Alaska Airlines is buying Hawaiian Airlines, unless the government stops them. They’re paying more than three times the Hawaiian share price at the time the deal was announced, and the real question is… why?
This is a great deal for Hawaiian’s shareholders. Hawaiian Airlines frequent flyers will get more valuable miles out of the deal. There will probably be some reduction in seats flying between the Hawaiian islands, but that’s happening anyway as Southwest Airlines pulls back. Southwest saturated the market.
Alaska is picking up planes, pilots, and experience flying to Asia Pacific destinations which the Seattle-based carrier has never done before. It doesn’t do any long haul flying. There just isn’t that much else for Alaska in the deal.
- A Honolulu hub that has no moat. Mainland – Hawaii flying is highly competitive, with United currently the largest player but also significant flying from American, Delta, and Southwest.
- Money-losing intra-Hawaii flying. Southwest Airlines dumps a tremendous amount of capacity with low loads in these markets. Historically there’s not been enough demand to support heavy competition between the islands (at one point the federal government even granted anti-trust immunity to Hawaiian Airlines and Aloha Airlines operate together between the islands).
- Debt and integration costs. Mergers are distractions, they’re expensive to work through, and they rarely generate promised synergies.
- An incompatible fleet and weak market positions in Asia Pacific. But Alaska does get some knowledge about flying to Asia.
Alaska has tipped its hand in a job posting for a Director of Long Range Network Strategy.
The Director, Long Range Network Strategy sets the long-term strategy for Alaska Air Group’s network. This leadership role is of vital importance to the long-term viability of the company as it establishes the strategic focus of the company’s network. This work includes planning future growth, identifying and developing new routes, and partnering with the fleet team to determine the optimal aircraft mix.
They specifically want someone with experience in “widebody network..planning”. Alaska hasn’t had widebody aircraft before. They’re picking those up in the Hawaiian deal and clearly don’t intend to just use them on the routes Hawaiian has been operating and planning.
When the deal was announced, I wrote “Alaska probably shifts widebody capacity from Honolulu” but noted that Seattle has been killing Delta long haul and American is abandoning the idea of Seattle long haul as a big money loser. They could move to San Francisco and get killed by United which has corporate contracts and way too many long haul planes coming into the fleet.
On day one I said that “the only thing of real value that Alaska seems to be buying here is a Pacific route network.” They do not currently have the fleet or local stations (or even traffic rights, though they could obtain those) to service places where Hawaiian is already well-established. Today, Hawaiian Airlines serves:
- Auckland and Sydney
- Fukuoka, Tokyo Haneda and Narita, and Osaka in Japan
- Seoul
- Papeete, Pago Pago, and Raratonga
The new role’s job duties are:
Establish strategic goals and direction for team of professionals across the network planning, fleet planning, and forecasting disciplines, and effectively communicate the output of the team’s work to an executive audience.
Set long-term, comprehensive multi-year commercial strategy for Alaska Air Group’s network, future growth, route development and fleet, incorporating corporate vision, strategic initiatives, and operational constraints. This work includes not only internal planning and development, but also extensive industry networking and relationship building to push forward initiatives and to uncover new opportunities.
Partner cross-divisionally with leaders across a wide variety of disciplines including commercial, operations & government affairs both as a trusted informational resource and to secure alignment to the long-term network plan.
Leads team to build models that deliver an accurate forecast of operational and financial metrics such as revenue, costs, block hours, departures, RONs, etc. in order to aid operational and commercial groups in long-term planning. Work includes all owning the company’s operating plan, which lays the groundwork for the annual planning cycle.
Develops construction of an infrastructure of models and tools to support development of the long-term planning process. Leads evaluation of big picture analyses such as large-scale network changes and M&A opportunities. Performs in-depth competitive analytics and creates comprehensive network strategies to position the company to win in a highly competitive marketplace.
Develop people through effective performance management and ongoing feedback, focusing on fostering strategic and systems thinking, development of talent, and succession planning across teams and disciplines.
Shape culture of the team through action, presence, and reinforcement of behaviors.
This new person will earn total compensation of $206,810 – $329,790.
Key considerations in Alaska buying Hawaiian are that they need an international presence in Seattle to continue to fend off Delta, they need to grow, and they don’t currently have a great way to do it. This gives them widebody aircraft and pilots to fly them and experience and a head start with access to long haul international destinations.
American Airlines was supposed to provide them with long haul flying but has backed away from that plan. Alaska uses myriad partnerships so that customers can earn and redeem miles for international even as they fly Alaska domestically, but the next obvious step is for Alaska to fly long haul themselves and the Hawaiian deal helps them to build this capability. Now they want someone to drive the details on hwo they’ll deploy it.
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