Interisland airlines to use antitrust exemption
By Susan Hooper
Advertiser Staff Writer
Hawai'i's two interisland airlines are developing a plan to collaborate before their proposed merger under a federal antitrust exemption granted in November.
Greg Brenneman, the former Continental executive who is orchestrating the merger, said yesterday that the two airlines are moving ahead with their application to cooperate under the exemption.
He spoke at a hearing on the merger held yesterday by the state House Committee on Economic Development and Business Concerns.
Keoni Wagner, a spokes-man for Hawaiian Airlines, said after the hearing that the airlines are drafting an application to collaborate under the exemption.
Brenneman could not be reached for comment last night.
Federal regulations prohibit Hawaiian and Aloha airlines from discussing merger issues such as routes and profitability before the deal closes, but the antitrust exemption overrides those regulations, Brenneman previously has said.
To operate under the exemption, the airlines must get approval of their cooperative plan from Gov. Ben Cayetano.
The governor then must ask Norman Mineta, the federal secretary of transportation, to sign off on the plans.
The antitrust exemption was granted as a result of the drastic loss in business the two airlines suffered after the Sept. 11 attacks.
At that time, the airlines had not announced plans to merge.
The exemption allows the airlines to coordinate schedules and routes, share revenues, and cooperate on operations and services as a way of cutting costs.
The day after announcing the merger in December, Brenneman said the two airlines likely would look for the necessary approvals to operate under the exemption in the first part of this year.
He said the approvals would allow the carriers to save money by consolidating schedules quickly.
Routes in the interisland market likely would be a top priority for consolidation, he said then.
Later Brenneman seemed less interested in pursuing the exemption, in part because it expires in October and because the savings to be gained are less than those expected from the merger.
"You get about $90 million a year (in savings) out of the merger and only about $14 million out of the (antitrust exemption)," Brenneman said this week.
"And so it isn't enough to fix the problem. It expires in October. And we still have to go through the DOT approval process to get it, which is going to take some time. So there's a bit of a clock; it's a chicken-and-egg thing. Clearly the right thing to do is to get the merger done and to fix the businesses."
The two airlines combined lost as much as $270,000 a day in the months following the attacks, according to a shareholders' document the companies filed with the Securities and Exchange Commission last month in connection with the merger.
In the filing, Hawaiian's daily operating losses through December are estimated at between $75,000 and $100,000; Aloha's are estimated at between $109,000 and $170,000.
Executives with both companies have said a merger is necessary because the current climate makes it impossible for the two carriers to survive.
