In this blogger’s continued analysis of the buyout of Hawaiian Airlines by Alaska Airlines, announced in December 2023, questions of “what if” came to mind when it came to what Hawaiian Airlines could have been.
More specifically, could Hawaiian Airlines have grown to something bigger than itself if it took the growth model of Alaska Airlines, over a long period? The reason for this question is in the documents to buy out Hawaiian, with the local airline being much smaller than Alaska Airlines, making the transaction more of a buyout than a merger.
It is an intriguing “what if” question because it provides a look at the decisions Hawaiian Airlines made vis a vie those of Alaska, and how they played out at the end. Since there are many parts to what Alaska did to expand in the continent, this will be the first of a couple of blog posts that examine the “what if” scenarios.
PC: “Alaska Airlines Boeing 707-321 N727PA” by Gordon Werner is licensed under CC BY-SA 2.0.
For this post let’s start with the headquarters choice, and if Hawaiian were to pull up stakes as just “Hawaii’s airline” and make its primary operational hub on the continent.
IN 1953, Alaska Airlines moved its headquarters from Anchorage, Alaska to Seattle, Washington. They moved the headquarters only 2 years after they received permission to fly routes connecting Anchorage and Fairbanks to Seattle, Washington, and Portland, Oregon. Among the reasons for this move included lowering operational costs (cheaper to run offices in Seattle than Anchorage), proximity to talent (easier to pick up talent that wants to stay in Washington or the Northeast than move to Alaska), and general access to investor money (investors like to be in bigger cities it seems).
Its expansion from Seattle was episodic and over a long period. Deregulation of the airline industry by the Carter Administration assisted in helping that expansion (as it did for many airlines at the time). Of course, because it was over a long period, with them doing it step by step, the overall investment of money to change headquarters was absorbed over time.
PC:”Hawaiian Airlines – Douglas DC-8” by deanfaulkner is licensed under CC BY-SA 2.0.
Now if Hawaiian were to make that move, it would require them to put in a lot more money, quickly and establish a large presence somewhere, again in a short period. In the past, say when they started regular mainland operations in 1985, the choices of places to go would have been more limited than in 1953, when the whole West Coast was good for the taking.
Back in the 80s as it is now, the choices would be limited to port cities that are not named Seattle, or Portland. The two that Hawaiian potentially could have expanded to are Las Vegas and San Diego. Las Vegas would have probably been the better market to expand from as its airport – Harry Reid International Airport – was small but had a lot of promise for expansion, as it did. Hawaiian could have grown with it, if not helped lead it. San Diego is harder as it is land-limited, but it’s a potential anyway due to its intercontinental length runway and operations.
One could say Los Angeles would have been a good choice, but even back in the 80s (way more now), the Los Angeles market is highly fragmented with no one airline dominating the market. And to boot, much larger airlines have tried to dominate the market and spent billions of dollars to try, only for it to not pan out as they hoped (look at Delta’s revamp of operations from about 2017-2022 and how much they put into it)
PC: “Las Vegas McCarran” by Craig Butz is licensed under CC BY-SA 3.0.
Either way, the cost of this plan would not be cheap. Estimates of how much an organic expansion into the mainland would cost Hawaiian range from a half-billion to $1 billion. And that money does not guarantee dominance in the port city in the end, let alone get access to future financing to continue expansion after the “beachhead” is established.
As for whether Hawaiian could expand like this, with financing, the answer is “yes, but it will be challenging”. While the airline does have a money-making brand, it would need to come up with an airtight plan that presents a compelling expansion plan that mitigates risks, demonstrates clear profitability potential, and attracts investors and lenders confident in its long-term vision.
If someone knows of financing at this level that Hawaiian could tap into, contact them, they might still need it.
Since Hawaiian has not done this hypothetical expansion, either those who could finance such an endeavor, or Hawaiian getting ambitions to try, it remains more a hypothetical “what if” rather than a potential “plan B” should the Alaska Air buyout not happen.
In the next issue of Politics Hawaii with Stan Fichtman, we’ll explore the possibilities Hawaiian would have to purchase an airline on the continent, who that airline could be, and how much Hawaiian would need to finance it. Similar to what Alaska Airlines did in the 80s in their continent expansion.