Chris Sloan, Senior Partner and Managing Editor of Airways Magazine, conducted this interview with Mark Dunkerley, Hawaiian’s current President and CEO and Peter Ingram, the airline’s incoming President and CEO on Monday, June 8, 2018, in Honolulu just prior to the service entry of Hawaiian’s Airbus A321neo. This interview has been edited for brevity and grammar.
Mark Dunkerley is the current President and Chief Executive Officer of both Hawaiian Airlines, Inc. and its parent company, Hawaiian Holdings, Inc. Mr. Dunkerley joined Hawaiian Airlines as President and Chief Operating Officer in December of 2002 and is also a member of the Board of Directors for both Hawaiian Holdings and Hawaiian Airlines. He is scheduled to retire later this year. Prior to joining Hawaiian Airlines, Mr. Dunkerley was Chief Operating Officer of the Sabena Airlines Group located in Brussels, Belgium.
In 2001, he served as a consultant with the Robert Roach firm, which specializes in providing strategic and economic consulting services to the aviation industry. He previously served as President, Chief Operating Officer and a member of the Board of Directors of Worldwide Flight Services. Mr. Dunkerley also spent 10 years at British Airways, rising to the position of Senior Vice President for the global carrier’s Latin America and Caribbean division. Mr. Dunkerley serves on the Boards of Directors for Airlines for America (A4A) and the National Air and Space Museum. He is also a member of the Board of Governors for the International Air Transport Association (IATA).
In 2014, he received the Airline Strategy Award for Regional Leadership by Airline Business, recognizing his role in transforming Hawaiian Airlines from a bankrupt niche U.S. carrier to a strong and growing global player.
Mr. Dunkerley holds a M.Sc. in Air Transport Economics from the Cranfield Institute of Technology and a B.Sc. in Economics from the London School of Economics. A licensed commercial Ingramlot, Mr. Dunkerley is a veteran performer at aerobatic competitions and was the U.S. Northeast Region Advanced Aerobatic ChamIngramon in 2002.
Peter Ingram is the incoming CEO and President of Hawaiian Airlines, Inc. Previously he was was the airline’s Executive Vice President and Chief Commercial Officer of Hawaiian Airlines, Inc., a position he has held since November 2011. As Executive Vice President and Chief Commercial Officer, Ingram oversees marketing and sales, revenue, management, network planning, partnerships, and cargo for Hawaiian Airlines.
Previously, he served for six years as the Chief Financial Officer of Hawaiian Airlines, from November 2005 to November 2011. Prior to joining Hawaiian Airlines, Ingram spent 11 years with AMR Corporation, the parent company of American Airlines and American Eagle Airlines. From 2002 to 2005, he served as Vice President of Finance and Chief Financial Officer for American Eagle Airlines, after eight years in finance-related management positions for American Airlines. Ingram earned his MBA from Duke University’s Fuqua School of Business and graduated with honors from the University of Western Ontario.
Courtesy of Hawaiian Airlines.
AIRWAYS: The Airbus A321neo enters into service with Hawaiian today. Describe the market opportunities with this aircraft and how you backfill capacity from larger 767s as they are replaced by A321s? And second, do you view A321 as a 767 replacement, a market opener for new city-pairs or both?
Dunkerley: This A321neo is going to do three discrete things for us: The first is it’s going to allow us to retire the 767s; the last of which will leave our fleet by the end of ‘18. The second thing is it’s going to allow us to grow capacity on existing markets in smaller increments than a wide-body allows you to do, so that will help us grow existing markets. And the third thing is it’s going to allow us to fly to smaller markets for which a wide-body is simply too large. So it’s an extraordinary airplane not only because of its performance capabilities but also for the way in which it neatly fits into our fleet and delivers this triple benefit.
Are there second tier city-pairs that you’re looking to open up with the neo such as Hawaii to Salt Lake City, Reno, or Burbank for example. The type of routes, once operated by Aloha.
