The second article in a series about the buyout of Hawaiian Airlines by Alaska Airlines
There has been a lack of historical analysis on Hawaiian Airlines amidst the media and aviation followers analyzing the buyout of Hawaiian Airlines by Alaska Airlines.
Mostly, Hawaiian Airlines has not been owned by an individual or entity in Hawaii for a long time. To make this point, in a recent analysis of who currently owns Hawaiian Air, 82% of its stock is currently held by institutional investors.
Institutional investors are organizations that invest in companies and use the profits to pay investors of the fund. For instance, if you have a 401k from Vanguard, a portion of your investment in the fund is tied to Vanguard’s investment in Hawaiian Airlines. If the airline performs well, the returns to its clients will be better.
Only 18% of the airline’s common stock is owned by individuals who buy and sell the stock individually. Those are people that include day traders and your occasional Millennial or Z-Gen that dabble in the stock market through online portals like Robinhood.
And the ownership structure of the airline has been this way, for the last 34 years. It’s fascinating to learn about the airline’s transition from being a Kamaaina (locally) owned company to being owned by many, but not by anyone in Hawaii. This history hasn’t been shared in the news of the buyout.
Here is the cliff notes version.
Going back to the 1980s, Hawaiian Airlines was mostly a Kamaaina airline. Owned by John Magoon, who bought most of the airline from Harry Weinberg (of the Harry and Jeanette Weinberg Foundation) in 1963. Also leading the airline, Jack spearheaded the first generation of expansion of the airline from just an interisland carrier to that of a transpacific airline flying to the West Coast and South Pacific.
And while the 1980s continued, and the value of owning an airline was attractive to other local businesspeople, like Hawaii real estate developer Chris Hemmeter who in 1987 planned to buy the airline for $100 million before the Stock Market crash later that year.
However, that attempt by a Kamaaina company (Hemmeter) to buy Hawaiian would be the last time that would happen with the airline. For all points after, it would be mainland interests that would put their money into Hawaiian.
Moving to 1989, an investment hui (a group or club in Hawaiian) made up of former Baseball Commissioner Peter Ueberroth and former airline executive/investor Thomas Talbert purchased the majority of Hawaiian Airlines and became the first of a long line of outside investors to come in and run the airline.
At this point, the airline was no longer owned by Hawaii. Although it retained its name, it was now being managed by non-Kamaaina – people who are not from Hawaii.
Other investors in the airline included another airline (another item not mentioned in the current news stream about Hawaiian), when in February 1994 American Airlines invested in Hawaiian. was not done with cash but with equipment (replacing Hawaiian’s L-1011 fleet with a DC-10 fleet) bringing Hawaiian into the SABRE reservation system and linking up the American frequent flyer program with Hawaiian.
With the refreshing of key operations, the airline held an initial public offering and became a joint-stock company mostly owned by the same types of entities that own the airline now – institutional and individual investors not necessarily based or living in Hawaii.
Of course, no cliffs-notes version of Hawaiian Airlines ownership would be complete without mentioning the two bankruptcies of the airline in 1993 and 2003. After 1993, no one entity owned Hawaiian, while in the 2003 bankruptcy, Ranch Capital and its owner – Lawrence Hershfeld – became majority owners for a time before he sold off the stock, thus making the ownership profile what it is now.
The legacy of that second bankruptcy and Ranch Capital continues to this day, with Hershfeld the Chairman of the Board of Directors of the airline. And while the current president of the airline, Peter Ingrham resides in Hawaii (for obvious reasons) Hershfeld is a Californian who lives in San Diego.
Referencing the first article on this issue published by Politics Hawaii with Stan Fichtman, with ownership not being Kamaaina-based, this could be one of the reasons why the political class in Hawaii has remained relatively silent about its recent sale to Alaska.
After all, it is just another mainland company operating in Hawaii, it seems.