Diana Birkett Rakow of Alaska Airlines joins Spotlight Hawaii

Thanks, Eugene, Ryan. It's great to see you again.

Yeah, I will just start with summer has been very, very, very busy. It's fantastic to see people come back to the skies and this really is in some ways the first summer sort of since COVID that we don't have any restrictions and folks are really traveling again. Just a couple of fun things. Between June 29th and July 5th over the July 4th holiday, our team welcomed one million people on board and actually on June 30th, the single day we flew the most passengers in a single day in our entire 90 year history. So it's actually been really exciting. The best part though, and the part that I think our teams feel so good about, is that we have more than 99% completion rate. We have 85% on time rate for this quarter that just closed for Q2 and that's the highest in the industry and we're actually the only airline at those levels of completion and on time. So that's just really the metrics that we use to make sure that we're delivering great service to our guests which is our highest priority.

Yeah, it's a great question. So, what's exciting is we are seeing real rebound in travel. Our airplanes during July are about 90% full on average across our system. So, if you think there are some routes probably to smaller communities or more rural areas that might not be full, that might be 50 or 60 or 70% full and then there's a ton of airplanes that are 100% full. So, you know, you're probably experiencing that when you get on board and we ask for our guests' patience with those full flights but they really are a sign of return to travel and help us balance out access to communities where the loads might be smaller as well. Leisure demand is back above pre-pandemic levels. So, that's really returned very fast. Corporate travel has come back. It's hovered about, plateaued at about 70 to 80% of pre-pandemic levels and one of the interesting trends we're seeing is we call it bleisure, but it's people that are traveling for work and might tack on a long weekend or might tack on a visit to go see family and actually just get the most out of that travel experience. So, those are some of the trends that we're seeing.

You know, I think both are true. The fact that leisure has come back above pre-pandemic levels means that still people have very high interest in traveling to and from Hawaii, but also, we've got interest in a lot of destinations. We actually just in the last 2 weeks announced non-stop flights to the Bahamas and to Guatemala, which we're really excited about. Guatemala and the Bahamas are both two new countries and two new sort of dots on the map for us. New dots on the map are really fun for an airline because it means you get to expand your horizons but we are seeing strong leisure demand really across the country and to Mexico, Central America, as well as ongoing to Hawaii. I think we've increased our frequency to Honolulu but try to make sure that the most importantly is that the flight times work for folks. So, we are seeing really high loads to Honolulu and that maybe because the fact that there's just a broader array of hospitality options, of hotel options across a variety of price points and people can have different kinds of experiences. And then we've also put some focus on making sure that for the Hawaii resident traveler that our flight times are better for not just getting to the West Coast but potentially accessing beyond the West Coast destinations without having to deal with the red eye coming going. So, we've got an early morning flight out of Honolulu now and we've got an 8 PM flight back from Seattle now so that people can really optimize their workday and business trips both directions. Yeah, it's exciting and we want to make sure that people continue to travel to Hawaii and that they do so with a lot of curiosity and respect and that they're the right kind of traveler coming to Hawaii as well.

It's a great question. A little bit of both. So, we are always looking at our schedule and you know, running an airline is like a five-dimensional Tetris game all of the time or something because you're trying to get the airplanes to connect in the right places, to be in the right places, to connect with crews coming from different places and obviously, to match up with passenger demand. So, we're always looking at those connection points and revising every quarter to make sure that we're optimizing in as many places as possible and as you can imagine, you move something over here, you impact something else over here. But we also have heard that the ability to get to the West Coast from Hawaii and then connect beyond without being stuck on a red eye across the country is really important, as well as that ability to have a full day on the West Coast or elsewhere in the United States but still be able to get home at night. And so those are a couple of changes that we made for that reason.

Sure. Well, that's a particularly exciting one. It's actually going to be the longest route from that airport. That airport is called Paine Field and if you think about Seattle, sort of being in the center of a big region, SeaTac, the airport that most people think about, is on the south end of that region and Paine Field is on the north end. And actually from where I live in the middle, they are equidistant and depending on traffic, one could be more favorable than the other. So, it's really nice to have options. So being able to offer both leisure and business travelers an option from the north end of the city is a really big difference and just to get more traffic coming through that airport. We also, SeaTac is incredibly busy as are many of the airports in Hawaii and so trying to figure out how to balance that out across different parts of our infrastructure is really important.

Absolutely. And we really appreciate being part of the conversation over the last couple of years really about shifting from simply destination marketing to destination management. The way that we think about that and our responsibility in that conversation is to help educate our guests and help provide as many opportunities as possible for our guests to come to the islands with the right sort of orientation around wanting to learn, wanting to contribute, wanting to give back, and wanting to be most importantly respectful. And ideally to be regenerative in that way of leaving Hawaii better than they found it. Some of the ways that we do that, we actually have materials that we share in our pre-trip emails. We have some content in our inflight entertainment system. And also that we put through a lot of our other communication channels to put information in front of our guests to help them think about some of those issues, both from an environmental sustainability standpoint as well as a cultural learning and experiences standpoint. The other thing, last time I remember we were together, maybe it was two years ago, we were talking about the pledge to our keiki, and we have used that as a platform along with Kanu to connect people to experiences and to ways of thinking about and even just prompting our guests and asking them to sign the pledge. It is a way of bringing them into this conversation to learn more. And part of it is just making sure that folks are thinking about it, then part of it is ensuring that wherever possible we can provide opportunities for them to take action on what they've learned.

