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New airline could A merged Hawaiian and Aloha airline will quickly expand mainland service, within five years adding 600,000 to a million seats a year into Hawaii, Greg Brenneman, whose TurnWorks Inc. is managing the merger, told legislators yesterday.
add million seats
Legislators and a citizens group
say that a merger will lead to
higher fares, poorer serviceBy Russ Lynch
rlynch@starbulletin.com
But a number of opponents said monopolies can never be good for consumers and such a merger must lead to higher fares and a lower level of service.
The merged airline will quickly start services between Sacramento and Honolulu, Phoenix-Honolulu and direct links between Seattle and the neighbor islands, Brenneman said. Other airlines are not interested in those routes because they don't involve their main hubs, he told a packed hearing in the auditorium at the state Capitol.
He said the merged airline will also seek flights between Hawaii and Japan and to other parts of Asia. The point is to make Hawaii a hub for expansion and reduce dependence on the interisland market, he said.
The former Continental Airlines head would not say that one of the two airlines would fail without the merger -- senators asking the question implied Aloha was more vulnerable -- but said refinancing, schedule changes, federal loan guarantees and other steps available to each of them would not stave off the "inevitable."
He would not clarify the statement and said conversations with the state attorney general and federal officials who have to decide whether the merger would violate anti-trust laws must remain private.
He said the new airline would maintain all existing interisland routes but flight frequency would change and there would be a fare advantage to those traveling at off-peak times.
Brenneman repeated a statement he has made many times, that the published profit-loss figures of the airlines do not tell the full story because of the amount of borrowing they both have done. The basic figures may show a positive cash flow, he said, but if the amount of debt is always greater than the amount coming in, the airlines continually remain in the red.
By his calculation, Hawaiian is "burning about $100,000 a day" in negative cash flow and Aloha, because it is bigger in the interisland business and not as big as Hawaiian in the mainland-Hawaii trade, is losing $170,000 a day.
A major group opposing the merger, Citizens for Competitive Air Travel, testified that "monopolies lead to higher prices and poorer services."
"Mergers that result in monopolies should only be allowed if the state and federal government are convinced that other options have been exhausted," former Lt. Gov. Jean King said in written testimony submitted by the group. The anti-merger organization does not believe all those avenues have been explored.
Merger opponents also questioned what might happen if Brenneman doesn't keep his word, such as the promise to cap interisland air fares at $78 for three years, to offer fares as low as $39 each way for off-peak flying, and to keep 30 percent of seats available at discount fares.
Richard Port, head of Citizens for Competitive Air Travel, acknowledged that Brenneman had made that promise.
"However, to anyone who belongs to an airline mileage club, we know that those tickets are reserved early" and often are not available, Port said in prepared testimony. Brenneman said he would be happy to sign a consent decree, a legally binding agreement with the state, to put his promises in writing in a way that would give the attorney general a clear right to attack the airline if it does not live up to its word.
One of those supporting the merger was David Carey, president and chief executive officer of Outrigger Enterprises Inc., parent of Outrigger Hotels & Resorts. "We believe in the merged carrier because it will serve Hawaii first and others second," Carey said in his prepared testimony.
The deal would make Hawaii the center of the market and shift tourism decision-making to the islands, he said. "When decisions are made in Chicago, Atlanta, Houston or Dallas by air carriers headquartered there, the best interests of Hawaii are not a critical factor or even a consideration," Carey said.
Three Senate committees are considering a resolution calling upon the Legislature to oppose the merger. They are the Committee on Transportation, Military Affairs & Government Operations; the Committee on Commerce, Consumer Protection and Housing; and the Committee on Tourism and Inter- governmental Affairs. They did not make a decision on the resolution.