Hawaiian Airlines rolled the dice on its future after emerging from bankruptcy 12 years ago when it decided to acquire costly long-range aircraft so it could expand to Asia.
Today, Hawaiian Airlines CEO Mark Dunkerley says the state’s largest carrier is in its best shape ever, plans to continue adding new routes to the Pacific Rim and North America, and is up to the challenge of more competition from United and Southwest airlines.
In a recent wide-ranging interview with the Honolulu Star-Advertiser, Dunkerley said Hong Kong could be one of the new destinations Hawaiian adds to its route map and that its over-budget and long-delayed maintenance and cargo facility is nearing completion. Since exiting bankruptcy, the airline has more than doubled its workforce to more than 6,500 and expanded its network to include 11 mainland and 11 international destinations, up from eight and three, respectively, during reorganization. Other routes were initiated and later canceled.
“We’re going to continue the strategy that we’ve had, which is further expansion of the reach of Hawaiian Airlines,” Dunkerley said in an interview at his office overlooking Daniel K. Inouye International Airport. “There are big communities around the Pacific Rim and North America which we think we can serve.”
Dunkerley would not disclose any of the new destinations for competitive reasons, but acknowledged that Hong Kong would be considered.
“There are a number of very big communities throughout the Pacific Rim that would be in our sights,” he said. “You might reasonably surmise that Hong Kong would be among them. In a lot of places, part of the difficulty is getting slots and facilities and gates to be able to fly there.”
Dunkerley said he’s not worried about United Airlines increasing its Hawaii presence by about 20 percent starting in December or Southwest Airlines potentially coming into the market as early as the end of 2018.
“Nobody, whether it’s United Airlines, whether it’s any of the other existing operators or frankly whether it’s Southwest, which hasn’t even arrived here, none of them concern us from a relatively competitive standpoint perspective,” Dunkerley said. “What they all do represent is more seats coming into the marketplace, and when there are more seats coming in, generally there can be an impact on the fares that airlines charge.”
Hawaii aviation historian Peter Forman said that when Southwest comes into the market, he doesn’t expect the fare structure to and from the mainland to change much.
“Southwest, with its smaller (175-seat) jets, will not have as much of a cost advantage to impact Hawaiian’s profitability,” Forman said. “They cannot drive prices down in the mainland-to-Hawaii market because they don’t have low-enough costs to do so.”
Dunkerley said he’s optimistic about Hawaiian’s future.
“It’s a tough business,” he said. “It’s always going to be hard, but we’re in the best shape of our lives. I think the opportunities, frankly, are tied to the quality of our service and our competitiveness. The airline industry is a contact sport, and we go up against very good airlines every day, and so far every year we’ve increased our market share because we’ve won share away from our competitors. We intend to keep doing that.”
Dunkerley said Hawaiian made a “bet-the-company” decision when it decided to remake its fleet after emerging from bankruptcy. It will take delivery of two different types of aircraft next month as it positions itself to enter new markets on the mainland and abroad.
The arrival of the 24th and final Airbus A330-200 marks the end of one chapter that began when the carrier decided after bankruptcy that it needed those long-range planes to expand to Asia. Those planes have a total listed value of about $4 billion.
“This was a huge investment — not only for the company, but also in this community,” said Dunkerley, noting that Hawaiian initially took just six A330s. “The economic growth that’s happened, the full employment that’s happened, the growth in the number of employees — none of that happens without taking these enormous risks. And so while it looks like just another airplane, the last aircraft arriving, it actually represents far more, and it’s been a really good story for seven years since the arrival of the first one (in 2010). It’s hard to imagine that in just seven years we’ve taken 24.”
Hawaiian’s newest aircraft will be the first of 18 Airbus A321neos that will be put into service in January. The planes are narrow-bodies, meaning one aisle instead of two, and will seat 186 compared with 278 in the newly reconfigured wide-body A330s. The A321neos will be used to fly to markets that are more economically feasible than the larger A330s. Hawaiian said the first three city pairings that will be the beneficiaries of the A321neo service will be Portland, Ore.-Maui, Oakland, Calif.-Lihue and Los Angeles-Kona.
Dunkerley said Hawaiian will explore other opportunities as the arrival of the A321neos frees up A330s for additional service. He said the remainder of the Boeing 767s in Hawaiian’s fleet that had been used on long-range flights should be gone by the end of next year.
Then, starting in 2019, Hawaiian will begin taking delivery on yet another type of aircraft in the form of six Airbus A330-800s, which have yet to be built and have a “marginally longer range” than the A330s, according to Dunkerley.
“Everybody in the company would like for one day to be able to fly to Europe, but we’re not going to select an airplane to fly one route,” he said. “What we do is select the right airplane for our total network, and if that allows us to think further afield than we’ve been able to fly so far, then that would be something we’ll look at at that time.”
It’s been a rapid growth path for Hawaiian since exiting a two-plus-year bankruptcy in June 2005.
“We have transformed ourselves from a troubled regional carrier with a history of difficult financial circumstances, not reinvesting in its product and its future,” he said. “Since that time we have systematically revolutionized this business. Financially, we are one of the strongest airlines not only in the U.S., but globally, which would have been inconceivable 12 years ago.”
Dunkerley said the airline also is “within a month or so” of unveiling its new maintenance and cargo facility, which previously was being built by the state but was beset by delays and defects. Hawaiian, which subsequently took over the project, said the total cost will be about $120 million and will be more expensive than the $85 million originally earmarked because of the construction problems. Since Hawaiian took it over for the state, the airline’s share of that overall expense will be about $40 million, Dunkerley said.
“We’ve got some important tests to do coming up, but at this moment since we took over, it has been on time and on budget,” he said.
