Thursday, December 20, 2001

Yesterday's merger announcement by Hawaiian Airlines CEO Paul Casey, center, Aloha Airgroup CEO Glenn Zander, left, and Greg Brenneman, head of the new company, opened a new chapter in the evolution of both airlines.

wonder what
future holds

'Business as usual is not an
option,' says an airline exec

By Rod Antone


Bullet Get ready for takeoff
Bullet Questions and answers
Bullet Employees, passengers worry
Bullet Political reaction to the deal
Bullet Ripple effects on tourism feared.
Bullet A profile on the new CEO.
Bullet Timeline

The proposed Hawaiian and Aloha airlines merger raises many questions for interisland travelers and for the employees of both companies.

Paramount among those questions: Will the merger affect air fares and air cargo prices? Will there be layoffs? Will interisland flight routes and schedules change?

The answer to all those questions: Yes.

"Overall, the interisland business has suffered dramatically," said Hawaiian Airlines Vice President and CEO Paul Casey yesterday. "Business as usual is not an option."

However, major changes won't happen until this summer at the earliest since the deal won't be completed until second quarter 2002.

The company said it hasn't made a decision as to whether the new company will fly under the Hawaiian or Aloha brands.

According to a joint statement, layoffs will be mostly limited to the elimination of duplicate management positions.

As far as how many of Aloha's and Hawaiian's combined 6,000 employees will be affected, the head of the newly formed company, Greg Brenneman, said it will likely be fewer than the 600 who were cut by the two carriers in the aftermath of Sept. 11.

"It'll be south of that number," said Brenneman. "You don't need the same kind of major adjustment that happened after 9/11 in the interisland market, but you are going to need some trimming."

Some Hawaiian and Aloha employees who were informed of the merger in meetings and handouts yesterday said the information they received told them little about how it would affect them in the long run.

Though layoffs are expected, some employees who remain could see higher pay along with better retirement benefits since, under the plan, Hawaiian employees would be brought up to par with traditionally better-compensated Aloha employees.

Brenneman has said he will be meeting with airline union officials this week to discuss the details.

"There's a lot of questions," said Sam Poomaihealani, representative for the International Association of Machinists & Aerospace Workers, which represents about 3,000 employees from both companies, ranging from mechanics to fuelers to customer service representatives. "We need to get a better vision of what this company will look like."

As for interisland travelers, their view of the merger may depend on what day or what time of day they usually travel.

Brenneman said while the state Attorney General's Office and the U.S. Department of Justice will have a hand in approving "fair" fares, he wants to lean toward a more "flexible" approach to pricing.

"What these two airlines don't do at all is in the airlines business what's known as 'revenue manage,'" said Brenneman.

"Take a look at times when people don't want to travel that much, a particular time of day or a particular time of week, and they make that fare real low; and times when people want to travel more, that fare might be a little bit higher; so I think there's actually a way of giving very affordable air fares to folks who have a little more flexibility.

"Friday afternoon, when you fill the airplane, the fares can be a little bit higher because the market demand is there."

Some who commute interisland weekly, however, question whether that kind of pricing will affect the passes they buy each month.

"I pay about $999 a month. ... That's about $12,000 a year," said Dr. Becky Rhodes, who commutes from Oahu to Kauai five days a week to run the Kauai Humane Society. "If this raises prices, I might have to consider moving to Kauai, though it's not something I'd want to do right now."

The fate of air cargo rates is another question that the new merged company, called Aloha Holdings Inc., is not ready to answer, much to the concern of shippers.

Businesses like the Kauai Kookie Kompany use air freight for mail orders.

"For now I don't know what's going on. Hopefully it will not impact us," said company spokesman Lyle Kobashigawa.

Brenneman also said all interisland routes would be serviced, though there may be some changes as far as how often flights come in.

Mainland flights are not expected to be affected, he said.

Elected officials
have mixed reactions

By Pat Omandam and Treena Shapiro |

Federal approval of the proposed merger of Hawaiian Airlines and Aloha Airlines will take a while, says U.S. Rep. Patsy Mink.

Mink (D-Rural Oahu) said she was surprised at yesterday's announcement, adding that both airlines must convince the U.S. Department of Justice to approve their petition to create a new holding company, Aloha Holdings Inc., to operate as a combined air carrier.

The congresswoman added that while there are assurances interisland airfares will not rise in the next two years, consumers ultimately will pay more without a competitive air carrier. That and the loss of airline jobs will affect the state economy, she said.

"Competition is very important," Mink said yesterday. "So this merger will have to go under the scrutiny of the U.S. Department of Justice in terms of whether antitrust conditions have been met, and whether anti-competitive arguments will be made against it.

"I think they have a ways to go to prepare their petition for approval."

While other members of Hawaii's congressional delegation could not be reached for comment, airline officials said they had the support of U.S. Sen. Dan Inouye (D-Hawaii).

"We've certainly been in contact with the senior senator," said Greg Brenneman, the chairman and chief executive of the new Aloha Holdings. "None of us would have gone forward with this transaction without the support of the senior senator and the governor."

Gov. Ben Cayetano said the state will support the merger.

The governor said the state will not seek any antitrust action to challenge the plan because both airlines were in bad financial conditions compounded by the Sept. 11 attacks. He said assurances the new company will keep interisland fares stable for two years, and the fact other carriers could enter the Hawaii market, makes the merger prudent.

"I think everyone has concerns about how this would impact the cost of island travel, but the reality is that at least one of the airlines could go under," Cayetano said.

"If that's the case, we're going to be left with one anyway. So, I think this idea of a merger is a good one."

State lawmakers said they will be watching the merger closely but admit they are not in much of a position to do anything about it.

Senate Consumer Protection Chairman Ron Menor (D, Mililani) said the state Legislature in the early 1990s provided financial assistance to Hawaiian Airlines to ensure Hawaii had a competitive airline market, and laments those lost efforts.

"I'm hoping that the merger will not result in less competition in the marketplace, where the air fares could be increased to the detriment of consumers," Menor said.

House Tourism Chairman Jerry Chang (D, South Hilo) said he believes the biggest challenge is gaining federal approval.

"Their biggest stumbling block will come with the antitrust question that I doubt they'll get," Chang said. "Personally, I dread to see a single interisland airline, as a consumer, because you don't have any choices."

It is a sentiment echoed by another neighbor island legislator, state Rep. Joe Souki (D, Wailuku). Souki said the merger will affect Hawaii's shaky tourism market.

"The airways is our road, and this is going to be a hell of a burden on the people who travel from Oahu to neighbor islands and visa versa -- and all the tourists that come in," the House transportation chairman said.

Still, Senate Transportation Chairman Cal Kawamoto (D, Waipahu) said there is not much the Legislature can do to affect the business deal. But he hopes the new company will provide fair and reasonable service.

Meanwhile, Mink said she was unaware Aloha's financial conditions were bad enough to force this merger. There was no hint of it during her talks with Aloha Airgroup CEO Glenn Zander in September while Congress discussed a financial assistance plan for the airlines, she said.

"Of course, we understand that businesses have to make money. They can't exist in a situation where there's a constant loss, so we have to take all these factors into consideration," Mink said. "But it's going to be tough -- tough for the economy and tough for the consumers' pocketbooks."

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