Ingram: You know what we’ve talked about with this airplane is that there’s a series of markets that make sense with a wide-body and you know, I think a year or two ago we showed a slide at Investor Day and we talked about there being 20 markets to and from Hawaii with over 200 passengers a day throughout the year. We were in 18 of those and I think the other two we probably flew seasonally. The next level is 100-200 passengers a day. That’s where we’ve been relatively underrepresented. Some of our competitors are able to make a go of those because they’ve had smaller gauge equipment. And because you know maybe they have connections on the other end of the route. We think that there’s a number of those markets in that sort of next tier of market sizes down that are the perfect examples. So if you look at Portland to Maui, that’s a perfect example of a place where we’ve flown Portland successfully to Honolulu for a number of years with a wide-body. Maui makes better sense for us with the smaller gauge equipment and now we’ve also grown our Maui connecting opportunity so that we can have you fly from Portland to Kahului, Portland to Kona and Portland to Hilo connecting passengers on that because we’ve got 717 flights in Maui that tie that in.
Do you see the 321neo being able to backfill additional capacity and frequency into some of your primary markets to just by its size?
Ingram: Yes, With the 767s retiring, you will see us replace 767s with 321s. In some cases, and as Mark suggested, that allows you to play a little bit differently with frequency or maybe one wide-body becomes two narrow bodies or some different permutations and combinations that it’s going to let us do.
Do you look at the A321neo as the true Middle of the Market Aircraft?
Dunkerley: I think what we would say about this airplane is that all airplanes have a particular design sweet spot in terms of what they can fly and what they can do. And all airplanes make compromises away from that sweet spot. It so happens that the sweet spot for the A321neo is 2500 nautical miles, which coincides exactly with all of our West Coast markets. So by happenstance this is an airplane that is ideally suited to the very particular markets that we fly.
Is there any interest on your part for the A321neo LR or the A321neo “Plus Plus” if it were to come to fruition?
Dunkerley: You see, this is the interesting thing. We have not taken the LR because getting that extra 600-700 nautical mile range that the LR brings you actually doesn’t bring of any of our likely cities at all for us into the route into the range possibility. And so we’re happy with the stock A321neo. The LR doesn’t actually give us any new markets that we might otherwise consider serving.
Would you consider a downgauge order of a 321neo to a320neo to serve further second-tier markets?
Dunkerley: We’ve got no plans to do that. We think 189 seats is really a terrific size and gives us so many new market opportunities that it is going to be a long, long while before we have to consider markets smaller than the ones we mentioned earlier.
Ingram: And I think the 321 size has some unit cost advantages that you give up if you go down to the 320. For a fleet our size, I’m not sure if that complexity makes sense.
I think you’re the first neo operator to put the aircraft into service having no prior Airbus single-aisle narrow-body experience. Can you describe the induction of this completely new platform into your fleet?
Dunkerley: Everybody involved, Hawaiian, the FAA, and Airbus have been very professional about it. So I think the introduction has gone incredibly well. Obviously, there were some frustrations with the late deliveries of the aircraft, but the introduction itself is going extremely smoothly thanks to the hard work of people both within Hawaiian Airlines and outside it.
Ingram: In our case, the CEO (Current Engine Option) versions never really quite made sense. You’ve had only a couple of carriers fly that from the western U.S. to Hawaii and typically they’ve had challenges at certain times a year with the range. The 321neo just pushes you into an area where you’re comfortable with the range and ETOPS and year-round service in a way that the prior generation didn’t quite get you there.
So just a few other fleet questions. You have high fleet utilization with your inter-island 717s operating up to 9 flights a day in a corrosive high maintenance environment. As they get on in age and there are fewer examples available, do you evaluate replacement aircraft for the mission things like a CSeries or E2-195 as a replacement for what you do?
