Checking in on Alaska as it prepares for the Hawaiian merger – Cranky Flier

I posted my conversation with Hawaiian CEO Peter Ingram last week, and then, well, the big changes in America distracted me. But my mind is now back to the islands. After speaking with Peter, I called Daniel Chun, Alaska’s regional vice president for Hawaii, and Joe Sprague, who is leading the merger effort for the airline.

Longtime readers of the blog will remember Joe as the one who joined me on the Milk Run in 2017. He has since left the airline, returned to run Horizon Air and now spends much of his time in Honolulu as he begins planning mergers.

But to talk about the merger, we first have to look back. Alaska first came to Hawaii in October 2007 when it opened Seattle – Honolulu and Līhu‘e. In December it started with Anchorage – Honolulu, and then it started to grow quickly.

At the time, the Hawaiian market was in turmoil. Within six months, both ATA and Aloha were closed and the number of seats between the mainland/Alaska and Hawaii dropped by almost 12 percent. As the only newcomer to the market, Alaska was seen as a real boon for a place where inbound tourism is so important.

You can see how the market has developed since then by looking at the seat share. Hawaiian grew when these two airlines went bankrupt, but American began to shrink. Alaska really played a major role as the only notable newcomer until Southwest arrived over a decade later.

Continental US + Alaska – Hawai’i seat share per month

Data via Cirium

How do I know that Alaska was viewed positively? Well, that’s where Daniel Chun comes into play. When Alaska started in the state, Daniel was the Executive Assistant to the Tourism Liaison for the State of Hawaii, and had been since 2004. Before that, he spent a few years in the Visitors and Convention Bureau. So he was very familiar with what flying to the islands meant.

In 2011, he moved to Alaska as Regional Manager of Sales and Community Marketing. His role has only grown since then, but the key to that is that he spends a lot of time on public affairs work. In fact, he told me he is the only airline public affairs person in Hawaii other than Hawaiian Airlines itself.

Daniel is from the islands and has continued to do his work in the community on behalf of Alaska for many years. Obviously he has good connections.

When the merger was announced, Daniel joined executives from both Alaska and Hawaii to really expand reach. They visited all the islands and met all the mayors – there are only four because mayors in Hawaii sit at the top of the counties and not in the cities. How did it go? Read it yourself. The mayors were unanimously in favor of the combination.

Alaska then went and created what it called the HICAB, the Hawai’i Community Advisory Board. This includes representatives from business, local interests and everything else on the spectrum with people on every island, including Molokai and Lāna’i where Alaska does not fly.

Joe added that there was another secret weapon in all of this: “the idea that we have been serving the state of Alaska for over 90 years – which has a lot of similarities with the state of Hawaii – and the people here in Hawaii understand that: and that brought us also on a slightly different basis than another airline that might have tried to do something with Hawaiian Airlines.”

But what about the benefits for the people of Hawaii? Daniel explained.

For locals we will have three times more choice than today to reach the mainland, either on a one-stop basis or non-stop basis. That’s what I think we’re hearing a lot in the community is that there’s a lot of excitement about it because the locals love flying Hawaiian Airlines, but they just couldn’t get to all the places they needed to go. And so they basically have to divide their loyalties.

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

  • maintain the Hawaiian Airlines brand
  • keeping all union workers on the front lines
  • maintain neighboring island service

With all this preparatory work, perhaps I shouldn’t have been surprised when Daniel told me that overall “there weren’t many concerns (about the merger)…. There is a cautious optimism and hope for the future, that they know Alaska Airlines – because we have been here all this time – they know that we are generous in the community, they know that we care about the community, and they also know that we respect the Hawaiian community. Airlines.”

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

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

Molokai and Lāna’i air service, interestingly enough, has become a very central part of this deal, especially with government officials here in the state of Hawai’i. And the reason why is that… Mokulele has had a very challenging period in recent months.

Our big thing at Mokulele is that we really stay focused on getting it right, and starting with safety…. If they would like us to assist with any kind of safety assessment, we are happy to do so. 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 major Part 121 carrier.

If there is anything we can do to advise them in a big brother way on some of their operational practices, we would be happy to do that. They share reliability information with us. We are closely involved and want to be as helpful as possible to them.

In other words, Alaska may not have an aircraft that can adequately serve the market, but if it can help ensure Mokulele’s service does its job well, then that earns some points.

However, those brownie points do not transfer to the DOJ. Joe and Daniel obviously wouldn’t talk about that in detail, but they continue to drive home the message that there is so little overlap between these two airlines, just a handful of West Coast-Hawai’i routes, most of which have other competition. on them. And none of these airports have any restrictions, so a newcomer could come in if interested.

This is where the uncertainty lies. If DOJ agrees to the merger, but wants to get a pound of flesh out of it to show it’s doing something… what can it get out of it? The only thing I could think of was maybe freeing up some gate space in Honolulu. Whether Alaska would choose to do that or not, I don’t know… but I would be surprised if it didn’t.

So for now, Daniel will continue doing his public affairs work in the islands off Alaska. Meanwhile, Joe focuses on integration planning. He expects to have a formal plan in place by August 1. This time it’s a lot easier because, unlike during the Virgin America merger, Alaska has much more experience in the organization to guide the organization on things like IT integration and organizational design.

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