Merger fireside chat: Airline demand patterns ‘thrown sideways’ on Maui since August wildfires

Executives with Hawaiian Airlines and Alaska Airlines discussed their recently announced merger agreement during a fireside chat hosted by the Maui Chamber of Commerce on Wednesday.

The talk story, held at Fuego at The Dunes at Maui Lani in Kahului, comes two months after Alaska Air Group, Inc. announced it will acquire Hawaiian Airlines in a $1.9 billion deal set to close in an estimated 12-18 months.

August wildfires “threw demand patterns sideways”

When asked about inter island flight scheduling, suggestions for additional flights from Maui to Kauaʻi, and requests for late night flights back to respective islands, the answer was framed simply:

“Things like how many frequencies a day we have non-stop between here and Kauaʻi—that’s often dictated by demand. One of the things you are seeing here particularly in Maui right now is our demand patterns have been thrown sideways since August.”

“Some of the things that we take to be normal neighbor island demand patterns haven’t occurred the same way,” he said.

Case in point: On his 7:15 a.m. flight to Maui from Oʻahu, Ingram remarked to Sen. Lynn DeCoite how full the aircraft was.

“What you used to think of in the early morning flights is that it was Maui to Honolulu was the full flight, and we’d fly some empty seats from Honolulu to Maui just to make sure we had some outbound seats; but it’s been flipped since the fires, and there’s a lot more people coming this direction in the morning and going that direction at night,” said Ingram.

“We all felt this very deeply and we want the recovery to be successful and work for all of you,” said Ingram of the August wildfires. “Our 500 [Maui] employees were gutted as we went through that, and I know in all of your businesses and all of your communities, people have been going through that. It would be irresponsible if we left there today without acknowledging how much this community has been through and reinforcing how much we’re supporting seeing you all and this community through to the other side of the recovery. It really is important to us,” said Ingram.

“Our hearts do go out, and we are going to be part of the solution. Alaska will be with you every step of the way,” said Ben Minicucci, Alaska Airlines president and CEO.

Minicucci said one of the ways Alaska Airlines tries and keep its fares competitive is keeping costs low. “That doesn’t mean not paying people well… but we work on being a highly productive airline… so we can drive our unit costs down so we can offer lower fares,” crediting the philosophy with the airline’s profitability success.

Unique roots creates ‘win-win’

Both airline executives highlighted their unique origins of each company and their roots in the two non-contiguous states.

Ingram said both Alaska and Hawaiian fly in states that are the most uniquely dependent on air service. “We can’t get from here to Honolulu, [or] here to Kona without air service. They serve 19 cities in Alaska—only three of them are connected by roads. So their ocean is land, but they’ve got the equivalent of an ocean in Alaska as well,” said Ingram.

Minicucci pointed to the similarities of the two airlines and the pride and culture that is portrayed in the tail art of both brands. “They’re two pretty special brands—brands that have been in business for over nine decades, that have built tremendous love and loyalty,” he said.

“We knew that success depended on us keeping the brand… What we have to do now is (and we’re in the process of figuring that out) we have to have two external facing brands, and then behind the curtain is one operating platform,” Minicucci explained.

He said that the single platform includes employees coming together on collective bargaining agreements under one employee group, with one operating certificate, but the customer facing experieince will include both brands.

“We think that is the unlock here to do something a little different, a little special that I think is a win-win for everyone,” said Minicucci.

Making decisions on roles, learning from experience

With the merger of the two airlines, Honolulu becomes Alaska’s second largest base.

“There’s going to be a big presence here in Honolulu, especially from an operational perspective when we’re running all the current system flights… and then we want to grow,” said Minicucci. “So we know we’re going to have some form of regional headquarters here with leadership to make sure we’re doing everything right,” he said.

With two organizational structures and parallel jobs in each company, especially administrative roles, the question was posed of how the merger will impact top level employees.

“It’s the worst part, because I know there’s a lot of anxiety on this process, but we do want to take the time to do it right,” he said. “What we don’t want to do is make a false step right out of the gate and have to change it 5-6 or 12 months down the road.”

Minicucci is no stranger to mergers, and reflected back on Alaska Airlines’ acquisition of Virgin America in 2016.

“We learned a lot of lessons through that… When we acquired Virigin America, we weren’t sure what to do, and because Virgin America had a very international, larger than life brand… the brand was different from Alaska,” he said.

Ultimately the decision was made to go with a single Alaska brand during the 2016 merger. “This is so visceral for people in terms of how much it means to them that we knew we had to come out of the gate with a decision… make the decision quick, let people know what it is, and take the anxiety away—whatever the decision it is, and then explain it and your logic behind it.”

For Minicucci, it was one of the biggest lessons and takeaways from past experience. For the new acquisition, the decision to preserve both brands was based largely on complimentary cultures and the desire to maintain the rich history that the airlines have created.

Looking ahead: ‘Opening up worlds’

“As we’ve tried to diversify our business, one of the things we’ve never been able to do is to offer a connecting network to our guests on the US mainland,” said Ingram. Outside of nonstop flights to specific locations, Ingram said the airline has not yet been able to connect people to places like Washington D.C., Chicago or Kansas City. He said there’s four large airlines—American, Delta, United and Southwest—that control 80% of the market.

“This really allows us to expand our network,” so that guests have options to fly on connecting flights. “Now they’re going to have that other option to travel on the connecting flights that Alaska has today over Seattle, Portland or Los Angeles to get to other cities.”

“Of all the things that I think are positive about this, I think that is the one that I’m really excited about—is how we can offer more service to our guests and our broader network and everything else that entails,” said Ingram.

“What this allows you to do is have three times the amount of choice than you do today by staying as a Hawaiian / Alaska loyalty member. You don’t have to split your loyalty,” said Minicucci.

According to the merger website, the transaction will connect Hawaiian Airlines’ loyalty members with enhanced benefits through a loyalty program for the combined airline, including the ability to earn and redeem miles on nearly 30 global partners and receive elite benefits on the full complement of oneworld Alliance airlines, expanded global lounge access and benefits of the combined program’s co-brand credit card.

The acquisition is conditioned on required regulatory approvals, approval by Hawaiian Holdings, Inc. shareholders (which is expected to be sought in the first quarter of 2024), and other customary closing conditions, according to earlier reports.