Checking in Alaska As It Preps for the Hawaiian Merger

Alaska Airlines

I posted my conversation with Hawaiian CEO Peter Ingram last week, and then, well, Americanʻs big changes distracted me. But my head is back in the islands now. After talking to Peter, I had a call with Daniel Chun, Alaskaʻs Regional Vice President for Hawaiʻi and Joe Sprague who is heading up the merger effort for the airline.

Long time readers of the blog will remember Joe as the one who joined me on the Milk Run back in 2017. Since that time, he left the airline, came back to run Horizon Air, and is now spending much of his time in Honolulu as he begins merger planning work.

To talk about the merger, however, we have to start by looking back. Alaska first came to Hawaiʻi in October 2007 when it opened up Seattle – Honolulu and Līhuʻe. In December it started Anchorage – Honolulu, and it started to grow rapidly after that.

At that time, the Hawaiian market was in turmoil. Within six months, both ATA and Aloha had shut down, and the number of seats flying between the mainland/Alaska and Hawaiʻi dropped by nearly 12 percent. As the only new entrant in the market, Alaska was looked upon as a real blessing for a place where inbound tourism is so hugely important.

You can see how the market has evolved since that time by looking at seat share. Hawaiian grew once those two airlines failed, but American started to shrink. Alaska really did carry a significant role as the only notable new entrant until Southwest arrived more than a decade later.

Continental US + Alaska – Hawaiʻi Seat Share By Month

Data via Cirium

How do I know that Alaska was looked upon favorably? Well, thatʻs where Daniel Chun comes in. At the time Alaska started in the state, Daniel was the Executive Assistant to the Tourism Liaison for the State of Hawaiʻi and had been since 2004. Before that, he spent a couple of years in the Visitors and Convention Bureau. So he was intimately familiar with what air travel meant to the islands.

In 2011, he jumped over to Alaska as the Regional Manager of Sales and Commmunity Marketing. His role has only grown since that time, but the key to it is that he spends a lot of time doing public affairs work. In fact, he told me heʻs the only airline public affairs person based in Hawaiʻi outside of Hawaiian Airlines itself.

Daniel is from the islands, and he has spent years continuing to do work in the community on behalf of Alaska. Naturally, he is well-connected.

When the merger was announced, Daniel joined executives from both Alaska and Hawaiian to really ramp up outreach. They visited all of the islands and met with all of the mayors — there are only 4 since mayors in Hawaiʻi sit on top of the counties, not cities. How did that go? Read for yourself. The mayors were unanimously supportive of the combination.

Alaska then went and created what it called the HICAB, the Hawaiʻi Community Advisory Board. This includes representatives of business, local interests, and everything else on the spectrum with people on every island, including Molokai and Lānaʻi where Alaska doesnʻt fly.

Joe added that there was another secret weapon in all this, “the notion that we have 90 plus years serving the state of Alaska — which does have a lot of similarities to the State of Hawaiʻi — and people out here in Hawaiʻi they get that, and so that also put us on a little bit different footing than another airline that might have tried to do something with Hawaiian Airlines.”

But what about the benefits for the people in Hawaiʻi? Daniel explained it.

For local people, we’re gonna have three times more choice than we have today to get to the Continent either on a one-stop or nonstop basis. Thatʻs the thing that I think we’re hearing a lot in the community is that there’s a lot of excitement around that because local people love flying Hawaiian Airlines, but they just couldn’t get to all the places that they needed to get to. And so they actually have to split their loyalty.

If all that wasn’t enough, then Alaska made three main commitments.

  • maintain the Hawaiian Airlines brand
  • retain all front-line union employees
  • keep neighbor island service

With all this groundwork, perhaps I shouldnʻt have been surprised when Daniel told me that in general, “there werenʻt very many concerns [about the merger]…. Thereʻs this cautious optimism and hope for the future, that they know Alaska Airlines — because weʻve been here for all this time — they know we are generous in the community, they know we care about the community, and they also know that we respect Hawaiian Airlines.”

It’s all pretty compelling, but that, of course, doesn’t mean that everyone is likely happy. Those who aren’t may be the people on Molokai and Lānaʻi who want a commitment that Alaska will come serve the market and provide a reliable option compared to what Mokulele (now part of Southern Airways Express) has today. Thatʻs just not operationally feasible for Alaska since it no longer has props, but Joe and Daniel did talk about how theyʻre thinking about this.

Alaska and Hawaiian both have an interline agreement with Mokulele, but Alaska is really trying to create a beneficial partnership with Mokulele in other ways.

The Molokai and Lānaʻi air service has, interestingly, become a very central element of this deal particularly with public officials here in the State of Hawaiʻi. And the reason why is that… Mokulele has had a very challenging last several months.

