Peter Ingram, Hawaiian Airlines, CEO Interview, says the airline must be able to properly respond to the desire to travel. Interview by Perry Flint.
How would you characterize your 2021 financial results and what do they tell us about the industry recovery?
Last year represented a substantial recovery from 2020 and the depths of the pandemic. At the end of 2020, we got relief from the strict quarantine requirements for folks coming into Hawaii that had been in place for much of the year and that sparked a robust domestic recovery.
By July 2021, we were flying a larger schedule to the mainland United States than we were before the pandemic, with new routes from Honolulu to Austin, Orlando, and Ontario, California. Our load factor recovered too. There were some ups and down in the back half of the year with Omicron but domestically it was a solid recovery.
To be clear, though, things are not fully back to normal. The part of the network that continues to lag is international. Many of the markets that are important to our network and to Hawaii’s tourism industry, including Japan—which historically has been our largest source of international visitors—South Korea, and New Zealand have not recovered. Japan continues to be held back by restrictions on international travel and stops us from having a full recovery.
But we’re hopeful that in 2022 we’ll move forward to the full restoration of our network as it looked before the pandemic.
How important is international travel to your network?
Before the pandemic, international travel was about 25% of our business and in 2021 it was 90% down. But at the end of last year, we were able to resume flying to Australia, which had been closed since March 2020. We’re currently operating four weekly flights to Sydney.
Hawaii has had tight travel restrictions. Are the authorities aligned with the need for travel to resume?
They have a better understanding than ever of how important tourism is to the local economy. Airlines, hotels, restaurants, retail, and even agriculture—so many parts of the economy are linked to air travel. There is solid alignment now on the thinking to get us back on better economic footing.
What lessons in leadership have you learned from the pandemic?
A couple of things became clear early on in the crisis. We all want to be analytical and thoughtful about decisions, but it was a real test when we had to make decisions with little to no information. Flexibility and adaptability were key in decision making.
The other thing that was essential for an organization with thousands of employees is communication. What was felt in the executive suite was felt throughout the business and community. You not only have to go out and explain what you know, which is ever-changing, but also express a vision of hope even if the route to recovery is not entirely clear. The team did a great job in recognising the situation and executing on that communication to keep our business moving forward.
When do you anticipate traffic will return to pre-COVID levels?
There are three elements to our network—within Hawaii or neighbor islands, mainland United States, and international.
Flying between the Hawaiian Islands represents about a quarter of our business, and we are on track for recovery. I’m not sure we will get completely back from the pandemic but, in part, that is because we are seeing more point-to-point travel to the islands from the mainland and also because other technologies, such as Zoom, have affected the way in which people connect. But we should get to about 90% of pre-pandemic levels for our neighbor island network.
Mainland United States is about 50% of the business. As mentioned, that recovered well in 2021 but took a step back because of Omicron. But as the Omicron wave comes down, we anticipate spring and summer to normalize and even be above 2019 levels.
International travel is going to be a function of the travel policies of countries that are important to us. Australia traffic is recovering but Japan and New Zealand still have restrictive policies and are months away from travel without quarantine. We will see some recovery by summer, but it will be the end of the year before a full recovery.
Importantly, leisure travel will resume its long-term growth trend. The desire to travel has not been deterred by the pandemic. Demand was only constrained by the restrictions placed on achieving that desire.
When people have the opportunity to travel, as we’ve seen from the US mainland to Hawaii, I’m confident they will do so. Visiting Hawaii is not something you can replicate with a Zoom or Teams call. It is not the same experience at all. You have to come here and feel the surf on your toes and the sun on your back.
Do you think the focus on aviation’s environmental performance will hamper demand going forward?
I am optimistic but also a realist. There is a lot of work ahead of us. Hawaiian is committed to achieving net zero carbon emissions by 2050 and so much will need to be in place to get us there.
Where my optimism comes from is that as an industry, we have developed technology where each aircraft generation is superior to the prior one in terms of environmental impact. Drop-in sustainable aviation fuels (SAF) work and it is just a matter of creating incentives to build supply up to the point where it is a significant part of uptake. We are also enthusiastic about aircraft manufacturers working on different propulsion methods, whether it is hydrogen or electric.
I believe the combination of those things, as well as offsets and market measures, will allow us to achieve our goal as an industry.
SAF work but what can be done to increase production?
There are things that governments can do to provide the right incentives to fuel producers. If you look at competing industries for biofuels many of them have more viable pathways to a carbon neutral future. Ground transportation, for example, can switch to battery powered vehicles.
We need to align incentives around tax structures, which is something we, along with partners such as Airlines for America, have been advocating. There could be a blenders tax credit on SAF. California has done a good job at the state level and that has energized production in California. Producers must move more fully into SAF.
What are the lessons learned from the recent 5G crisis?
It is a crisis that could have been avoided had there been better communication at the federal level. Fortunately, the problem got rectified before there were massive cancellations. There is a pathway for 5G, but aviation must be able to operate safely, which is possible as solutions continue to be developed by engineers.
There is good cooperation between airframe manufacturers, telecoms, and altimeter manufacturers to understand the risks. And as that continues, we will see viable standards and solutions that will allow 5G to be rolled out to improve broadband in the United States.
The important thing is to preserve and continue to improve aviation’s great safety record. That is the outcome we should all be working towards.
Hawaiian has been quite active in challenging the ticket distribution status quo, including introducing a surcharge on traditional EDIFACT-based transactions. What’s driving that?
It has become clear to us that legacy distribution technology is no longer suitable for the way we market our product and the variety of options that are available in our product.
For several years, we have been more successful in communicating the attributes of our products through direct channels, such as our App and website. That’s because there is richer data available through those channels, such as dynamically priced ancillary products.
We want to ensure access to this content is available throughout our distribution. To do so, we needed to transition the technology into an NDC format. We’ve constructed an incentive structure in our distribution agreements to provide richer information to our agents and partners so they can offer customized options to our guests.
Are there another trends or regulations you are watching in 2022?
There are a few things on our radar. We want to encourage the modernization of the air traffic control system. In about 18 months, there is another reauthorization process for the Federal Aviation Administration and that is always an important piece of legislation. We also want to make sure that regulation is sensible and does not constrain our ability to serve our guests with the same Hawaiian hospitality they’ve come to love.