Alaska Airlines Buys Hawaiian Airlines For $1.9 Billion - Will Passengers Stay Loyal?

In possibly the most out of nowhere announcement, Alaska Airlines has announced on Sunday night that they will acquire Hawaiian Airlines for $1.9 Billion in cash. With Alaska's commitment to retaining the brand through the merger, will it be enough to keep the fierce loyalty of Hawaiian Airlines' passengers?

The Deal

A quick recap of the announcement, Alaska Airlines has committed to buy Hawaiian Airlines for $1.9 billion in cash and over the next 12 to 18 months will integrate Hawaiian Airlines into the oneworld Alliance.

Two of the major bullet points in the email sent out to both Alaska and Hawaiian airline members is the promise that the Hawaiian brand will remain and that Alaska will continue to commit to supporting employees and the community on the islands.

Brand Loyalty

I have been visiting the Hawaiian islands for 30 years, through those years I've seen how vastly loyal the residences are to Hawaiian and how much distrust they have for outsiders and non-local islands. I think that Alaska Airlines needs to play their cards carefully over the next 12 to 18 months to ensure their loyalists feel like the airline is still a Hawaiian-owned and operated airline.

The moment that they feel Alaska will move jobs to the mainland and when the Seattle-based company cuts basic services they offer to their customers, they will lose customers and loyalty.

For my first 20 years we only ever took one airline to the islands, Hawaiian, and their unique hospitality and brand image made us extremely loyal to the airline. Even when Alaska, Northwest (Delta), Continental (United), and others offered service we would spend the extra money to fly on Hawaiian. I have very fond and early memories of flying their DC-10 to Honolulu and then taking an inter-island service between the islands.

Not knowing anything about the behind the scenes plan, I believe that it would be extremely important to keep the operations center in Honolulu and keep as many jobs on the islands. With the commitment of keeping the Hawaiian brand, one would assume that the airlines would remain separate and the only real interaction between the two airlines is their alliance and codeshare agreements.

Captive Market

There is really only one way to get between the islands, inter-island 717 service. Even through Southwest offers a smaller inter-island service, loyalty to Hawaiian is so high that there are usually only a hand full of people originating on the islands for those flights, most are through passengers connecting from the mainland.

I've had the pleasure of taking multiple inter-island flights with both Southwest and Hawaiian. Every time of the nearly 50 inter-island flights I have taken, the Hawaiian flights are always extremely full and with the 6 of those flights being Southwest each one was less than half full.

Prices are usually similar between the two airlines, averaging around $39 for one-way around the islands. But even with the price similarities I've seen locals on the islands spend more just to fly with Hawaiian.

Unique International Offerings

Alaska Airlines isn't much of an international airline, but with the acquisition of Hawaiian it will immediately open up expanded opportunities for them to directly service international destinations.

Hawaiian offers international flights to Japan, New Zealand, Australia, America Samoa, Cook Islands, and Tahiti. While Honolulu isn't a traditional international connection hub, it will be an opportunity to offer Alaska passengers international flights in a unique way.

I suspect that this may only be a good thing for Seattle Portland, or Los Angeles based passengers. I think there may be some faster options to get to Japan or Australia than going, for example New York to Seattle to Honolulu to Tokyo or Australia.

Final Thoughts

It will be a very interesting next 12 to 18 months, I suspect that Alaska may have government approval concerns that may push out the timeline. I think the larger concern is about not alienating the Hawaiian loyalists by having an outside company managing the airline. At the end of the day it will be less competition to the islands which may produce some unexpected hurdles in approval for this merger. Time will tell, maybe we'll see an Alaska Airlines 787 sometime in the future?