Hawaiian Airlines President and CEO Peter Ingram has answered questions about the proposed merger with Alaska Airlines in a memo to employees. Most interestingly is that Hawaiian is open to other suitors, even as it remains optimistic about its tie-up with Alaska.
Hawaiian Airlines CEO Address Employee Concern Over Alaska Merger
I’ve included below what I found interesting in the memo and a separate SEC disclosure answering questions about the proposed merger:
1. Hawaiian Airlines Can Still Go It Alone
“[W]e still believe strongly that we can compete on our own. We have done it for decades and continue to do so every day. But, on our own, we think it will be harder, riskier, and take longer to reach a thriving future.”
Hawaiian Airlines may not have been profitable, but it believes it can continue to survive just fine without a merger. Maybe so, but likely not as a global carrier to Asia and Australia.
2. Union Jobs Are Safe, But Non-Union Jobs May Be At Risk
“There is a clear commitment to maintain and grow union-represented jobs in Hawai‘i…For our many non-union teammates, I recognize that the absence of a specific commitment raises even more uncertainty. What we do know is that there will be a need for many of your roles on an ongoing basis because of the size of the combined company’s operational presence in Hawai‘i.”
(bolding mine)
While all union jobs will be secure, no such promise is made to non-union workers. While “many” will be needed, that is quite a different guarantee than those made to unionized employees.
3. On Maintaining Hawaiian Airlines As A Separate Brand
“It is a model that does not exist in the U.S. yet. For both airlines, this will be a process of discovery and learning.”
Outside the USA, we see Air France – KLM or Lufthansa Group subsidiaries have done a superb job of retaining independent brand identity despite operating as one company. On the other hand, those carriers retain separate operating certificates along with maintaining separate brands.
4. Hawaiian Open To Others Offers
“The board, subject to certain constraints, may consider other unsolicited offers for Hawaiian Airlines with the best interest of our shareholders in mind. However, we are focused on the agreement we reached with Alaska Airlines, which we believe is the best path forward for our company.”
While Hawaiian Airlines is willing to entertain offers from other investors, a deal with Alaska is the “focus” for now.
5. Alaska First Approached Hawaiian “A Few Months Ago”
“Alaska Airlines first approached us a few months ago, and our Board of Directors, in consultation with independent advisors, began evaluating the proposal.”
I’m somewhat surprised this all happened so quickly. I wonder how long Alaska Airlines thought about this before approaching Hawaiian?
6. On Flight Attendant Integration
“We will work with Alaska Airlines during the integration process to better understand how In-flight work will proceed under multiple brands after the transaction closes. But we do know that employees will be part of one team, with joint collective bargaining agreements to be negotiated after close.”
Flight attendant integration when it come to seniority is often a contentious issue, but more so than seniority the real wrangling may come down to harmonizing work rules and benefits. Even minimum rest period can be a source of conflict, as it was when Continental and United merged.
7. The Combined Airline Will Be Based In Seattle, With Honolulu To Become “Regional Headquarters”
“While the combined company will be headquartered in Seattle, where Alaska Airlines is based, Honolulu will become a regional headquarters for the combined entity, with significant operations and local leadership. Alaska Airlines currently has other regional headquarters in Anchorage, Alaska, and San Francisco, California.”
Reading between the lines, it seems likely that some jobs for the merged carrier will move to Seattle or become remote…you don’t need loyalty office or aircraft acquisition offices, for example, in both Honolulu and Seattle.
8. Hawaiian Airlines Employees Will Become Alaska Airlines Employees
“At closing of the transaction, Hawaiian will become a wholly owned subsidiary of Alaska Air Group. At some point after closing, we will move to a single operating certificate, at which point Hawaiian Airlines employees remaining with the combined entity will become Alaska Airlines employees.”
The fact that every Hawaiian employee will become an Alaska employee reflects that Hawaiian Airlines will be more a brand than a separate carrier.
9. Miles + Elite Status Will Be Honored…Though Not Necessarily On A 1:1 Basis
“Prior to the closing of the combination, you may continue to earn and redeem HawaiianMiles as you did prior to the announcement. Miles that you earn with Hawaiian Airlines do not expire and your existing miles will be honored – both before and after the combination is official.
“Members who qualify for Pualani Elite status with Hawaiian Airlines will also see their status carried across into the combined program. While the elite tiers of any combined program may not have the same names as our Pualani Elite tiers, it is expected that they will offer comparable or better benefits to what you receive today.”
I expect that Hawaiian miles will become Alaska miles on a 1:1 basis and at least initially, benefits will only be added, not subtracted, for Hawaiian flyers. There is no better way to tick off elites than to devalue benefits and the merger will be undermined if that occurs.
Hawaiian Airlines’ employees are reasonable to ask questions about their job security and the future of Hawaiian as a division of Alaska Airlines. At this point, however, it appears most of the integration will be behind the scenes, with the exception of a unified loyalty program. Merged loyalty programs tend to take the worst of both programs, but hopefully the loyalty folks at Alaska will realize that their unique product is a strong-selling point for flying on the airline itself and work to continue to offer a differentiated and valuable product compared to their US legacy carrier peers.
Finally, as long as we are dreaming, imagine a powerhouse merger between Alaska (strong in the West Coast), Hawaiian, and JetBlue (strong in the East Coast). Creating a major competitor to the “Big Four” (American, Delta, Southwest, and United) actually might bring some competition and innovation to the market.
