
The Southwest competition is really a key to the competitive dynamic right now. Compare this situation to what the story would have been 10 years ago in 2013. At that time, Alaska and Hawaiian overlapped on 11 routes, which isn’t much different.
Alaska left Oakland once Southwest arrived, and it and Hawaiian dominated most secondary markets on the West Coast. Of the overlap routes back then, only two — Honolulu to Los Angeles and San Diego — had other competition.
The reality is that in many of these markets, there isn’t room for three airlines. This will help create a stronger airline to compete with all those others on this myriad of routes. This is a similar rationale to that which American and JetBlue used in the Northeast Alliance, but the difference is that Hawaiian is losing money and may have trouble staying afloat on its own.
The other difference is that none of these markets are slot-controlled. They can’t divest slots or runway timings. Can they divest gates? I guess, but since the Mauka concourse opened in Honolulu, gate availability hasn’t been as much of a problem. It’s really just not difficult for another airline to enter any of these routes, if the demand was there.
I don’t know if DOJ will challenge this, but I’d expect it to happen if I were running these airlines.
The Fleet Conversation
People love talking about fleet. If airlines have the same fleet, it’s somehow a match made in heaven. If not, then it’s a terrible idea. As much as I love the memes about Alaska getting Airbuses again, I don’t worry too much about this. The combined airlines can always rationalize over time.
The most obvious question that needs to be resolved the soonest is what to do on interisland flying. Hawaiian says it can keep flying the 717s through the end of the decade, but a replacement is needed. As the investor presentation says, that airplane “could eventually be replaced by the 737.” Just imagine Alaska flying more 737s into the islands and rotating them in and out of interisland service, similar to what Southwest does today.
The 737s obviously will remain the backbone of the fleet, but will the Airbuses stay as well? They might stick around this time, unlike with Virgin America. It looks like the 737 MAX 10 which competes with the A321neo has about 100nm less range than a 737-900ER. Is that good enough to make it to Hawaiʻi? Iʻm honestly not sure. The A321neo is certainly more capable, but maybe it wonʻt be capable enough for Alaska to decide itʻs worth keeping.
The final decision is around widebodies. Hawaiian is flying 24 A330-200s today plus one A330-300 in operation flying packages for Amazon. (The A330-300 fleet will grow to 10 when fully built out for Amazon.) It also will be taking delivery of its first of 12 787-9s next month. Itʻs hard to know exactly how this will be rationalized, but that is likely to be a longer term question.
105 comments on “The Alaska Acquisition of Hawaiian is a Good Deal for Both Airlines”
I’d like to see the Hawaiian brand be on E-175 or 95’s or 717’s for interisland only. I’d also like to see the same for inter-Alaskan. Then, I’d use the Horizon Brand for long-haul/connecting to the mainland and international a both places lie just over the horizon from the lower 48.
I agree… it wouldn’t shock me if there ends up being a 3rd brand for the medium/long-haul stuff several years from now. Too bad Northern Pacific is already taken – has a nice ring to it.
Alaska Pacific could work
Northern Pacific was changed to New Pacific because they forgot to check the trademark before painting their 757. Maybe AS/HA could buy the trademark from BNSF.
HAPA – Hawaiian Alaska Pacific Airlines :)
*Hawaiians will understand the pun….
Alaska or Hawaiian Airlines, abbreviated ALoHA. ;)
Catchy, and relevant! Don’t hate the HAPA either..
The Alaska brand is already well established in California, Seattle and Portland. It would make no sense to change it.
You are all forgetting that HA has a reasonable presence between HNL and the South Pacific islands and Australia/New Zealand. In terms of name, these destinations are well beyond the Horizon of the US mainland. North Pacific doesn’t really work as a name either.
Brett- in your network overview, you left out the 9th island (LAS) traffic. Pre- COVID HA had 3-4 flights daily to the islands. Not much competition on that route…
WN has invaded that market share to the levels of profitability for Southwest and blood bath for Hawaiian with the exception of its sole reverse Red eye to HNL. But WN will most likely double down on LAS-Hawaii flying once they announce their pending Red Eye flights in the not to distant future further crashing Hawaiian yields . AlaskaAir air will probably shift A330 capacity to more lucrative long haul markets or on the over lapping routes where it can dominate every one else.
I also think they will abandoned OAK-Hawaii moving those flights to SFO capturing the connections and one world benefits AlaskaAir will have when it relocates to Terminal 1.
Karen – I didn’t leave LAS out. Alaska doesn’t fly it, so it’s not an overlap route. And there is plenty of competition with Southwest in there now.
Left out BLI/South Vancouver as well, which Alaska flew BLI to HNL, KOA and OGG
Caribbean Airlines and Air Jamaica might be an example of one airline and two brands – similar dynamic with local customers and stakeholders. I’m not sure if it would be held up as a shining example, but I think things are better than if they were separate.
CF,
Wouldn’t the Airbus 220 work in place if the 717’s?