Our big thing with Mokulele is just stay really focused on running it well, and starting with safety…. If they would like for us to help with any sort of safety assessment, we’re happy to do that. We don’t have any indication that they’re not safe, but that’s just an area where we have a lot of resources as a large Part 121 carrier.

Then if there’s anything else we can do to advise them in a big brother manner on some of their operational practices, weʻre happy to do that too. They are sharing reliability information with us. We’re closely engaged and want to be as helpful as we can with them.

In other words, Alaska may not have an airplane that could adequately serve the market, but if it can help make sure that Mokulele’s service is doing the job well, then that get it some brownie points.

Those brownie points, however, won’t carry over to the DOJ. Joe and Daniel naturally wouldn’t talk about that in any detail, but they do continue to hammer home the message that there is such little overlap between these two airlines, just a handful of West Coast – Hawaiʻi routes, most of which have other competition on them. And none of those airports are constrained, so a new entrant could come in if it was interested.

This is where the uncertainty lies. If DOJ is ok with the merger but wants to extract its pound of flesh to show it’s doing something… what could it extract? The only thing I could think of was maybe freeing up some gate space in Honolulu. Whether Alaska would go for that or not, I don’t know… but I would be surprised if it wouldn’t.

So for now, Daniel continues to do his job running public affairs in the islands for Alaska. Meanwhile Joe is focused on integration planning. He expects to have a formal plan by August 1. It’s a lot easier this time around since unlike during the Virgin America merger, Alaska has much more experience in the organization to help guide it through things like IT integration and organizational design.

Shortly after that plan is ready, we’ll know for sure if DOJ is going to allow the merger or try to challenge it in court. That’s when the real fun begins.

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47 comments on “Checking in Alaska As It Preps for the Hawaiian Merger

  1. Proportionate to their size, Hawaiian has far more employees than Alaska, an airline with a shockingly low casm (14.14c in Q3 vs 15.14c for HA or 16.27c for UA or 18.44c for DL).

    I’m thinking that at least in the short term, Alaksa will trim capacity on many Hawaiian routes and send that capacity to Seattle or Portland, somewhere where it can actually make money.
    Longer term they’ll just copy their Seattle strategy on the islands (new cities, leaning on partners, bigger emphasis on credit cards, etc)

    1. That’s kinda what happens when you outsource ground handling in almost every station in your network.

  2. I see two problems… 1. as stated the DOJ & their current antimerger stance & 2. the fact that Alaska could have used Vergin America to their advantage & chose to hollow it out instead. Who is to say if they would do the same to Hawaiian at some point in the future.

    1. Looking at the B6/NK case, I don’t think this merger is at that much risk; it doesn’t run a risk of cities losing service (as was expected with B6/NK dropping smaller Spirit cities), there isn’t loss of an ULCC, and there’s no questions around market entry for new competitors (except perhaps gate space at HNL? I’m not familiar with the situation there.) Admittedly, I don’t see JetBlue, Spirit, or Frontier adding Hawaiian routes anytime soon, but theoretically they could.

    2. The Justice Department doesn’t care about greater economic benefits or ensuring proper competition, they’re ideologically driven and if let alone on their own accord will sue to block this. Only way around this is politics, and AS/HA may just have enough.

      The NEA was pointed out to be pro-competition by anyone with industry knowledge (the DoJ didn’t have or want any) yet they still sued to block it, all while Delta was slot hoarding at those very same airports

        1. How the DoJ rules remains to be seen. But one focus not mentioned is the elephant in the in-house room of Alaska, the unresolved flight attendant contract. It is not a good look to act as though you are family, offer to spend billions to absorb another company before you have the affairs of Alaska in order first. Taking care of employees and the community begins with taking care of ones own. A contract resolution for Alaska flight attendants that is extended to Hawaii, if the merge is approved by the DoJ, is likely the only way to move forward in good grace. Take care of the ones who are forward facing with the company and whose primary job is safety and customer service alike or potentially suffer failure exponentially as a result.

      1. A220 – But DOJ isn’t going to fight it if it doesn’t think it has a winnable case. When you’re talking about slots and restricted airports, it’s a very different story. This one will be harder to build a case on, and they may decide they can’t win it. We’ll see.

    3. Apples and Oranges. The Virgin acquisition was a defensive move to keep Jet Blue from gaining a foothold on the west coast. Alaska had no big plans for Virgin other to defend the west coast. This Hawaiian merger is a growth story from the beginning. It’s not a defensive move, but an offensive move. Don’t compare the Virgin and Hawaiian mergers…ya just can’t, they’re totally different stories.

      1. If Alaska wanted, they very easily could have made the Vergin acquisition work as a growth vehicle for them as they plan to with Hawaiian. Of course we all know what the outcome was.

