United Airlines' Hawai'i market going strong

By Michele Kayal
Advertiser Staff Writer

Norman Reeder, United Airlines' managing director for Hawai'i since 1995, will retire from the state's largest carrier effective Thursday, 35 years to the day since he began.

For the past 30 days, retiring United Airlines Hawaii managing director Norman Reeder, left, and incoming managing director Thomas Renville have worked on making a personnel transition at the airline's Honolulu office. kyle Sackowski • The Honolulu Advertiser

Renville, a 29-year airline veteran with six years at United, comes to the Islands from Denver, where he was general manager at Denver International Airport, one of United's largest hubs.

In Denver, Renville was responsible for United's 320 daily flights, 38,000 daily customers, and 3,500 employees. In Hawai'i, he will oversee 1,800 employees and 20 daily flights.

Renville began his career at Pacific Southwest Airlines and moved to US Air.

Reeder and Renville spoke with The Advertiser last week. Following are excerpts from the conversation:

Q: Norm, since you've been here, you've presided over a lot of different things — the building of an $8 million cargo facility, a $4.5 million reservations center, about 300 flight attendant jobs being moved to the Mainland. What were some of the biggest changes in United's approach to Hawai'i while you were here?

Reeder: The most important thing was that we put more focus on managing the Hawaiian market as a total business entity — I mean put it on its own to make a profit. When you market a leisure market you treat it differently, it has different characteristics, high volume, lower prices and a different type of passenger. And so, what you have to do is adjust your philosophy of how to do business focused on leisure, and that's what we did is broke apart Hawai'i.

We treated it as an entity and then we fashioned our strategies and operated it as a separate entity. (Before) the responsibilities for selling Hawai'i fell in cities throughout the country, because we are a destination. Some people come from Southern California, so Southern California had a piece of the action. Some come from the Bay Area, so the Bay Area had a part of it.

Q: And how has that affected Hawai'i's performance?

Reeder: It's one of the strongest markets in the company, particularly with the weakening of the business market. United's primary leisure market is Hawai'i, and our leisure market is outperforming our business markets right now by quite a bit.

You start with that as a philosophy, then resources follow. When you look at Hawai'i traditionally, United and almost all the carriers, you see how old their planes are — DC-10s, old 747s, the L-1011s are still rattling around — and we were kind of the end of the food chain. What you've seen is United's turned around and put resources in. We have several Triple 7s operating to Hawai'i. We built the cargo building, the reservation facility, we did that in partnership with the state. We made a commitment to add 200 more employees. This is the only office that is growing in size and now it's becoming one of the larger offices in the company. And that all goes to a philosophy, we're going to treat this as an entity, we're going to grow the market and make it a profitable stand-alone.

There are two exceptions, one is the Chicago situation, which still is a labor question, not an economic one, and I truly hope that airplane will be back before too long.The other is that we've downsized the Narita and Osaka (both in Japan).

Q: And what are the changes you've seen in tourism patterns?

Reeder: Well, there's been tremendous growth to the Neighbor Islands. So Hawai'i in total is growing but somewhat at the expense of Honolulu and to the great benefit of the Neighbor Islands, particularly Maui. If you'd asked me five years ago whether I thought we'd ever have seven flights a day to Maui, I'd have said, you're dreaming. I've been kidding about moving the regional office to Maui.

Q: Tom, Honolulu is a much smaller operation than Denver. So why the change?

Renville: My entire career has been in the operation, within the station, and this managing director position really provides me an opportunity to keep my hands in the operation, four islands with 20 flights, but also, the most exciting opportunity for me job wise is to learn sales, to learn marketing, to get involved in the community a lot more than I did in Denver. Here, I think I can devote what I would call quality attention to boards and to community.

... Another thing about the job, one more quick thing. Actually, a lot of people ask me, leaving Denver, general manager, huge hub, second, you know, largest city for the world's largest airline, a lot of people ask me, isn't it smaller? It's absolutely smaller as far as number of stations and flights and all that. Again, the real attraction for me is the diversity of responsibilities. It's actually the only managing director job left I think in this company that has all the responsibility.

Q: For the past five years, Hawai'i has been gaining air seats, and United has been very consistent in adding seats to the Islands. How will those numbers trend in the future?