Why would they need a plane whose major selling point is range for interisland flights? I think the A220 can’t quite make it mainland to Hawaii (so no thin routes like GEG-HNL), so using it interisland would get exactly none of the range benefits. E175s are the totally obvious plane for interisland, with some rotated-in 737s for larger capacity where there’s demand. Only issue I see is pilot scope issues.
The A220-300 has a range of 3,480 nm. The distance from HNL to LAX is 2,556 nm. Plus more pax can fly on the A220 than the E-195 and it is roomier.
I worked for the airline that used it on BOS-SJC-BOS. It was capped daily. The performance is not as good as advertised
The Q-400 is the obvious plane for interisland flights. (Unless they are more susceptible to salt?)
I think Horizon has gotten rid of them mostly
Yes, unfortunate timing.
Yes, Q400 is gone from the Horizon fleet. Horizon is an all-E175 operator now.
Problem with Q400 and other turboprops like ATR72 in the interisland market is cargo capacity. The proposed Embraer large turboprop seemed interesting as I think it had a E-Jet fuselage, so it might have solved the cargo capacity concern. I thought it would have been an interesting option for Hawaiian, the biggest downside was the fact that it’s a turboprop, which gives it an inherent disadvantage in the customer’s eyes vs a pure jet. If it had come out in the period when Hawaiian had an interisland monopoly after the failure of Aloha then it probably would have been accepted since there was no alternative, but now it would be competing against Southwest’s 737MAX which would require some creative marketing to overcome. Maybe play-up the environmental angle.
I just looked it up, and surprisingly the E-175 has a shorter minimum runway requirement (just under 4,200 feet) than a Q400. So that could be an option for Lanai and Molokai. Restoring service to those two islands (scope clause permitting) would definitely get AS a ton of local political support in Hawaii for the merger.
Angry,
As I understand it, the newer engines require more time to cool down between flights. The 717 is fairly unique in its ability to fly frequent short hops. The A220 and E-190/95-E2’s can’t do that as well. This may be one case where older technology is better.
Angry Bob – I’d be very surprised if they brought in an Airbus fleet for this. I don’t see how it’s anything but 737s in the long run. The only outside chance could be some Embraer 190/195s, I suppose but I consider that a longshot.
Cranky: aren’t the 737s oversized for inter-island?
Southwest has certainly proven otherwise. If I were Alaska, I would dedicate some of their 737-800’s to Hawaiian and maybe some of the lavs with seats, raising their capacity from 157 to 168 seats. Or maybe Hawaii is a good home for their non-ER 737-900 fleet.
I read somewhere today that WN has a 40%-ish load factor in inter-island. If that is true, I don’t know that WN proved anything other that they are willing to burn piles of money to buy market share/kill a competitor.
XO – Well, it depends. If they want, they could put some 737-700s down there and run them exclusively interisland. Those aren’t much bigger than the 717s. Otherwise, they might find it easier to go with the -800 or MAX 8 just so they can flow in and out of the network. They are probably bigger than they need, but there might be enough operational benefit to do it.
737s of any variant since (and including ) the -300 will need more ground time between flights than Hawaiian does today with the 717. Aloha had experience with the -300 and -400 on regular interisland service along with occasional use of -700s and all had the same cool down issue and stuck with -200s until the end. The lack of a suitable replacement for the 717 though suggests that Hawaiian, whether independent or under AAG ownership, is going to need more airplanes to offer the same frequency they do today, which is one of their competitive advantages over Southwest.
Crazy idea that won’t ever happen: Combi aircraft.
I know they haven’t been worth the headaches in most cases when they have been tried in the past few decades. That said, while I don’t know the market, it sounds like the intra-island flights have a varying mix of pax & cargo.
If the planes are going to have to sit on the ground some between flights anyway, that reduces the marginal cost (in terms of impact on utilization) of adding/removing seats to adjust for demand. Even just adding a few such combi aircraft might be worthwhile.
Again, I know it’s a bit of an absurd idea, but it’s still fun to contemplate.
At JFK there’s a single HA flight designed to connect into B6’s network via code share. Would AS keep it & if so, could AS expand into T5? This is where the AS/ B6 merger becomes more interesting. And if the DOJ is concerned about “bigness” as you put it yesterday cranky, then the other big mergers should not have been allowed. Yeah I get it… change of administrations & all that, but, “bigness is bigness.”
SEAN – I don’t see why Alaska would cancel that flight. It makes sense to keep it as part of the airline’s JFK portfolio.
I think they question here is whether they will keep the B6 codeshare (and DL).
Does anyone know how much cargo/mail HA is putting on its inter-island 717 flights? The bins on an E75 are tiny comparatively. Almost prohibitively so.
