Hawaiian Airlines sapped some of the profit of parent company Alaska Air Group in the third quarter, but performed relatively well as integration between Hawaiian and Alaska Airlines progressed.
Pre-tax expenses to operate Hawaiian exceeded revenue by $42 million in the three months ended Sept. 30, and contributed to reduced income for Alaska Air Group, which reported a $73 million net profit in the quarter that compared with a year-earlier profit of $236 million.
Ryan St. John, Alaska Air Group’s vice president of finance, planning and investor relations, said in an interview Thursday that Hawaiian’s operating loss, which excludes integration expenses, stemmed from weak leisure travel in September that followed profitable months in July and August.
“I don’t think we’re ecstatic with the result,” he said. “Our goal is in the long run of course to get Hawaiian back to sustainable profitability. … We expect to improve from here for sure, but there will always be seasonal challenges.”
In the second quarter of this year, Hawaiian achieved a $1 million pre-tax operating profit that represented the carrier’s first quarterly profit since 2019.
St. John said Alaska Air Group is on track to cut Hawaiian losses by a lot this year toward a goal to return the Hawaii carrier to sustainable profitability amid continuing work to integrate Hawaiian and Alaska operations.
Alaska Air Group completed its $1.9 billion acquisition of Hawaiian Holdings, the parent of Hawaiian Airlines, in September 2024. During the recent quarter, loyalty programs for the two carriers were combined into Atmos Rewards, and a transition to a single reservation and passenger service system is more than half done.
The customer reservation and service transition did not go smoothly for some corporate travel customers initially, and Alaska Air Group apologized for glitches that St. John said are being worked out.
“We’re not happy with how some of that rolled out,” he said.
Another hiccup during the quarter was an IT outage on July 20 that resulted in a three-hour system-wide ground stop for Alaska flights and flights by Horizon Air, another carrier owned by Alaska Air Group, but not Hawaiian.
A similar IT outage occurred Thursday that began at about 3:30 p.m. Hawaii time that led to an initial system-wide grounding of Alaska and Horizon flights followed by the cancellation of flights by the two carriers Thursday night. Alaska said late Thursday that it had restored its operations.
Alaska Air Group in a statement apologized for the disruption and said, “We appreciate the patience of our guests whose travel plans have been disrupted. We’re working to get them to their destinations as quickly as we can. For those who have a flight with us, please check your flight status before leaving for the airport.”
Next week, Alaska Air Group expects to place both carriers under a single Federal Aviation Administration operating certificate that will provide efficiencies that include having one training manual and one operating manual.
Two major integration changes are still on the horizon. One is completing the migration to a single reservation and passenger service system, which is scheduled to be completed in late April and will result in the preface for Hawaiian flight numbers changing from “HA” to Alaska’s “AS.” However, the Hawaiian Airlines name will still be used on flight listings, airport signage, boarding passes and planes, among other things.
The other major remaining change is to negotiate a half dozen or so union labor contracts for pilots, flight attendants and other positions that combine portions of existing Hawaiian and Alaska contracts, which among other things will allow current pilots of Hawaiian planes to fly Alaska planes and vice versa.
Integration costs during the third quarter totaled $61 million, down from $90 million in the same quarter last year. For the first nine months of this year, integration costs totaled $154 million, compared with $128 million in the same period last year.
Overall, St. John said the integration and operation of Hawaiian, a little over a year since the acquisition, is going very well and has resulted in the two carriers bringing more travelers to Hawaii than they did independently.
“The Hawaiian side of the business is still performing very, very well,” he said. “It’s been one of the bright spots all year. We’re seeing all the benefits of the network synergies that we had laid out.”
Alaska Air Group has a goal of achieving $1 billion in incremental profit from the Hawaiian addition by 2027 under a strategic vision dubbed Alaska Accelerate.
In a statement announcing the company’s third- quarter financial results, Alaska Air Group CEO Ben Minicucci said, “I’m proud of our people for taking care of our guests, executing major integration milestones and capturing synergies ahead of plan as we bring together Alaska and Hawaiian Airlines. Together we are delivering on our Alaska Accelerate vision, building our future as a global airline positioned to compete with greater scale, deeper relevance and stronger loyalty in the places we fly.”
Source: The Garden Island
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