Renville: Well, it looks at least today pretty similar, although Norm had mentioned that from a business perspective, especially from the revenue side, United is struggling like most carriers and Hawai'i's an anomaly. We're actually making money in Hawai'i. Potentially we could look at moving some resources down the road if this business travel doesn't revive itself.

Q: How long is down the road?

Renville: I'd say after fall. There's an opportunity to look at some growth in the future. How long in the future would be a big guess for me.

Q: What are United's plans for Hawai'i; how does it fit into the whole picture?

Reeder: United will remain Hawai'i's No. 1 domestic carrier. We will maintain our current market position and perhaps grow it.

Renville: The big advantage we have now in Hawai'i is that we now no longer are just a leisure spot that United, a business carrier, flies. This is run like a business now and we've demonstrated that with the way we manage it, and especially with the more efficient aircraft, we can make money here. So when they're looking at resources and where you should place resources, Hawai'i is on the radar screen.

Ten or 15 years ago when the company was looking for what to do with aircraft and to maximize efficiency of airplanes, I'm not sure Hawai'i was on the radar screen.

One thing I want to make sure I do is be a voice for Hawai'i within our company like Norm has been for his six years. You still have to fight for resources in any company and this is no different. I'm a fighter. I can make sure our voice is heard.

Reeder: I have a line I use when I give presentations about (air) lift. I say "airplanes are like heat-seeking missiles — they seek profit margins." So we have to work collaboratively within Hawai'i to make Hawai'i profitable for the carriers. It's like an NFL draft — the No. 1 pick goes to the segment with the highest profitability. And Hawai'i used to be way down. And that's how we wound up with old junk airplanes. Now we're a player. We may not be first round, but we're real close.

Q: We're about to get a lot more cruise ships that start here and end cruises here. Norwegian Cruise Line alone will bring about 100,000 passengers a year starting in 2002. What kind of pressure will that put on people trying to get airline seats into Hawai'i?

Reeder: The cruise industry faces some of those same questions in other parts of the world, specifically in Fort Lauderdale (Fla.) and Miami — big Saturday in, Saturday out, groupings. This is where inventory management comes into play. Wholesale package travelers and cruise travelers come on a lower fare base. It's part of the deal. At all carriers, and specifically at United, we capacity control how many seats we can allocate to a cruise passenger.

And there will be a favorable bias, and this is not peculiar to United, to the higher yield customer. So it would not be detrimental to the customer who wants to get here if that person pays a higher fare and in most cases they do.

Q: So it should take care of itself? The airline will only reserve a certain number of cruise class seats, and the cruise lines will have to charter airplanes or do something else if they need more than that?

Reeder: Yeah. But we sit down with our cruise partners each year and look at their needs on an annual basis.

Q: So land-based folks shouldn't get squeezed on this?

Reeder: Not at all. If we're doing our job of inventory management.

Renville: If cruise lines are moving resources to Hawai'i, and let's say the demand does exceed available seats, then we as a company, like all the other carriers, will evaluate that demand and then decide what it is we should do. So if the demand does increase and there is the ability to make money we will evaluate that.

Reeder: I believe there's going to be a fairly large percentage of people who do pre- and post-trips in Hawai'i. If that holds to be true, that'll level it out. And I believe the cruise industry is very good for Hawai'i.

Renville: I was going to say the exact same thing. If that demand gets that great because cruise ships are moving resources into Hawai'i, that's a great thing.

Reeder: People who cruise find places they like and they want to go back to.

Q: What have we left out?

Renville: With the economy soft, and especially for our airline, business travel soft, things will be a lot more difficult resourcewise for us. As a company it will be more difficult to spend and to do some things we've been used to doing for the last five or six years.

It will be pretty challenging here over the next year or two, until the economy gets back to normal and the economy gets back to normal and the airlines and the industry as a whole kind of stabilize.

Q: But Hawai'i is in a better position to claim resources because it's the stronger part of the market?

Renville: Absolutely. Our argument is stronger. We're in a good position to argue. We're going to have to really argue, though, for resources these days, because United is no different from any of the other major carriers. We've hit a little bump in the road, and these bumps usually last anywhere from six months to two years. It's one of those challenges there for me.