Aloha-Hawaiian | End of a 55-year rivalry
New boss is an airline turnaround expert
By Andrew Gomes
Advertiser Staff Writer
In just six years, Greg Brenneman has earned his stripes as an airline turnaround expert.
Richard Ambo • The Honolulu Advertiser
And industry analysts and the two longtime executives he will replace as the chairman and chief executive officer of a merged Aloha and Hawaiian airlines say that if anyone can pull off a consolidation of Hawai'i's interisland carriers, Brenneman is the one.
Greg Brenneman and TurnWorks Inc. will own 20 percent of the merged airline. He plans to move his family to Hawai'i this summer.
"Greg is among the most skilled — if not the most skilled — in the industry as far as managing turnarounds," said Stuart Klaskin, an airline analyst in Miami. "If you had a couple of airlines that weren't working exactly right, and you wanted to put them together and turn around the underlying operations while developing a cohesive brand and a cohesive culture, he's the guy I would choose."
In succeeding Aloha Chief Executive Glenn Zander and Hawaiian Chief Executive Paul Casey, who are both 55 and have a combined 60 years of airline industry experience, Brenneman, who just turned 40, will be trying what has been considered but never accomplished: consolidating the state's two major passenger airlines.
Brenneman was instrumental in one of the most successful turnarounds in U.S. business history. He helped lead the nation's fifth-largest airline, Continental, from dysfunction, two bankruptcies and 16 years of losses to six straight years of profit.
He also has general corporate turnaround experience that will be useful in mapping out a strategy to consolidate and grow the merged Hawai'i airlines.
Brenneman, who grew up in a Kansas farming community, started out as an accountant. He earned a master's degree in business administration from Harvard, then joined Dallas-based corporate turnaround firm Bain & Co., where he helped shape up several real estate and manufacturing companies.
Greg Brenneman
Age: 40
Education: Bachelor's in accounting/finance from Washburn University in Topeka, Kan.; master's in business administration from Harvard
Work experience: Accountant, consultant at corporate consulting firm Bain & Co. Inc., president and chief operating officer of Continental Airlines, founder of the Texas-based private equity investment and turnaround firm TurnWorks Inc.
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Board directorships: Home Depot, J. Crew Group, Automatic Data Processing
In 1994 he contracted Bain's services to Continental, which had emerged from its second bankruptcy a year earlier. After the resignation of Continental's chief executive officer, Brenneman joined the $6 billion airline as chief operating officer in May 1995. In September 1996 he also was named president.
He made drastic changes by eliminating money-losing routes, improving aircraft reliability, standardizing the carrier's fleet, building up hubs, cutting jobs, reversing abysmal customer service and making the airline a desirable place to work.
When he left in May, Continental promoted two senior vice presidents to fill his positions. According to one analyst, some stakeholders in the airline feared for the company's health.
Brenneman, who had founded private equity investment and corporate turnaround firm TurnWorks Inc. shortly before joining Continental, rejoined the firm and began looking to invest in another airline.
He got a call about four months ago from Mercer Management Consulting, which Aloha had hired to help it evaluate strategic options to improve the company.
"I got a call from Mercer and they said, 'Greg would you be interested in buying Aloha Airlines? When can we have lunch with you?' I thought for a second, and said we don't need to have lunch, I can answer that on the telephone. I said to buy one of two carriers in what should be a single-carrier market would be just a real crazy thing to do."
Brenneman did have lunch with a Mercer representative, and got to thinking about merging Aloha and Hawaiian even though past attempts had never resulted in an agreement.
Instead of buying Aloha, Brenneman engineered the merger. Neither TurnWorks nor Brenneman are investing capital in the roughly $150 million to $200 million deal.
Raymond Neidl, an airline analyst with ABN Ambro Bank in New York, was surprised Brenneman chose to take on Hawaiian and Aloha.
"I thought it would be a bigger carrier, like USAir or United," he said. "They managed to get a real top-notch manager. Greg is an excellent manager."
Brenneman has an evergreen contract that allows him to stay as long as he wants. At Continental, he started with a one-year contract and stayed for six.
Brenneman said he plans to move to Hawai'i with his wife and three children next summer. At the merged Aloha Holdings Inc., Brenneman will make $400,000 a year, compared with about $600,000 at Continental, where he also earned bonuses that brought his income to $5 million in 1999.
TurnWorks, where Brenneman is chairman and chief executive officer, will own 20 percent, or roughly $30 million to $40 million equity stake, in Aloha Holdings.
Neidl applauded Brenneman's large share in the company. "It is going to make him work a lot harder to make sure it succeeds," he said.
Brenneman's goal is to take Hawaiian and Aloha, which he described as breaking even at best during the past five years — the best five for the industry — and grow the company 7 percent to 10 percent a year after cutting business down to a "profitable core."
"I wouldn't be here if I didn't think there were opportunities for expansion," he said, noting that when he arrived at Continental it had 40,000 employees, cut to 33,000 before rising to 56,000 by the time he left.
To ease some of the hardships, Brenneman has committed to establishing a $250,000 foundation with his own money to be administered by Aloha and Hawaiian employees for their co-workers.
Brenneman did something similar, to the tune of $500,000, when he left Continental.
"Hawai'i could not be more fortunate to have a person of Greg's stature to lead this new airline into the future," said Aloha's Zander. "It is truly a time for optimism."
Added Casey: "This deal is not without its issues, but I think he will have fun and make this company a great place to work."
The merger, subject to shareholder, antitrust and other regulatory approvals, is expected to be completed in the first half of next year.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