Dunkerley: We’re always looking at different aircrafts types to use. It’s our responsibility to understand what the capabilities of all the available planes are out there. For what we do, flying between the islands of the state of Hawaii, there’s no aircraft currently in manufacture or on the drawing board which is as good at fulfilling the mission as the Boeing 717. We’ve got a lot of belief and hope that that is an aircraft that can fly for a considerable number of years yet. So we’re not in the market at the moment looking for a replacement for the 717.
What’s your feeling on the tariff tiff between Boeing and Bombardier’s CSeries / Airbus?
Dunkerley: Frankly, we don’t know all of the details of it. What we would say is that we value having choices when it comes to suppliers of aircraft types and anything that reduces that choice and suppliers is obviously something that would trouble us.
So let’s talk about the A350-800. Obviously, that variant has been essentially scuttled. Upon switching to the A330-800neo in 2014, you were quoted as saying “It’s an elegant solution to our need for growth aircraft for the decade”. Now you all are evaluating the Boeing 787. Why the change of heart?
Dunkerley: I think a couple of things have changed. The first one is, with several more years, our needs have continued to evolve and we have that opportunity now to try to have a real look. It’s a responsible thing for us to do, so we very much like the looks of the 787. We also like the look of the 330neo programs so at this point, we’re spoiled for choice. The important thing is that we make sure we look at both alternatives and the power plants and make a considered decision.
Do the delivery delays and delivery positions relate to this?
Dunkerley: We’ve benefited from the fact that the delivery time horizons for white bodies have shortened considerably from where they were 2, 3, or 4 years ago. So what hasn’t really changed is the time period in which we think we’re going to need some additional aircraft. What has changed is how late in the day we can wait before making that decision.
So is that a decision you intend to make in the next year?
Lastly on fleet, was there ever any real serious consideration on your part to the A380? What do you think the prospect are for ANA’s A380 assault on the Japan-Hawaii market?
Dunkerley: First of all I think things people perhaps don’t quite appreciate is that Honolulu to Tokyo is by some measures the second largest long-haul international city pier in the world. There are, I believe, 14 daily flights with wide-body equipment between between Honolulu and Tokyo. So it’s a very, very large market. And ANA has made plans to come in with the 380. That’s more capacity. It’s not special capacity, it’s just more capacity. We, over this period of time, continue to have plans to grow in this market. We’re the 2nd largest operator between Japan and Hawaii. We can continue to prosper.
You are switching from an ANA code-share to a likely Joint-Venture JAL. Give us a sense of the opportunities there?
Dunkerley: We’re super excited about that. We think that is an extremely important strategic development for our business. We have long been interested in securing an Asian partner that will help us gain access to markets behind the main gateways. Over time, this will help develop the markets and ultimately perhaps allow us to fly to some of these destinations that are currently behind the gateways. It also promotes Hawaii as a destination more broadly in Asia. In terms of these community, it is terribly important.
What’s the timeline for the JV?
Dunkerley: We’re looking to have an agreement on the JV certainly in the next few months. Beyond that, we have to get the appropriate regulatory approval because we can’t really start implementing it. You know that may well push the effective date to a number of things out of this year. But we remain hopeful we can get a lot done in 2018.
Let’s move on to growth opportunities among in the network. There have been rumblings at times about Europe. You’ve identified additional markets on the mainland. China and the launch of Beijing have been successful, so it seems like there are opportunities to expand there.
Under the Never Say Never category, looking at your model, would you ever see a situation where you would actually consider direct service between the mainland US and Asia or the South Pacific mainland, overflying the Honolulu hub into Asia?
Ingram: I would never say never. You know, I think we’ve got a lot of opportunities within the network that we have built over the last ten years. Our focus is in the immediate term; 2018 is going to be a year with the 321 Neo’s coming in. A lot of the focus of our growth is going to be in the western US. And we’ve already announced some of those routes and will be announcing more as we get further into the year and more 321s join the fleet.
Editors note: A few hours after the interview, Hawaiian announced the launch of a new city-pair of Long Beach – Honolulu, the first A321neo route into Honolulu from a secondary US market.