        1. One thing I noted that’s slightly different from the language used when the merger was first announced. Up until now(and still on the local care, global reach site), they say “Maintain and grow union-represented jobs in Hawai‘i”, now it’s “retain all front-line union employees”. I take it Alaska looked at some of the back office operations @ Hawaiian over the past couple months, and decided they needed to add that qualifier.

    4. SEAN – Not sure what the concern is about Hawaiian but there is a concrete commitment to maintain neighbor island flying. So it wouldn’t be abandoned by any stretch. Routes might come and go, but that’s the case in any merger. There’s nothing particularly concerning here, especially compared to other mergers. Doesn’t mean DOJ won’t try to fight it though, if it has a case.

  3. I don’t think the DOJ will block this merger. This merger doesn’t eliminate an airline serving 50% of the working class and poor people in the United States the way the merger between JetBlue and Spirit would have.

  4. Very surprising to me that DL and AA (moreso Delta) are so much smaller to Hawaii than United and Hawaiian.

    DL and AA each look to be roughly half the size of United or Hawaiian and both might even be smaller than WN now. That’s shocking.

    Please tell Alaskawaiian that we need MORE premium economy to Hawaii, not less!

    1. I think United has more of a history flying over the Pacific than American or Delta in part do to WWII spoils. Same for Northwest, but Delta has dismantled that part of the network.

        1. Delta has hubs at LAX, SEA and SLC. United has hubs at LAX, SFO and DEN.

          As any Tim, Dick and Harry will tell you, DL is now bigger than United at LAX. United’s other two hubs are bigger than Delta’s but that doesn’t explain twice the level of service, especially when most Hawaii travelers connect someplace en route and are likely ambivalent as to where they connect.

          American is another story altogether but I’m just curious as to why Delta doesn’t choose to compete vigorously to Hawaii as it does to most other major destinations.

          1. Delta has hubs at LAX, SEA and SLC. United has hubs at LAX, SFO and DEN.

            As any Tim Dunn, Dick and Harry will tell you, DL is now bigger than United at LAX. United’s other two hubs are bigger than Delta’s but that doesn’t explain twice the level of service, especially when most Hawaii travelers connect someplace en route and are likely ambivalent as to where they connect.

            Well that may depend on the passengers final destination or some people just would actively avoid certain airports for a connection do to time/ layout.

          2. DL has to compete with Alaska at SEA and everybody at LAX. Nobody is anywhere close to UA at SFO.

            1. They all compete on connecting traffic. The larger amount of originating passengers in a single city (SFO) certainly can’t account for such a large difference systemwide.

            1. Having actually flown on a widebody on this city pair, I absolutely laughed out loud here. Bravo!

    2. It’s geography; United is huge in SFO with about a dozen flights a day to Hawaii from there alone.

    3. Bill – Remember that United had a whole fleet of domestic 777-200s plus some pretty hefty 757-300s that do almost all Hawai’i. So it isn’t just a frequency thing but it’s a gauge thing.

      1. Which presumably they’re using because they are making more money flying to Hawaii compared to other destinations, right? I know there isn’t much business traffic but I am struggling with the notion that Hawaii travel is somehow low yield, especially shopping for tickets recently! Any numbers in your database to show whether or not that’s correct?

        1. Bill – Yeah, so stage length adjusted yield to 1,000 miles for mainland US to Hawai?i was 16.6 cents for FY 2023. If you look at CONUS flying over 2000 miles, it was 17.8. But the CASM of those big 777s is really low.
          Hawai?i has the volume to fill those airplanes while few other places do.

          1. Roger that, many thanks! Figured it wasn’t solely “geography” ;-)

    4. Delta is very focused on generating high RASM, and Hawaii traffic is low yield. They have to keep some capacity there for FF burn, but there’s not much incentive to add more than that.

      1. Do you know that and have supporting numbers? Because I have a hard time believing Hawaii is so low yield. It’s not Orlando or Vegas by any stretch of the imagination.

  5. Is there a reason that AS couldn’t base a few Horizon or Skywest E-175s in HNL and fly to Lanai and Molokai (along with other neighbor island destinations)? Are their runways too short even for an E-175?

    1. There’s an argument to be made that the right interisland aircraft is one with front and rear doors so you can enplane/deplane quicky.

      Utilization on that kind of system is highly dependent on turnaround time. It would be interesting to see a re-think of Hawaiian’s interisland service that seeks to minimize that turnaround time and keep the aircraft in the air as much as possible – what would be the gains from that? How much could you reduce costs? How many aircraft could you eliminate?

      It’s all highly dependent on having the right facilities – ones where you can board/exit safely front and rear. Think Southwest circa 1972, but with higher load factors. Is it possible? It would be interesting to understand what would be necessary to make this happen.