Absolutely. Well, it's a pledge that is hosted by Kanu Hawaii and it was developed by students in Hawaii who were thinking about what they wanted for the future and inviting others to have responsibility to take care of that future and to make sure that that future for them and for future generations were protected. And so we signed on to the pledge and we committed as part of signing on to get others to sign on. And so we've brought it to our guests. We did a big sort of activation in the San Francisco Airport one day during Earth Month last year to help educate people that were coming and going through the airport with a big version of the pledge and actually had people physically sign and had some music and hula and other things to welcome people into that conversation. And then we are continuing to work with Kanu to bring the pledge. For example, it was launched throughout Hawaii public schools and bringing other stakeholders into that conversation. So we're excited about where this is going to go. It's one really important lever in the conversation. It's not an endpoint though. It's a way of galvanizing conversation and then what we need is for people to not just sign the pledge but take action accordingly and be conscious of their own choices.

Yeah, I love that question. Thanks for asking it. Every place is unique. I mean, that's one of the things about not just our country but the places that we fly. But we do, I mean, it's sort of in our ethos to, and we talk about, and they're actually usually presented in a circle, taking care of all of those who depend on us. And those stakeholders include our employees, our guests, our communities, and our owners. And so across our business, our business is run and designed in a way that takes care of all of those stakeholders. And they have to be in balance in order for our company to sustain and take care of everybody for the long term. So that's the origin behind our level of community engagement. And it is something that we do in all of our major areas of operation and where we have employees. And sometimes it's more organized and sometimes it's more grassroots if it's an area where we have maybe smaller operations in Florida or something like that. Each place though, and it's one of the things that drew me to working at Alaska Airlines, how we show up in communities. The level of commitment is consistent but how we do it is responsive to what's important for that community. So, there's some key themes. We engage on environmental sustainability issues everywhere but that may look a little bit different in the state of Alaska or in the Arctic obviously than it does in the state of Hawaii. And so, we work on tailoring our approach to meet the local needs wherever they may be.

Yeah, it's a great question. There are both challenges and opportunities. There are a lot of jobs available and figuring out the right way to reach people and the right way to train people into them is certainly an ongoing topic. So, we are hiring people all over our system at really unprecedented levels partly because a lot of people took retirement during the pandemic or as you noted may have shifted locations in their lives, may have shifted career paths, maybe looking for more part-time work and so we're trying to be flexible in thinking about meeting people where they are and getting into careers. Our one big focus is hiring pilots and that's been a big topic of conversation across the country. We are hiring about 400 pilots this year. One thing that has shifted, that's about 100 more than we hired last year. We've hired about 284 of them year to date. So, we're more than halfway through about halfway through the year which is great. But the thing that we started to do uniquely in the last few years is actually invest in our own training programs to train pilots from the very beginning of their careers rather than leaving that to chance and helping them get through that long journey. In Hawaii, we have a number of entry-level positions available. In particular, across some of the airports that we work out of, we are looking for leadership positions. So, lead or supervisor positions for people who want to get into a management role or work on leadership in their career. But we've got 30 entry-level positions available in Kona right now, 25 in Lihue, and 20 on Maui. So, just a couple of examples of ways that people can get into the business. And one fun thing about the airline business is you can start one place and you can move geographically but you can also move to all these different career opportunities within the industry or within the company which is pretty fun.

Yeah, it's a great question. Well, we have a great relationship with the HTA and have for a number of years. For many years, but we really do appreciate that leadership in shifting from destination marketing to destination management and really cultivating the right kind of tourism in Hawaii. And that doesn't happen overnight and it isn't an easy journey but we appreciate the path that they've laid out and we look forward to working with both the Hawaii Convention and Visitors Bureau as well as with the Council on Native Hawaiian Advancement because both have incredible skill sets that we really need in this journey. I think how we take care of the places that we travel to and that we live in is going to be an increasingly critical conversation and so we just really appreciate the leadership in making sure that we are having those conversations and moving forward.

Yeah, it's a great question. And Ryan, that question you asked me earlier about sort of, how do we do these things everywhere, is Hawaii special? And I sort of said, we do these things everywhere and Hawaii is special. One of the core ethos in our business came from the fact that we were born in the state of Alaska serving very rural communities and very air service dependent communities and we still do. We serve 20 communities in the state of Alaska, only three of which are accessible by road. And if you think about that, that's a lot of people that we take care of that are really dependent on us and dependent on making it accessible. And increasingly, there's been a conversation about how do we not just make air travel accessible but how do we make sure that it is doing the right thing for communities, for people, both our guests and our employees, and for the climate and the land and the ocean. And so the metrics that we hold ourselves by are guided by those categories. We have metrics in terms of employment. We have metrics in terms of the diversity of our leadership, reflecting the diversity of our frontline employees so that people can see themselves in leadership and be willing to stay and continue to evolve their careers. We have metrics around safety. We have metrics around community giving. And one in particular, a goal around a certain level of employee volunteerism from within our employee base showing that willingness to give back. And then on the climate and environment side, we have goals around carbon, our carbon emissions, which are our number one environmental impact as an airline, our waste and water, and restoring clean and healthy water. So those three areas have some sub-goals within them. One of which is actually a path to net zero carbon emissions that we've outlined with a goal of reaching that zero by 2040. And there's a lot of work behind that and we are taking it one step at a time but really committed to making progress toward that ultimate destination.