The “two-brand” thing can be very risky. Yes, there are the AF-KL situations that have managed but I can’t help but think of the Caribbean Airlines(Trinidad) and its 2010 acquisition of Air Jamaica. For a variety of reasons including but not limited to the high costs of the double branding and issues with the DOT a rocky road can be had. Less than 2 years after Caribbean Airlines attempted such they abandoned such. In doing so. the Air Jamaica branding was eliminated. That offended both native Jamaicans as well as the Jamaican diaspora stateside and resulted in Caribbean losing tremendous market share at the KIN and MBJ hubs that it has never been able to recover. Trinis and Jamaicans were hardly the best of friends going into the dual branding and with all that occurred with failed dual branding even much less so to this day.
I wonder if the alliance with AA is going to give the DOJ heartburn. That might be the biggest hurdle.
Then again I think the writing is on the wall that without help HA is going bankrupt, so maybe the DOJ gets out of the way to help preserve the Hawaiian name.
What alliance? They’re frequent flyer and oneworld partners with some codeshares already limited by the last merger conditions. They have no antitrust immunity (unlike the AA/B6 agreement that the DOJ successfully ended). Maybe DOJ would extract an extension of those codeshare restrictions, but I can’t see much more.
The west coast international alliance, WCIA in AS speak. It isn’t much now with AA departure from SEA international flying but it could be offered up on the merger altar to appease the anti trust gods.
But what could they offer? There’s no immunized alliance between AS and AA, just a frequent flyer partnership with reciprocal benefits. AFAIK, the “west coast alliance” is nothing more than marketing speak that describes a strategy (and, as you say, not much of a strategy at that). I don’t recall DOJ ever imposing changes to those agreements as merger conditions or accepting those changes to appease antitrust concerns. They look at assets that can be given up like gate space, slots, or immunized partnerships and limitations on codesharing.
DOJ doesn’t care about the HA name, but if they belive HA can’t survive on their own they may cine to the conclusion that allowing rhe acquisition isn’t worse for competition.
Kind of a pipe dream, but I would love to see them leverage this merger to take advantage of AS’s SEA feed and HA’s widebodies. I’m thnking SEA-Tokyo, SEA-ICN, SEA-AKL, etc. all on HA widebodies. And then who knows, maybe there’s some feed from Alaska and Hawaii that could make SEA-Europe work as well.
I doubt there’s much demand from Western Europe to Hawai’i, but ANC is right on the great circle route for that, and SEA very nearly so.
Agreed that it’s a pipe dream, but it’s still fun to consider the possible connections and routes.
Robert – I don’t think this is a pipe dream. Just think of oneworld hubs… London, Tokyo… those should all be opportunities for Seattle widebody flying. (And it’s not good news for Delta.)
SEA-SYD could be interesting too. No other airline serves that route, Qantas can connect all over Oceania, and US to Australia and NZ seems very in demand right now.
Maybe also SEA-HKG for CX connections, though both AA and DL have failed with their West Coast to HKG flights from LAX and SEA.
From what I can tell, Delta hasn’t had too much success with international routes. When i look to redeem on Delta, the routing is usually cheapest through SeaTac. I thought they came in with the idea that SeaTac would be a mini SFO and that hasn’t worked out at all.
Would Alaska have any success on long haul routes that aren’t to other OneWorld hubs?
southbay – I’m not sure it needs to have success beyond oneworld hubs. It doesn’t need an enormous international footprint, but getting something that feeds partners on the other side of the ocean instead of this side would be beneficial. I don’t think it needs to be huge.
I don’t think this a pipedream. I think competing with DL in SEA amd AA’s failure to help them with that are key to why this decision was made.
Yes, agree with you! They really can’t grow more in Seattle unless they use larger planes. (And even then it will be tight)
Even some of their once-a-day, compete-with-Delta-on-designations-flights, like flight 500 to Indianapolis, are consistently full.
In due time, the “BEAN COUNTERS” for Alaska will make the final say as to who survives. They will look at each aircraft and see which route will make the most income from each aircraft. (Leisure Market “FARE” vs Business Market “FARE”. It’s a business.
This is a great deal for Hawaiian shareholders. But what does Alaska really get of value for its $2 billion, besides a merger integration headache after the distraction of getting to deal close? There’s little moat for the business they’re buying, so they largely get brand equity, planes and pilots. Not a big acquisition cost, but that’s because Hawaiian is a money-loser.
If they’d stop thinking like an airline they’d realize they could achieve a higher rate of return for shareholders by taking the cash and… not investing it in an airline.
The first time I flew to Hawaii was crammed into a United Airlines 737, quite possibly the most uncomfortable plane for longhaul travel. The next time was on a Hawaiian Airlines A330….what a difference! The A330 is a fantastic aircraft for a longhaul flight which is why I’ve been flying Hawaiian to Hawaii ever since. That and the POG juice.
Cranky – what was the rationale for the 787 buy when they had the 24 330s flying? Replacement or supplemental? I know fleet matching isn’t the big deal that us amateurs seem to believe but that still seems like a lot of additional expense and complexity for a small airline like Hawaiian.