    2. I thought the issue is that it requires longer turnaround times than other similar-sized aircraft. But they probably could use them if they had no alternative.

      1. If memory serves, there was a post here on CF somewhere in the last year or so about this – it’s not just a passenger turnaround issue there’s also an issue with engine cooling time on the extremely short inter-island flights with tight turnarounds – the 717 doesn’t have this problem, which is why HA is in no big hurry to replace them and may even acquire a few DL or QantasLink 717s for parts as they’re replaced with A220s.

        The MD-95 lives!

        1. Yep, between engine cooling and high cycle counts, having a plane built like a tank with low bypass engines means you can keep them running inter-island rather than having to rotate them out to give breathing room (as Southwest does with their MAXes). Wouldn’t be surprised at all to see HA happily take all of DL’s 717s off their hands for this reason, as I don’t think E2s or 220s could be ridden that hard, and the last 737 that could was…maybe the -200?

        2. CraigTPA – That’s right. New generation engines just aren’t mean to turn quickly and do these high frequency, short duration routes. The 717 has maybe a half dozen years left, but then a replacement will be needed and there isn’t a perfect one. It may very well be that Alaska flows 737s into the network the way that Southwest does today. But we’ll see.

    3. Anon – Yeah, it sounds like any of the jets have similar characteristics that make it impossible to have reliable service with a regular load of passengers. I definitely asked about that. If the Q400 was still around, that would work, but it also probably has too many seats. Not around anyway though, so no big deal.

      1. When the 717s need replacing in several years, would it make sense to get Q400s or ATRs then? New or used examples should be easier to come by than used 717s or other 30+ year old jet aircraft.

        1. You could use a Q or an ATR, however, not under the current HA contract. The contract requires mainline pilots fly between the islands except MKK and LNY which HA doesn’t serve. I am pretty sure ALPA will choice to died on that hill as that seems to be important to their members.

        2. Jason – I can’t imagine them going with props. Capacity is too low, and the customer preference is there for jets. I just assume they go with 737s.

    4. We flew them into MKK and LNY as charters when we had them in the islands and they did just fine. We just hoped that we didn’t need to do an air start; and the GPUs available to us on both islands weren’t strong enough to power the airplane. Granted GSE can be brought in, its just one area.

      Sadly the traffic has dropped off dramatically as the cost for an airline to operate in Hawai’i has essentially doubled since my time at Mokulele; and ticket prices, while up, haven’t caught up. I think this is one reason HA is experiencing a lot of losses. And why Mokulele is taking it in the chin under their new owners.

      MKK’s economy is all over the board and sadly not much going on there, albeit Hotel Molokai is a great spot to go and relax, tourism there just hasn’t been back since the ranch & Sheraton closed.

      LNY had a contract with us to fly PC-12s for the luxury/high end clientele at the Four Seasons, Island Air was pretty unreliable, and even our own flights didn’t really fit the time. The resort then moved the contract to a lower-cost bidder (Western Air) that has been operating the flights. PC-12s didn’t work well for us at Mokulele because of all the luggage some of these travelers would bring.

      Hawai’i interisland is a major loss-leader right now; Southwest did it to increase loads and access to their mainland flights – and stick it to Hawaiian. Hawaiian operates it because it *has to*. Mokulele’s a mixed bag; JHM used to be our gold mine, well.. yeah, not anymore. The fires took that away (as did the cheaper yields to OGG vs HNL).

      1. To be clear, they can get those airplanes in there on a clear day if the winds aren’t causing issues. But there will be a weight penalty, and if the winds shift or if there’s a wet runway, it gets significantly more challenging. HA has always said that it couldn’t run reliable service with a jet, and what the people on those islands need is reliable service.

  6. Are there still operators running classic 737 freighters interisland? A 738 combi seems like it would be great for interisland, if they could be had. Kelowna Flightcraft is currently working on making three of them for Air Inuit. From what I can see it looks like 11 containers and 24 tonnes in the front, 16 rows in the back. They were supposed to have delivered one this spring but I don’t know if that’s happened yet.

      1. Not to wish ill against Aloha, but as competition goes that seems like low hanging fruit for a big and established company like AS+HA would be, and a couple combis would be a “two birds, one stone” kind of bargain. Half of an -800 will take as much cargo as all of a 300, I believe.

        1. Not sure AS wants to get into the combi market again. AS is really trying to go for a consistent customer experience now, one of the reasons all 800 and MAX8s will be getting the 16F seat retrofit. A combi probably wouldn’t have F or not as much as the rest of the fleet.

          If the did go for more Cargo I could see more -800 ETOPS cargo conversions once enough MAXs are in the fleet.

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