But one of the things we have done over the past several years is to build a comprehensive network from Honolulu, where we’ve grown successfully with New York to the eastern US. We’ve grown successfully in Japan, as you and Mark were just talking about. We’ve got successful operations in Australia and elsewhere in Asia. And so, to use a choice of phrase Mark used a moment to go in regards to our fleet: we’re spoiled for choice in terms of having the opportunity to look in each of those areas, and we see that there are routes in the eastern US, elsewhere in Asia, Australia, and Japan that we don’t fly today.
Do you want to go deeper into China as well?
Ingram: Yeah, certainly. We fly three flights a week to Beijing right now. The China market is destined over the next decade to grow that much more important. So, I think over the long term, we will be growing in China, and we’ll be growing again throughout that network footprint.
And what about Europe, particularly the oft-mooted London and Paris?
Ingram: It’s a long-term possibility really based on what the aircraft capabilities are; how the markets develop over time. It is not something I’m expecting to announce in 2018.
This is a time of enormous capacity growth and competitive pressure in your growth market, particularly with United’s boost and now Southwest’s entrance. Hawaiian’s obvious advantages are your sky-high profit margins, operations, and customer satisfaction scores. What is in your secret sauce, especially the headwinds of operating in a high-cost environment like Hawaii? And how do you continue to go from strength to strength against all this additional competition?
Dunkerley: Well the thing that’s very clear to all of us in the C-suite is that it’s our team on the front lines that is doing an absolutely terrific job of delivering a quality and type of service that our competitors haven’t been able to match. They are ably supported by a terrific team behind the scenes who are very focused on making sure that our frontline team has the tools to succeed. I think an area of particular strength for us is that our business model is focused on Hawaii. Nobody else has the Hawaii experience central to that product offering, and what we’ve discovered over the years is that people coming to visit Hawaii are coming on a trip of sufficient importance to them that they really care about the details. They really care to experience a sense of place, a sense of the culture, when they travel. And that has been, if you like, a secret sauce which has seen off the competition over the years, over the last decade, 15 years or so.
Throughout that period of time, we’ve seen occasional pulses in competitor capacity, and in each case, we’ve met the challenge head on. We’ve met the competition head on. And when the dust settled, our market shares actually increased and improved. So, you know we have every expectation that when this next pulse of capacity comes through, likewise we will prevail.
You have a virtual monopoly on inter-Island flying. Numerous and sometimes well resourced, entrenched, fierce competitors like Aloha and Go!, and now Island Air have vanished. Though nothing has been formally announced, it seems like a foregone conclusion that Southwest will compete on the inter-island routes. If that comes to pass, how do you plan to compete?
Dunkerley: So, there’s nothing preventing another airline coming into the neighborhood. The entire island market and flying against us I would say that when we look at our business it’s a franchise of 88 years standing. And when we look at how we manage it we manage it with the belief that we need to provide cost-effective, efficient transportation to facilitate the kind of social economic and cultural ties that bind this community together. As a consequence of that, I think people elsewhere in the industry look and see the phase that we charge and the decisions that we make. And so far, I think they’ve concluded that we are charging a competitive market set of fares and that perhaps is why we haven’t seen the competition from others. But that’s for them to decide. There’s no barrier to entry. And you know, whatever happens, Hawaiian Airlines I think is in very good position and will continue to compete for the custom of our guests.
Having experienced it myself, I can vouch for the quality of the inflight product. The same can be said about Virgin America, which has an excellent inflight product, but ultimately didn’t translate into a great business. How did you throw so much more at the product and yet keep your costs and fares in check?