Bill – Well, this was just the third choice. They had purchased the A330-800neo, but then Airbus canceled that project. Hawaiian moved over to the A350-800, but then once again Airbus canceled that. So they switched to Boeing. Thing is, those A330-200s can go for a long time, and I don’t really know why they felt the need to buy any new fleet.
You’ve got it backwards. The A350-800 order came first, when that variant was dropped they moved to the A330-800neo rather than going to the bigger A350-900. The 338 is looking like an orphan variant too (it actually exists but has very few customers left), and eventually they went back and reevaluated and decided to drop the 338 order in favor of the 789.
A next generation widebody was always in the plan for Hawaiian. The original Airbus order was for both A330-200 and A350-800.
David M – You’re right, whoops.
The two brand strategy is only a ploy to win approval.
Once the two airlines are combined, improving margins will be one of the top goals. You cannot achieve this running two brands. This has been the case with every airline merger that has attempted this strategy.
Furthermore, the airline will start to move a lot of trans-oceanic flying to places where the airline believes it can improve margins. This will most likely mean moving some HNL-International routes to SEA.
Therefore, local politicians as well as the local Hawaiians will be sold a lot of corporate double speak and then in 3 to 5 years after the merger, the Hawaiian brand will slowly be sanitized and then washed away entirely into one brand.
^This. I’m not sure why CF is so confident Alaska will maintain both brands. Certainly nothing remains from Virgin America. Single operating certificate, single airline, single workgroup = dominant culture = Alaska.
The comparison to Virgin America doesn’t work well:
They never even pretended they were going to keep the Virgin brand.
They actually had to pay significant feed to use the Virgin brand.
The community ties to the Virgin brand paled in comparison to the ties Alaska and Hawaiian enjoy.
The geography of Virgins network would have made it extremely difficult, expensive and confusing to keep seperate.
All that said though, I do imagine the brand difference will erode over time and will eventually be combined, but they may be able to hold out for a long while.
All well said. For some reason VA fanboys never mention that the airline got very little in value from the Virgin name but had to pay a lot for it. I don’t think the Virgin group was even interested in letting Alaska keep the name, either.
I should have been more specific, I wasn’t referring to the name. But they didn’t really retain *anything* from the acquisition, other than a few routes from SFO perhaps. And they did have a distinct onboard product. I was never a big fan, but they did have quite a few loyalists in the Bay Area.
Fair points. I think Alaska lost a bit of their quirkiness in their marketing, in order to go for a “California” cool vibe. The planes lost hot meals for purchase and the fabric bulkheads… but most people probably don’t notice these things.
Drew – I don’t know why keeping the brand is such a contentious issue. It doesn’t have to be that hard. We don’t have answers yet, but if it’s just a matter of soft product being different then it can easily be handled.
This isn’t going to add all that much complexity or cost, if it’s done right. But I guess we’ll see how it’s done.
Very curious about the international network implications of this. Will AS start flying to some of Hawaiian’s east Asia destinations from ANC/SEA/PDX (finally killing Northern Pacific once and for all… lol)? Less likely, but is there enough demand in Alaska’s Latin America network to support an HNL flight from MEX / GDL, etc.? Take advantage of United’s shrinking presence in Guam? Lot of possibilities here, but in some scenarios they could end up dominating the entire Pacific Rim.
While you didn’t explain the two valuation slides, it is noteworthy that Alaska is comparing its HA merger proposal favorably to the DL/NW merger, one of the best executed in airline history and which has yielded strong benefits, from a financial standpoint and unfavorably to the Virgin America transaction with most of the rest of the “mid-sized” carrier transactions closer to industry average.
HA certainly comes closer to being able to claim that it needs this merger to survive than B6 or NK, although the finances of all 3 have deteriorated significantly. The timing of the AS/HA merger announcement could be a benefit as the judge rules on B6/NK.
It is those details that are hard to guess and which ALK will keep close to the vest until the merger is approved.
Given that HA has long held a role in helping mainland and Asian carriers connect traffic throughout the islands, there is a good chance that one provision will be that HA has to continue to offer simple intrastate (inter-island) codesharing to carriers that want it.
As for fleet, AS will have a very complex fleet; they know from the Virgin America merger how much that complexity costs and it is certain that they will take steps sooner rather than later to reduce complexity and generate cost benefits. HA’s 332s are in a fairly dense configuration and the same will be true for the 789s which makes them lower CASM than comparable global carrier aircraft but also less focused on capturing premium revenue (but the 789 business class cabin should be fairly high quality).
From a personnel standpoint, AS’ commitment to keep jobs in Hawaii will certainly be offset by the need to cut duplicated functions.
While it is certain that HA will become part of oneworld, there will be carveouts given that JL and AA have ATI but it is doubtful the DOJ will extend that to fully include AS and HA. The same thing could be true for other alliances in addition to the usual DOJ restrictions that do not allow two U.S. carriers to have a JV between themselves – which is why the NEA was shot down.
