Changes are coming for flyers using Hawaiian Airlines, as its new parent company, Alaska Air, revamps routes, planes and services to boost profits. They aren’t all for the better, but on balance, passengers have reasons to be glad the deal went through.
The primary benefit of Alaska having bought Hawaiian is that there will continue to be Hawaiian Air flights at all. Hawaiian suffered devastating losses during the COVID-19 pandemic — bleeding money right up to the date of Alaska’s purchase, and approaching bankruptcy. The buy allowed Hawaiian to clear its debts, and positions Alaska to turn a tidy profit in operating the merged airlines, offering flyers the comfort of knowing the business is stable.
As for those profits, Alaska Air announced this week that over the next three years, it would earn an estimated $1.5 billion in additional profits — yes profits, not gross earnings — by leveraging its acquisition of Hawaiian to fulfill “booming” demand for first-class and “premium” travel. It will do this, in part, by moving some of Hawaiian Air’s wide-body jets to routes between Seattle and Asia or Europe, where premium seats are in demand. Flights between Seattle and Tokyo or Seoul are coming within a year.
The planes will also be reconfigured to include a “premium economy” section. Adding 3% more premium seats to its planes, bringing the total share up to 29% by 2027, could produce around $100 million in additional profit, Alaska predicts.
That’s pretty good news for flyers out of Seattle, though not so great for Hawaiian Air travelers who enjoyed the extra cabin space in a wide-bodied plane flying to West Coast locations before the merger, as some of these bigger planes are being switched to a Seattle hub. The full extent of this plane shuffling isn’t known quite yet, but the smaller aircraft really pack passengers in, with a narrow, one-aisle configuration that can make getting in and out of one’s seat a struggle.
Nonetheless, flyers can continue to count on Hawaiian to take them to favored locations, for the most part. Federal regulators mandated that service between these islands and to other “key” locations be maintained in the merger. Not all destinations, though: Hawaiian has announced it will end its nonstop flights to Austin, Texas, at the end of March; and nonstop flights to Boston may hit the chopping block next.
Military families come out ahead: The feds required the airlines to waive change fees for rescheduling for military reasons and to offer free carry-on and checked bags for family members. For all families, regulators required that Hawaiian Air seat children under 13 next to a responsible adult, even on “basic economy” flights.
The airlines’ loyalty program is expected to be another profit center, along with plans to launch a “premium” credit card. For Hawaii’s frequent flyers, this could present a sweetened set of perks as incentives to join in. Alaska predicts its frequent flyer numbers will increase by about 50%; for this to happen, it will have to make its programs attractive. Hint: Heightened access to those additional premium seats would be a good start.
Former Hawaiian Air stockholders make up another set of winners so far. Alaska Air has raised its profit estimate for this year’s fourth quarter, from 20 to 40 cents a share up to 40 to 50 cents a share. That good news, along with the new route announcements and plans to launch a $1 billion share buyback, have sparked a respectable rise in its stock price.
For those who simply want to get to and from Hawaii without taking out a loan, Alaska Air’s solid showing is also potentially favorable. Alaska says its $1.9 billion buy of Hawaiian Airlines in September has not diluted its profit margin, and in fact, will unlock an estimated $500 million in savings. That should give the airline leeway to keep its fares reasonable for the foreseeable future — good for consumers — as will competition from Southwest Air and other carriers here.