Dunkerley: So, we’re not a low-cost carrier, correct. We are a legacy carrier operating out of a high cost of living place with high costs. It is our ability to earn a revenue premium that has helped boost margins and we’ve done that by being an ally of choice. People vote with their feet and they do that in part because of the quality of the offering onboard -the attentiveness of our team is just terrific. But also, the fact that through not only in the good times but through all of the bad times, we’ve always served meals and served a free glass of wine in coach. We’ve always recognized the fact that travelers coming to Hawaii are spending for their entire vacation experience a lot of money in terms of their own household finances. In some cases, it can be the second largest household expenditure. Their perspective is not buying a cheap discounted ticket. Their perspective is that they’re paying a lot of money for an annual or semi-annual experience with their family. They paid dearly for this and they deserve to receive a quality service that fits that sacrifice.
Ingram: One of the things I would add to what Mark is saying is that when we look at our competitors, we don’t spend a lot of time thinking about “whoa, it’s us.” They’ve got advantages that we don’t have. Whether it’s scale or something else, well, we look at what advantages we have and focusing on that – what the Hawaiian experience is and the sense that our employees can give people of an authentic Hawaiian hospitality. It’s something that can’t be replicated and so, our investment in that guest experience on the airplane is really fine-tuned to focus on those things that are valued by people specifically traveling to Hawaii. So, we’re not trying to make some sort of average experience out over a broad global network. The best thing we’re saying is: let’s focus on exactly what that experience is, just for people who are traveling to and from Hawaii. And that allows us to make some decisions on whether it’s on product or service. That may be a little different than people who are trying to hit the average for a broader global network.
AW: What keeps you up at night? How do you feel about competing against the scale and being left out of the consolidation dance?
Dunkerley: You know, I think the thing that keeps me awake at night is really around other things that affect Hawaii as a destination. So long as there is sufficient demand for Hawaii as a destination, I think the team does a terrific job of positioning us to succeed. So, we don’t spend a lot of time worrying about the other guys nor worrying about industry consolidation.
So Mark, your era at the helm of Hawaiian is heading to a close. Over fifteen years ago, you arrived here at a company that was in somewhat of a shambles. The airline endured Chapter 11 twice in about a ten-year span, once on your watch, but has been a business school case example of a dramatic turnaround. Can you reflect on what you walked into, what you’ve achieved, and why the Hell are you leaving now?
Dunkerley: Yeah well, I wonder sometimes…I ask myself the same question. No, but I’m leaving because we’ve got some family issues that need tending to on the East Coast and Europe as well. It’s difficult to attend to those adequately, when I am located full time here in Hawaii. That said, I’m not planning on leaving Hawaii and tend to keep a residence here. As to the journey, you know, it’s been a fascinating journey and it’s a journey that I’ve very much shared with many of the employees of this company. All the raw material was here in 2002 to be a successful business with terrific employees that wanted to do the right thing. There were a number of business decisions that needed to be made which we went ahead and made. And then the rest of it really was around building self-confidence within the company that we were not preordained to be a second-best airline. We could actually aspire to attain and achieve the kind of number one ranking in all of the things that we set out to do. Along the way, I’ve been incredibly supported by my colleagues and management, so as I think about the future, I remain incredibly optimistic about what’s in store for the long term.
I hope the Hawaiian still allows you to pilot the 1929 Bellanca.
Dunkerley (chuckles): Well that is what this is. It’s up to them.
Peter, as you take the left seat of the airline, can you speak about the transition as the baton is passed to you? It’s not as if you are new around these parts. You have been one of the architects of the turnaround. But there’s unfinished business at hand.
Ingram: Obviously, relative to the situation that Mark walked into 15 years ago, I’m very lucky by comparison. I’m taking the CEO job at a company that I’ve known for the past dozen years, being on the management team, too. We’re in much better shape in having a strategy that is working. Having our financial house much better in order, that was when Mark and I joined the company. That doesn’t mean it won’t be without its challenges moving forward. But the message that we’re really talking about here is one of continuity. I think that by the way the board made its decision to select a CEO from the management ranks there, they’re sending a message of continuity. But inevitably, even if Mark was staying here, there would be changes because we are going to have to continue to evolve the business to adapt to changes and our guests’ expectations. There will be changes in competition and the market, and our team will be very focused on making sure we manage that as effectively as possible in the years ahead.