As much as there is justification for the merger because there are other competitors on many routes, the DOJ will be looking at the potential for fare increases – because their primary focus is assessing harm and/or benefit to consumers. They are pretty good at figuring industry dynamics including about pricing and capacity.
A couple of random thoughts.
I like this combination – mainly because it’s an “end-to-end” merger with little overlap. It will create a nice sized regional carrier that can more adequately compete in a more and more consolidated airline environment.
I can see Alaska retiring Hawaiian’s Airbus NEO fleet in the relatively near future. Most of the flights the NEO currently flies can probably be flown by a 737MAX. If any Airbus narrowbody aircraft could potentially work for Hawaiian, it would be the A321XLR, which should be able to reach Chicago, Auckland, and Fukuoka – which are all close to 3800nm from Honolulu. But many of those flights can also be operated by 787s.
I’m guessing, and only guessing, that the Hawaiian branded flights will be those to, from, and within Hawaii.
American wouldn’t be a suitable buyer for Hawaiian’s current NEOs because they have different engines from the rest of American’s fleet, but United and Delta might be interested.
If you want to talk about someone that could help clean up the messy fleet, it would be Delta that happens to operate 717s, A330-200s and A321NEOs w/ the same engine as HA (and DL Tech Ops is also an authorized repair center for the GTF so they might be fixing HA’s engines for them anyway – DL Tech Ops has worked w/ HA for quite some time).
The 332s could work for DL’s own eastern US Hawaii routes plus a few high density transatlantic routes.
Good points.
Elaborating: It’s possible that Hawaiian would want to keep its 717s and maybe add a few (for parts if nothing else). And don’t forget, the 787s won’t be delivered all at once or overnight. But Delta does look like a good potential landing spot for Hawaiian’s A330s and A321NEOs long term if and when it would want to get rid of them.
Also plausible to imagine AA buying/leasing some of the B787s if and when those orders are ready since they do need more of them going forward.
It’s nobody’s idea of a good example, but weren’t Song and TED two brands (alongside Delta and United) on a single AOC?
Bgriff – I think those were single cert, but I don’t know. But that wasn’t an acquisition, that was about trying to create a new and separate brand to stand for something else. That was destined to fail from the beginning.
This is a very different situation.
I don’t understand why people think keeping two brands would prevent any merger synergies. A brand is a thin veneer over the guts of an airline – aircraft interior config, uniforms, soft product, signage, liveries. All are things that must be purchased anyway, can be segregated happily by fleet type, or can be synchronized with savings (as in IFE options). Just a wild guess but the HNL “Regional Headquarters” probably keeps most of the machinery that is Hawaiian Airlines – dispatch, scheduling, training, fleet management. I don’t think the SEA facilities are big enough to absorb those, and there really isn’t an efficiency gain by doing so. In fact having dual operational facilities provides a little redundancy if calamity strikes one.
It’s hard to see them splitting brands along anything other than fleet type. Otherwise you start having 787s or A321s splitting between a SEA HQ running some and a HNL HQ operating others. HNL should manage the HA brand/fleet and SEA the AS brand/fleet.
I think Hawaiian’s pilot contract prohibits non-seniority list inter-island flying, so the Horizon option is out for now. Pulling Horizon into mainline to get rid of scope limits might be an option. Maybe a JCBA would allow 175s to routes not currently served? I feel frequency over size is probably the winning option there, but that’s just an uniformed guess.
The 321 NEOs are stock, not LR, so they don’t have much advantage over the Max series. There’s nowhere they’re currently deployed that the 9 Max and 10 Max can’t match, though maybe SLC being hot and high will challenge that. They’re cheap, so probably no great hurry to replace, but it’s hard to see them surviving long term.
It’s hard to overstate the difficulty in an airline getting their first widebody. The upfront cost is massive. Hangars are expensive, ramp space is expensive, parts inventory is expensive, training your flight attendants to international first service is expensive, dealing with foreign currencies and taxes and governments is expensive, and then you get to the plane and the enormous cost risk in operating it. Buying an established carrier circumvents all that. Alaska just bought their way in, and have massive flexibility in growing or shrinking it, and have leverage with both manufacturers. They should have a field day deploying these in creative ways. They can start having seasonal and sub-weekly operations to HNL, replace and supplement One World long haul from SEA and maybe elsewhere, and upgauge domestically.
Alaska has a not insubstantial cargo fleet, but what will it do with 330Fs pledged to Amazon?
HNL isn’t a great location for a hub, and they’ll never ever beat the direct flights on A380s, but they have a decent shot at competing for one or two-stop itineraries on the 30ish destinations they’d offer in the States.
Fully agree with this sentiment – the biggest value for Alaska is getting a fast and low-risk introduction to widebody flying. They may choose only limited SEA flying to start (think LHR, NRT, SYD) which would not be economical if starting from scratch at such a small scale. With AA abandoning SEA plans, this is a natural progression for Alaska and a smart way of making it happen.
