The chief executives of Hawaii's two airlines sat side by side at a legislative hearing yesterday to support a merger that will cost both of them their jobs. Hawaiian and Aloha
execs say merger will
strengthen local air serviceBy Russ Lynch
russlynch@starbulletin.com
Paul J. Casey, vice chairman and chief executive of Hawaiian Airlines Inc., and Glenn R. Zander, president and chief executive of Aloha Airgroup Inc. and Aloha Airlines, told a joint informational meeting of several Senate committees that it will be better to have one profitable airline than two marginal carriers.
When the airlines merge, both Casey and Zander will leave their positions.
It is better to have "one strong carrier interisland" than two marginal ones, Zander said. "We get eight people on an airplane" at certain times of day, such as early morning, Zander said. He was referring to what Greg Brenneman, the former Continental Airlines president who is putting together the merger, calls unprofitable "wing tip to wing tip" competitive flights that cost both airlines money.
In the end, "there will be bargains you don't see today," because a single airline with flexibility can make that happen, Zander said.
But he said there is always a threat that major airlines could come to Hawaii and run mainland-Hawaii and interisland flights in a way that would put one or the other of the existing airlines in jeopardy. "We prey on the major carriers" now by offering interisland service at competitive rates but both airlines lose money by doing so, he said.
"If we combine we can resist efforts by the major carriers to come and get us," Zander said.
Casey said a combination is recognition of a changing environment.
"A trend in recent years toward more direct service to the neighbor islands by the major carriers serving Hawaii has impacted on the profitability of frequent interisland service," he said. He said a drop in travel from Japan hurt both airlines to the point where their continued viability was in question.
Casey, whose company is publicly held, said public conversations like this could not have happened without a merger agreement, but he and Zander said there had been some efforts over the past few years to feel out the possibility of a merger.
Brenneman's entry into the field, proposing a deal in which shareholders of both airlines will benefit and Brenneman will run the combined company and be a 20 percent shareholder, made formal talks and public disclosure possible.
Zander said both companies hired consultants on legal and other issues to give opinions on whether a merger would be legal and proper and they all concluded that it would be.
Steve DeSutter, senior vice president of Brenneman's company, TurnWorks Inc., repeated earlier assurances about no big increases in interisland fares. Some fares may in fact be lower than they are now because of special discounts for travelers whose schedule is flexible enough for them to fly on low-bookings flights, DeSutter said.
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