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.