Time will tell whether they can turn HNL into anything more than a niche hub for transpacific travel, but I suspect that’s not the point.
As an aside – Alaska used to fly across the pacific to Russia, and supposedly has a longstanding offer for subsidies from Japanese airports for ANC service. Would not at all be surprised if we see ANC-NRT on 737-8 at some point – almost exactly the same distance as their recently announced ANC-JFK service. Much easier to support the investment if you already have other flights in your network touching Japan.
just a reminder that every route from the US to a oneworld hub is part of the AA joint venture with another carrier.
The DOJ COULD allow two US carriers to have a joint venture with the same foreign carrier – but there isn’t much precedence on that.
And it is not at all a given that AA would give up further presence on the west coast in order to allow AS/HA to launch a joint venture w/ the same routes.
absent a joint venture, AS/HA would be at a significant disadvantage not just to AA and its JV partners but also to DL or UA.
IOW, don’t hold your breath that AS/HA will be welcomed to start international routes to oneworld hubs.
I agree that if AS/HA keeps the long-haul planes, they will likely either have to be strictly used on more long routes like JFK/BOS-HNL (as HA does now) and maybe seasonal flights to ANC, and/or they will have to apply to join the transpacific joint venture(s) with AA, Qantas and JAL in order to make the economics work.
As for the 330Fs for Amazon. Those are Amazon owned (or at least dry leased by Amazon.) HA just operates them for Amazon.
Most of the Amazon branded fleet is organized in this way.
“Alaska has agreed to sign a 100-year deal to keep POG juice on all Hawaiian-branded flights. (Ok, that’s not true… wishful thinking.)”
There’s no reason why we shouldn’t be able to have POG juice on all flights! :)
I don’t know if that ultimately matters much, but let’s not forget that Amazon and Alaska share Seattle as a home port.
Agree that the “two brands, one operating certificate” is without a lot of precedent, but I don’t see how a total rebranding (e.g. LATAM) can be in the cards… Alaska is simply too powerful of a brand on its own to consider messing with.
The only real world example with any history of success I can think of is Carl’s Junior and Hardees. Both were regional names, and it’s been over a decade where both names continue to exist even though the menu and marketing are pretty much universally one and the same.
Six Flags and Cedar Fair are about to go thru the same dilemma… Cedar Fair just bought out Six Flags in their “merger of equals” but there’s no way you can rename Knott’s Berry Farm as “Six Flags over Orange County”…
Dreyers and Edy’s works pretty well in teh ice cream world.
Six Flags can stick their name on it if they want, but everyone is still going to just call it Knott’s Berry Farm. Just like Magic Mountain on the other side of LA.
There’s actually another example of keeping a local brand in Hawaii. After being acquired by CVS, the Longs Drugs name was kept for the Hawaii locations (where CVS didn’t have any previous presence) where it was perceived as a local company, even though it was actually California-based prior to the acquisition and mainland Longs stores were rebranded as CVS.
Marriott has like 20 brands now. Safeway-Albertson’s similar.
Very easy for Alaska to keep the Hawaiian name for neighbor Island flying and maybe the Hawaii-mainland routes.
I think that over the medium term there is a strong possibility that most if not all flying to/thru and intra-Hawaii will be on the HA brand. AS might keep the ANC flights for aircraft rotation purposes and let HA do the rest. That would free up some a/c for increased flying on the Mainland for AS.
Part of Marriott’s numerous brands come from their merger with Starwood, since both companies already had several brands. This also means they have a lot of brands that seem equivalent; there’s not much difference between Marriott and Sheraton, for example. And because nearly all brand name hotels are actually franchised by other companies, I suspect that on top of the costs of changing signs and such, legal gets involved to redo the contracts and that adds more costs. So probably not worth the effort.
Hotels are also pretty good at using different brands as product differentiators. While the old Motel 6 ad isn’t wrong when it noted that fancy hotels and cheap motels all look the same when you’re sleeping, what the hotel offers when your awake can make quite the difference. Full service hotels, business oriented hotels, extended stay hotels, luxury resorts, boutique hotels, all offer different sets of amenities and nominally try to target different markets and types of travelers. Airlines I don’t think have as much room for significant product differentiation; in the end you’re all on the same airplane. I’m not sure having significantly different in-flight product between Alaska and Hawaiian would gain much for AAG (thinking about how Song and Ted didn’t really work out), I think the important thing for them is to maintain the brand itself. So a geographic distinction (Hawaii-based flights get the Hawaiian brand, others get the Alaska brand), but everything is basically the same underneath (like there’s no difference between Safeway in San Francisco and Vons in Los Angeles) probably makes more sense for them.
Marriot has 35 brands and Hilton has 22 brands
One of he most famous dual brands is Hellmann’s and Best Foods mayonnaise. They’re virtually identical.
The one thing that the marketers have said, is that this costs them a fair bit more in advertising, because they can’t buy national advertising, they have to buy local advertising. Though, that statement may be more reflective of an older TV centric way of managing advertising.
