EXCLUSIVE: Hawaiian Airlines CEO: Iran War Pushes Fares Up But Merger Goals on Track

The U.S.-Israeli war in Iran has caused across-the-board hikes in airfares for Alaska Airlines and Hawaiian Airlines, and more increases and service cuts could occur if the disruption to global oil supplies persists, the CEO of Hawaiian Airlines told Hawaii Business Magazine.

Diana Birkett Rakow, who has been in the role since October, says the combined airline company is closely monitoring the unpredictable oil market, and like other global airlines has had to recoup rising jet fuel prices through a number of strategies.

“We had about a $100 million fuel hit” for the first quarter, “and that’s obviously significant,” Birkett Rakow said during an interview at the company’s offices at Daniel K. Inouye International Airport. “We’re projecting even higher fuel hits for the next quarter. And if the situation continues? I think, first of all, it’s just really hard to predict, because none of us knows exactly what’s going to transpire.”

Besides fare increases, the airlines have been forced to look for fuel savings through changes in operations, such as taxiing to the runway using only one engine before starting the second closer to takeoff, or connecting to the terminal electric system when at the gate instead of cooling the cabins using the engines.

“We have increased fares across the board — every airline has, and [also] bag fees,” she says. “Frankly, we’re only recovering a very small portion — a fraction — of the cost of fuel. It’s certainly important and significant to recover that cost, but it doesn’t cover all of it. So, we’re also looking at just how do we configure the business as well as possible for success in that time frame? We’re not changing our strategy.”

The war, which President Donald Trump started on Feb. 28 in coordination with Israel, was originally intended as a short “excursion” but has dragged on even after he declared in mid-March that the U.S. had “won.” Recent cease-fire announcements have been followed by a U.S. blockade of the Strait of Hormuz, which Iran had also blocked from its side. That standoff has resulted in verbal accusations by both sides while a stalemate prevents oil and other shipments through the strait. About 20 percent of global oil supplies are shipped through the gulf.

Meanwhile, global oil benchmark prices have frequently spiked near or above $100 a barrel.

All airlines are struggling with the rising fuel costs after the Iran war, and Trump said his administration is considering a government bailout of Spirit Airlines, or possibly buying the company outright, after its ongoing financial losses led it to file for bankruptcy.

United Airlines’ CEO, meanwhile, said he approached American Airlines about a possible merger as a way for the No. 1 and No. 3 U.S. airlines to contain costs and better compete with global rivals. That effort reportedly was rebuffed by American.

As for Hawaiian Airlines, Birkett Rakow says: “We’re full-steam ahead on implementing that [strategic] plan, but we may need to make some adjustments around the edges to get through it as well as possible. Does that include possible cancellation or the suspension of certain routes? It could. That’s not something that we’re actively looking at right now, but depending on how long the conflict and the impact lasts… we take that kind of action really carefully, because particularly if you’re suspending a whole route, it’s harder to re-enter the market.”

Birkett Rakow says the combined airlines passed an important milestone on April 22 when it merged the online booking and processing system. It is unique in the industry because both brands will remain active after the merger, and customers can still choose which airline they prefer to be predominant on the app.

With that milestone completed, executives and employees can now turn toward other goals, including retaining customer loyalty, which has been historically very strong for the Hawaiian brand but was strained due to glitches and confusion tied to the merger.

She emphasized that both airlines are now part of the One World Alliance of 16 airlines that serve destinations in 170 countries. That means Alaska and Hawaiian customers can use their accrued miles on routes of the other member airlines. It also means more passengers from the other airlines may use their miles to travel to Hawaiʻi, which has been struggling to recover from a slump in tourism.

The combined company recently announced new one-stop routes starting in April and May from Hawaii to Rome, London and Reykjavik, Iceland.

Building Loyalty at Home and Abroad

Closer to home, Birkett Rakow says the airline is promoting its discount program for local residents to help defray rising fares on inter-island routes, some of which took place even before the Iran war.

“We don’t make money on our neighbor Island network,” she says. “And we don’t intend to do that [raise fares], but we do need to make sure that it’s closer to breaking even. It’s a really important service for us.

“The way that we’ve tried to address affordability, particularly for local people, is with the Huakaʻi by Hawaiian program.” It provides state residents benefits such as free bags and discounts on inter-island travel.

While an unfavorable exchange rate has hurt Japanese tourism to Hawai‘i, and a backlash from Trump’s comments about Canada have caused many Canadians to avoid U.S. destinations, Birkett Rakow says that has been somewhat offset by strong demand from U.S. travelers.

“One of the things that we try to do as an air group is really take the long view where we can — we try to be nimble and adjust our business to what we’re seeing in the moment but also making sure that we’re set up for long-term success,” she says. “The connection between Japan and Hawaiʻi is strong and will always be strong. Currency issues ebb and flow over time. That’s an important market to us. We just celebrated our 15th anniversary of flying to Japan.

“People love the Hawaiian Airlines brand. They’re so thrilled that we’re keeping the Hawaiian brand.”

‘Until the End of Time’

On the financial front, Birkett Rakow says Hawaiian Airlines had cut running annual losses of $350 million ahead of the merger to half that amount.

“We pledged to cut those losses in half, and we did. We’ve taken some headwinds in the beginning of this year, but that core trajectory is one that we need to continue, and I think it’s enabled by some of the milestones — with coming onto one platform, reducing that guest friction, being able to deliver the full value proposition of the combination.”

Part of the savings came from layoffs. Some 466 were announced, but Birkett Rakow says the actual number was less than that – 302 – as positions were found for some of those initially targeted.

The airline says it has hired more than 1,200 new employees since September 2024, primarily in unionized roles based in Hawaiʻi, maintaining a workforce of more than 6,500 employees across the islands and more than 7,200 systemwide.

Now the company is in discussions with labor unions to update contracts.

Working to the airline’s advantage, state residents are loyal to the Hawaiian brand and image.

“That is part of our strength,” Birkett Rakow says. “It also means anytime we change anything, people take it personally. And I get that. It’s part of the strength of that relationship. And I think people so want to protect Hawaiian Airlines and make sure that it can continue.

“That’s my top goal, right? That’s what we’re all here to do, all of us, including my colleagues in Seattle. We will be better if we have two strong brands until the end of time. We will be a better organization.”