What are your thoughts on the merger?
Hawaiian management has been feckless. There were a few weeks away from violating loan covenants with several lenders. They were headed to a BK very soon after. Alaska will fix everything that Ingram broke. The only thing HA has going for it is unwavering loyalty from a lot of islanders, true Hawaiian spirit and service in the cabin, and kind and helpful front line employees on the planes and in the airports they serve. Their technology, Upgrades, loyalty program, call center are basically Air Korea in North Korea. Happy to see him go.
@Matthew … As a resident May I suggest that we do not have unwavering loyalty to HA . They have a near-monopoly on interisland air travel . The alternative would be canoe . The Best inter-island airline in my memory was Royal Hawaiian Air Service , which was dependable and loyal to customers in return .
I don’t disagree with what you said. I think I should have said Islanders have been willing to put up with a lot mainly because they didn’t have much choice.
A near monopoly? Is that why WN buried them in the interisland market?
As residents of Hawaii have known forever , Unionization is Best for worker protection . ( The unfortunate side effect is a sort-of political affiliation .) My favourite HA story was the time , 10 or 15 years ago , when the pilots were negotiating a new contract , and the ceo of HA was removed from a HA flight by the captain , because the captain was upset by management . The ceo shrugged it off and flew UA . Funny .
Hawaiian will shrink under Alaska. The 717 fleet will remain Hawaiian as will the E195, if used to replace them. If 737’s are rotated into Hawaii, that will be more difficult. Permanent use of 737s on inter-island routes wear out the 737 engines prematurely.
Some 787s will be in Alaska livery and will be used in Hawaii. There will be FAs based in Hawaii that will wear Hawaiian uniforms. Some FAs might have 2 uniforms or might just wear their Hawaiian uniform on Seattle flights within the mainland.
Hawaiian Airlines will just be a facade. It is possible that there might even be a new livery with minor differences for Hawaiian, like Hawaiian titles and maybe the Pulani on the tail.
The non union employees are those in the back office (accounting, legal, IT, scheduling, purchasing, compliance, etc). This is where you get the biggest “synergy” as bragged about in press releases as any overlap is identified and those selected are released. I’ve survived this several times. Not a happy place.
Those in the functional and production side maybe scrambled about (transfers, even promoted), but have a greater chance of long term survival as long as they are flexible about a move. Yet, you’d be surprised how many refuse to budge an inch, are released, then realize their error.
I’ve been to this goat rope a couple of times myself on the management side as well. I’m sure there will be the usual spread of retention packages (like Spirit and JetBlue have already put in action) even down to station managers in key locations. I used two acquisitions myself to jump up and out (cashed my second round retention check, and went to work at a competitor for 20% more for another coworker who jumped ship). It gets hard to keep people shoveling coal to keep the lights on when you can’t tell them anything certain. Makes it a great time to jump even if your job isn’t in danger.
I gather with Hawaii, and what I know from people who live or have lived there, the basic premise of having to move to/from the mainland may be a deal breaker right up front.
4. Hawaiian Open To Others Offers…….
Is that B6 I hear calling Honolulu!?!
Should Mr Hayes get a favorable ruling from Judge Young, Hawaiian would make an excellent complement to develop the 5th nation wide airline in the US.
The only thing missing would be airline lounges.
In the airline business, anything goes
In my opinion, B6 would be a much better partner for Hawaiian. Plus, what AS did to Virgin America has me worried for HA.
To look at the future of Hawaiian Airlines, except for the brand on the side of the aircraft, look what Alaska did to Virgin America. There’s the future. Better than bankruptcy. You can thank Southwest for the dagger.
It really amazes me that HA has lasted this long. I’ve been through multiple mergers and from a union standpoint, our seniority doesn’t mesh well with other airlines seniority rules and such. Sure we’re all thankful we have jobs, but if mgmt had their act together mergers wouldn’t be necessary. It’s all about that golden parachute for the upper mgmt, and those primadonna pilots that are sucking the life out of these airlines… One of these years I see a massive bail out coming, and it won’t have the public sympathy.
It’s all about where “people want to go.” Do you want to go to a place with skyrocketing prices for hotels, and spend a fortune for your vacation?
I would not be surprised if the HA brand is eventually retired, but it makes sense that management is pretending otherwise to move this deal forward. I’ve lived in Hawaii. Local customers are very parochial and react poorly to any perception of mainland hustling.
Will be good if AS doesn’t steal the planes for other routes as it did with VX and completely destroy the goodwill value. Hopefully will keep the Asia routes and lie flat F which are a plus.
But fares to mainland will definitely go up.
Alaska doesn’t have any interest in preserving HA, they are in the business of acquiring and dismantling. There were lots of promises and lofty plans for VX but Alaska only wanted their routes and slots. They didn’t want the employees and the certainly didn’t want the planes.
With Southwest now in the interisland market Alaska can quasi promise to preserve the interisland service and technically do so by operating one flight a day between interisland points then just termination it by saying that it isn’t cost effective to maintain.
Alaska will strip any of the good service away from Hawaiian and replace it with the non service you get on Alaska flights. I can’t imagine them keeping the 787s or any of the long haul flying .
They want to eliminate Hawaiian, not marry them.