So thinking about weird synergies, is there space in the AS/Mainland network for more 717s enough that it makes the fleet viable to maintain when Delta retires the type?
Perhaps it displaces the SkyWest E175s in the long term?
With all due respect, you have it backwards about which airlines will park the 717 first and last. Among large carriers, Delta is a specialist in running aircraft to the end of their life long after other carriers – witness the L1011 and they will also do it with the 717, 757, 767 – and then parking those aircraft in the desert so they cannot be reused by any airline. Delta has been spending the last couple years buying up spare planes in order to ensure that they can support the 717 fleet – something it did not do with the MD90s. Delta Tech Ops has far greater maintenance capabilities than AS or HA. The 717 has far greater strategic value to DL because the 717 is DL’s replacement for regional jets and the economics for the 717 are far more favorable for 717s than even for large RJs. The A220s are simply too costly (even at great prices) and designed for longer flights than what the 717s do – which is why the 717s and A220s have very different missions at DL.
Southwest has proven that the 737 can work for interisland service; HA would not be able to run the frequency or turn aircraft as fast as what the 717 does but, if there are only 2 carriers, what was done in the past with high frequency service is no longer what has to be the case now. Remember also that narrowbodies can now fly from the mainland at the right levels of demand to just about every island so the necessity of interisland service is reduced to local intrastate Hawaii needs and for international connections since many of the islands cannot support longhaul widebody service.
The 717s might be one of the first fleets to go and, as much as some people want to believe there is some great animosity between AS and DL, they both know that working together might be beneficial to both sides if DL is able to help AS simplify its combined fleet, eliminate multiple fleet types, and have DL Tech Ops take over some of the maintenance functions on non-737s which HA currently provides.
It is not a joke that the pilots of Airbus and Boeing fleets after taking those fleets to the desert will fly home on a derivative of the DC9.
Side question: do you know who’s buying the Qantaslink 717s? The article I read said “another major carrier in North America”, but didn’t say who. So is it DL or HA?
https://www.news.com.au/travel/travel-updates/end-of-an-era-qantas-sells-iconic-boeing-717-as-part-of-fleet-renewal/news-story/d38bb0af90088f300c52e05a4aa9da9a
Two carriers at high frequency was the norm in Hawaii for decades with Hawaiian and Aloha. Whether or not either of them made much money at it is certainly open for debate, and you’re not wrong that the increased capability for mainland-outer island flights reduces the demand for interisland service from HNL.
But high frequency 717 service is one of Hawaiian’s competitive advantages over Southwest’s 737s, so there’s an argument to be made that Hawaiian will want to keep the 717s as long as possible, given that no potential replacement can do what the 717 does for Hawaiian quite as well. The conventional wisdom around other online forums is that Hawaiian’s 717 retirement schedule will ultimately be driven by Delta’s as Hawaiian’s operation alone is too small to keep the 717 parts chain alive.
Of course, with Southwest unable to compete the same way Aloha did, there’s less pressure for Hawaiian to keep doing what they’ve been doing. And new management from Alaska Air Group may be willing to make changes that Hawaiian’s long time management was unwilling to do. Doing things they way they’ve always done them because that’s they way they’ve always done them isn’t exactly unheard of.
Tim, it’s not a zero sum game between DL and HA/AS on the 717s.
Maybe DL is the last carrier in the developed world to operate 717s, maybe it’s HA. I don’t care and that wasn’t my point.
I was suggesting that instead of just aiming to replace the 717s, maybe the more economical thing to do is to grow the fleet with whatever planes Delta doesn’t want.
It could be in DL’s best interests to keep the number of 717s worldwide operating, even if those aren’t all being operated by DL. Better to share the costs of parts runs, or even better sell parts to HA/AS.
Nick,
your original post seemed to indicate that you thought DL would be the first to retire the 717 and HA could benefit afterwards.
There is less reason for HA to hold onto the 717 now that AS brings any number of 737 sub-models that could be used for interisland service; HA has the A321NEO as its only other narrowbody and that is clearly not suitable for most interisland routes.
I don’t know if there are any remaining decent 717s that could be acquired beyond what DL has sought out either for parts or to fly but I doubt it. DL learned its lesson about now having parts sources for the MD90 and they aren’t repeating that with the 717. The 717 plays a much more significant role for DL than the 717 does for HA/AS on a combined basis.
I’m not even sure the incremental benefits of HA’s A321NEOs – which are not long-range models – makes it worth keeping them.
and I do think that AS/HA and DL could both help each other out – which is contrary to the persistent idea some have that they are constantly at war. Both are very rational competitors and DL has had a strong maintenance provider relationship to HA in the past.
Rebranding is a tricky, and expensive venture with plenty of cost and lots of downside. Especially when converting brands that carry state or regional monikers. In the 90s Stephen Wolf spent millions that US didn’t have because he thought US Air sounded LCC & start-uppy. Plus a feeble attempt to distance themselves from a series of high profile accidents. Putting that on the back burner makes sense. The near term goals are getting the DOJ & labor on board. Then securing the common AOC. Then fleet rationalization and network.
