Spirit of Aloha | Message of Aloha | May/June 2004

Message of Aloha

A Decade of Continuity and Change

Recently my staff surprised me with a cake to mark my 10th anniversary as President and Chief Executive Officer of Aloha Airlines. The gesture caused me to reflect on the many changes that have taken place both at Aloha and in the airline industry over the past decade

I came to Aloha after managing the successful exit of TWA from Bankruptcy One. The sunny shores of Hawai‘i and the relative simplicity of managing an interisland airline beckoned in early 1994 and I answered the call. Reality soon set in, however, as I realized the challenges presented to Aloha by our principal competitor being in bankruptcy and a new startup carrier entering the interisland market. By steering Aloha away from aircraft that were too big and too expensive and concentrating on one fleet type, we brought our costs down to a level that allowed us to be competitive and retain our position as the dominant carrier in the Hawai‘i market.

As I reached the five-year mark in my tenure, it occurred to me that a trend made possible by new-generation aircraft was gradually and irreversibly changing the interisland market. Nonstop flights from the Mainland to Maui and other islands were bypassing Honolulu and diminishing the demand for interisland flights. Because interisland connections provided more than half of Aloha’s revenues, there was a need to reinvent ourselves. Thus began the evolution of Aloha from an interisland carrier to one that now serves destinations on the West Coast and throughout the Pacific islands. This summer, we will offer customers 10 daily nonstop flights between the West Coast and O‘ahu, Maui, Kona and Kaua‘i.

We’ve come a long way since we launched trans-Pacific service in February 2000, betting on our belief that convenience would be a key factor in a traveler’s choice of airline. By operating Boeing 737-700s out of smaller, more convenient airports like Oakland, Orange County and Burbank, we were able to offer customers something of great value: their time. We also believed that we could win customer loyalty by offering a better inflight product at a good price. The combination of convenience, product and price has clearly worked. Surveys indicate that on average 40 percent of our West Coast passengers have flown with us before on one of our long-range flights.

In the wake of the 9/11 attacks, stringent new security requirements have changed travel patterns all across the nation. In Hawai‘i, Aloha has had to adapt to an interisland market that has shrunk by 30 percent from its peak. As it has for the past 58 years, Aloha remains committed to providing Hawai‘i residents and visitors with efficient and reliable jet service in the Islands. For this reason, we most recently decided to increase the number of seats on our interisland passenger jets by eliminating first class. The seat conversion program, which began in June, increases the number of seats per plane by about 8 percent, enabling Aloha to better meet peak-hour and peak-day demand. It’s a sign of the times. Twenty years ago, in the days before nonstops to the Neighbor Islands, Aloha became the first Hawai‘i-based carrier to offer interisland first class. Today, we are giving our interisland customers what they want: more seats at certain times of day and certain days of the week.

Looking at the bigger picture, the past decade began on a high note with a dot-com and stock market boom that made it possible for major airlines to expand the difference between leisure and business fares by a factor of five or six. When the dot-com bubble burst, the era of excessively high fares and big-airline profits ended, giving rise to the phenomenon of ever-expanding, low-cost carriers, led by the unrelenting growth of Southwest Airlines. At the same time, the popularity of the Internet as a consumer tool has produced transparency in airline pricing and fueled the rise of low-cost carriers as benefactors of the new Web-based pricing system. The airline customer has spoken and it is clear that price has become the predominant factor in choosing a carrier. We now see the specter of once-proud airlines cutting back on service and selling sandwiches on board their aircraft, a trend we satirize in our TV commercials.

It’s hard to predict what the next 10 years will bring, but it’s safe to say there will be tremendous change in the airline industry and that consumers will continue to appreciate the combination of convenience, service and value for money. That’s what we at Aloha seek to provide every day on every flight

Thank you for flying with us.

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