It's a great question. So, one of the things that we have always been proud of in terms of how we serve Hawaii from the West Coast and Hawaii residents is having those direct flights from all four islands that we serve to destinations up and down the West Coast. And so there is a lot of demand for flights in the Honolulu but we will never move away from that direct service because we know it's really important. I think as we go forward, part of what we look at is where do people want to go, what times do they want to go, and where might they be connecting from or to and how do our flights work into the overall ecosystem. One of the things that we did during the pandemic is we actually joined the One World Alliance. So, now we can connect more seamlessly and have reciprocal loyalty benefits with the airlines that are part of the One World Alliance, like American, JAL, Qantas in particular, that serve Hawaii. And so, one other thing that we look at now is how do our flights intersect with some of those other partners' flights.

That's such an excellent question. They are more spread out and yet, one thing that is true is summer is busy. Seasonality, different people go different places sometimes in the summer than they may during the spring or fall seasons. One thing that is consistent that we're really working on is the period right after the Christmas and New Year holiday is really tough. Many have traveled. They're not traveling yet for the new business cycle. They're not traveling yet again for leisure. And so we've tried to focus on where do we put our airplanes during that time that makes sense, where people want to go. And so that's where we've really leaned into. We've called it sort of a sun and ski destination, but including these new destinations I mentioned, and connection to the Bahamas and to Guatemala, where people may be going to visit friends and family or to take a vacation sort of off cycle if especially if you don't have kids in school or you're not bound by some of those schedule restrictions. So, we're playing with a few things to make sure that we're using our airplanes in the right way.

It's a great question. So, I feel like I should not go out or something but right now, we feel really good about that staffing reliability. And I think one of the things that we learned from coming out of the pandemic is the need to be really proactive in ensuring the right levels of staffing. Really proactive about our hiring and to be managing those numbers really, really carefully. And that's something, I mean, it's in our ethos to be somewhat fiscally conservative, to think about durability for the long term, to manage numbers tightly. And so, it's in our DNA. We just needed to put that muscle to work in some key areas that weren't as volatile before the pandemic. So, we feel really good and I think those operational stats that I shared are sort of demonstration we're on a really good trajectory as it relates to the operation. A couple things that we're kind of excited about though, certainly the opportunity to get more pilots and more other people into the industry. But there's some really interesting things happening on the sustainability front. There's a lot of innovation around electric and hybrid electric aircraft that might be smaller aircraft and do shorter hops but where you can use non-traditional combustion engines. And actually one of our smaller aircraft we donated to a hydrogen electric powertrain manufacturer that actually works up at Paine Field, the airport that I noted north of Seattle, so that they can retrofit it with their hydrogen electric powertrain system and can do zero emissions flights. On another part of the sustainability innovation area, working on sustainable aviation fuels and making cleaner energies for current infrastructure, current engines available. And they exist. They're safe. They're made sort of recycling carbon materials like you might find in waste material or agricultural waste. And that's an area that we're putting a lot of energy because we think it's a market that not only will be essential for a more sustainable future but that will continue to grow.

Yeah, you just characterized what keeps me up at night. But our board said, look, if we're going to do this, we have to be bold because we have to push ourselves to actually go fast and go far. We just know that we can't do it alone. So, the five parts of our path are: operational efficiency, how do we use what we have incredibly well and efficiently so that we save fuel where we can. Our new MAX aircraft are about almost 25% more fuel efficient than the airplanes that they're replacing. So, right there, that's the foundation. Sustainable aviation fuel is very small supply right now but it can't be niche in the future and so that's where we need collaborations, private investment, public investment, tax policy, and there's been an incredible acceleration in the last couple of years that gives us hope that that market will continue to take off. And then the electrified aircraft that we talked about. And then finally we may need some level of reliable, durable, carbon removal projects to close that gap. But we're working on the foundational things to start. So we're committed. We know we have a lot of work to do though and it's going to take everybody working together.

Well, thanks for that. Your questions have been phenomenal and I love chatting with you all. But I would just say that a lot of what we're so honored to serve Hawaii and to be part of the community. And I think a lot of what is evoked in the spirit of aloha, aloha is something that, and just the idea of care and of being welcoming and of curiosity and of responsibility and stewardship. Those are things that run deep in our culture. And so I hope that we can continue to be mutually supportive and to do the right thing for Hawaii in the future.

Thank you very much. Have a great weekend.