The paint and soft product are WAY down the list. Another intriguing concept would be the new HAAS+B6 being the bedrock of a new alliancenew alliance. There are plenty of cats and dogs in Europe, Asia and Latin America to bring into the fold. Using the tired retail analogy, they are the Targets of the industry pinned between the Dollar Tree and Nordstroms.
How many pax are we talking for the inter island flights annually? Is it really important for tourism or locals or both?
It’s hugely important for locals and somewhat important for tourists. For the four quarters ending Q2 2023 (latest DOT data), there were over 7,500 people per day starting and ending their trip in the islands. More than 10,000 people flew on interisland flights per day, with the difference being those who connect to/from outside the islands.
I think a lot of folks forget that it wasn’t too long ago that Horizon was it’s own standalone brand until 2011. Heck Santa Rosa wouldn’t be a Alaska dominant market if it wasn’t for Horizon moving in in 2007. For decades, Horizon did it’s own thing and it worked, however the financial crisis in 2009 harmed both carriers very badly and if you look at a lot of the executives from Alaska around that time the majority of them came from Horizon. Of all the carriers that has experience running two brands, that will be Alaska. I hope that the leadership team does succeed in establishing two different brands that compliment each other in many ways. I agree I think this merger will be better as a whole because simply Hawaiian is more of a long haul international carrier, whereas I view Alaska as primarily a West Coast domestic carrier that provides great west coast connectivity. I do think this merger is an opportunity to grow Seattle with upgrading flights to HNL from SEA with a 787 over a 739. Other than the Amazon Cargo flights, I do think Hawaiian will end up becoming an All Boeing carrier (specifically 787), since Alaska seems to prefer a 1 fleet type operation. I wonder if the existing A330s will be converted to Amazon freighters as 787s come on board.
Isn’t AS dumping some capacity in LON and TYO outside the JVs AA/BA/JL are running like being the skunk at a garden party? I would think they might actually try someplace like CDG where it’s not horribly duplicative of existing service in OW.
eponymous – I think it really depends on where Alaska’s customers want to go. But if I were Alaska, I’d start with a destination where I have a partner with a lot of onward connecting opportunity.
Eventually someone should try to make Seattle to India work. There are more immigrants from India living in King County than China or Mexico.
One would think that SEA-BLR/BOM/DEL would have some good corporate premium demand, but I’m not sure how much demand there is for a nonstop on that routing vs a connection along the way. I know my Indian friends on the East Coast generally prefer to have a layover when flying to India, if just for the opportunity to stretch their legs, but I could see a company paying a little more for a nonstop.
SEA-BLR is over 8,000 statute miles via the Great Circle route, which crosses central Siberia, so it would be a very long flight in the best case. Given that US airlines aren’t currently transiting Russian airspace, that route won’t happen with a US carrier in the near future. I haven’t checked potential itineraries & layovers, but just looking at the GC distances, a connection in Northeastern Asia (e.g. NRT or ICN) wouldn’t add THAT much GC distance vs a nonstop through Russian airspace.
American had SEA-BLR filed for a long time, but without Russian overflight it’s impossible. I tend to think American got lucky that it didn’t have to lose so much money on the route by actually launching it, but there is some demand there without question. That’s how American could justify it originally.
I’d like to think Alaska is going to figure out how to bring HA’s widebodies online for them. While the product boost is incredible using the A330 vs a 737 Max on traffic between Hawaii and the US mainland, the fleet economics make way more sense for narrowbodies.
Alaska now has a huge opportunity and yet a challenge ahead of it to figure out what they’ll do with the widebodies. They could become a carrier for the routes to East Asia. There could be targeted flying to Europe via SEA. There could be a connection to Australia and New Zealand. The possibilities are seemingly endless.
As much as I’m an AS fanboy, HA is going to teach AS about wide bodies. They’ve been running them for what? 40 years? More?
Wow. lots of relevant (and irrelevant) stuff – I just want to add that long time Alaska patrons are becoming disenfranchized with the perceived reduction in service on it’s routes (compared to when they served a full meal between SMF and SEA).. perhaps not specific to the merger, but could be customer important.. jus’ sayin..
Well
This will be interesting to say the least. Look for the E-175 to take over the local island routes as either Hawaiian or Horizon. The 737s will still fly the Alaskan Eskimo. Now the mystery will be the 787s? (Yes I think we all can agree Hawaiian made the deal with Boeing for the 787s to sweeten the pot for AK Air there’s no other good reason to buy a new/ different aircraft when you’re financially floundering) now will the 787 fly the Hawaiian or the Eskimo on the tail? After the Virgin acquisition, it’s safe to say bye-bye Airbus. It also makes sense as it streamlines all of the larger body aircraft under one manufacturer (parts and training $$$).