Perhaps there was something autobiographical in the cover story of the December-January issue of the Hawaiian Airlines in-flight magazine. “Portraits of Survival” is a story about rare Hawai’i wildlife, but could easily be a story of the endangered inter-island airlines,
Perhaps there was something autobiographical in the cover story of
the December-January issue of the Hawaiian Airlines in-flight
magazine.
“Portraits of Survival” is a story about rare Hawai’i wildlife, but
could easily be a story of the endangered inter-island airlines,
especially how they have been limping along after the events of
September 11.
Riding in on his white supersonic steed yesterday was Greg Brenneman,
late the savior of Continental Airlines, who described his
involvement in the merging of Aloha Airlines and Hawaiian Airlines as
the neutral third party able to broker the deal between the feuding
“Hatfields and McCoys.”
Back in August, a consultant friend called Brenneman asking him if he
was interested in buying Aloha Airlines, he said yesterday. The only
way he would be interested, he told the friend, is if the deal could
be structured in a way to combine Aloha and Hawaiian into one
“flagship” carrier, serving Hawai’i the way Alaska Airlines serves
Alaska.
“I think the reason this deal was able to come together – they’ve
tried to do it a dozen times over the 50 years of the airline
business – (is because) I was able to provide an independent third
party in between the Hatfields and the McCoys to negotiate with them
to reach agreement. And I think that was pretty successful,” he said.
The timing seemed perfect, too, as leadership of both carriers was
willing to negotiate. The alternative, Brenneman indicated, was that
one or both of them would run out of cash and be forced to cease
operations or declare bankruptcy.
The deal was announced yesterday, and immediately drew words of
caution from Sue Kanoho, executive director of the Kaua’i Visitors
Bureau.
If the merger results in fewer airline seats to Kaua’i, that will be
a bad thing, she said. Elimination of competition in the inter-island
market also is not good, she noted.
“It’s a wait-and-see situation,” said Kanoho, who added that concerns
about spiraling fares with no alternatives will be raised by both
residents and visitors.
She acknowledged that both Aloha and Hawaiian have been “economically
challenged of late,” something expanded upon by Brenneman.
The transpacific routes of both carriers “appear to be doing pretty
well” after the events of September 11, but even with the cuts made
to numbers of flights and employees after September 11, the
inter-island market is still operating with below break-even loads in
the cases of both Hawaiian and Aloha, he said.
“The inter-island business, in spite of the cutbacks that were made
around nine 11, is still suffering. The airlines are running
high-50s, low-60s load factor, and are losing money,” he said.
“So what I would expect is a trimming, not even close to what was
done after nine 11, but a trimming in the inter-island service to
reach profitability there.
“And, then, of course, you won’t need two corporate headquarters to
run one company, so there will be some challenges there as well. But
in every case I would expect the number of affected people to be far
less than that that were affected as a result of nine 11,” said
Brenneman.
The combination needs approval from both the state Department of the
Attorney General and U.S. Department of Justice, and Brenneman’s
group has already been meeting with the state attorney general “to
work through a process of both guaranteeing service levels and
guaranteeing fares that protect our customers,” Brenneman said.
“It’s an easy market to enter, because there are no assigned gates
and there’s plenty of extra space at the airport these days. And so
if we’re not fair, we’re going to attract a lot of competition,” he
continued.
“And as you’ve seen from the results of both carriers, that
competition has been pretty destructive over time. So we both have a
personal interest in keeping fares at a reasonable level, just in
terms of having a profitable company, but also we’ll be working with
the authorities that the public has chosen to agree with them in
terms of how we take a look at it and monitor fares going forward,”
he said.
Brenneman is spending today with employees of both companies, sharing
with them his vision for the Hawai’i flagship airline to be known as
Aloha Holdings, Inc. For his part, Brenneman’s investment and
consulting company, TurnWorks, gets 20 percent of the combined
company, with Hawaiian’s major shareholder group, Airline Investors
Partnership, getting 28 percent of the new company, Hawaiian public
shareholders getting around 24 percent, and Aloha Airgroup
shareholders getting around 28 percent of the new company.
Brenneman is chairman and chief executive officer, and Han “Sonny”
Ching, Aloha board chairman since 1993, will be vice chairman. An
11-member board of directors will include three members representing
major employee labor units.
The transaction is expected to close during the first half of 2002,
and at that time Glenn Zander, Aloha president and chief executive
officer, and Paul Casey, Hawaiian vice chairman and chief executive
officer, will both retire.
When Brenneman took over the helm of Continental Airlines, the
company endured nearly two decades of continuing losses, and he had
to make painful cuts in company employees, from 40,000 to 32,000.
When he left Continental six years later, the carrier had 56,000
employees.
That involved a restructuring similar to what’s needed to bring the
inter-island segment of the business to profitability, he said.
“My goal would be to get the company profitable, and then grow it
like mad and bring all those employees back off of furlough that are
on furlough even today as a result of nine 11,” he said.
Staff Writer Paul C. Curtis can be reached at
mailto:pcurtis@pulitzer.net or 245-3681 (ext. 224).
