The airline industry always seems to be in the crosshairs of consumer groups, not to mention late-night comedians. It’s an irresistible target, given flight delays, stranded passengers, ubiquitous fees and the occasional berserk flight attendant.
Mark Dunkerley can empathize with frequent fliers — he is one — but he’s had issues of his own with the airline business. In 2002 he joined Hawaiian Airlines as president and COO — just as it was going through bankruptcy. When the carrier emerged from Chapter 11 in June 2005, he became CEO and turned Hawaiian Air’s fortunes around.
The captain’s hat seems a perfect fit for Dunkerley, 47. A native Briton who has a bachelor of science degree from the London School of Economics and a master’s degree in air transport economics from the U.K.’s Cranfield Institute of Technology, he began his aviation career as an acrobatic pilot. Before landing at Hawaiian Air, he was COO of Belgium’s Sabena Airlines Group. Dunkerley also spent ten years at British Airways, rising to senior vice president of its Latin America and Caribbean division.
He recently sat down with Staff Writer Julie Segal to discuss how he pulled Hawaiian Air out of a tailspin and how he sees the prospects of the airline and its industry.
You don’t have to be a chef to run a food company or a designer to run a clothing company. But you are a pilot — you’ve even won a North American acrobatics championship. Does being at ease in the cockpit color your view from the corner office?
Somehow it’s become vogue for CEOs to approach certain industries with no deep experience of them. I very unashamedly say that I have a passion for aviation in all its forms, whether it is flying acrobatics or 80-year-old airplanes from the first years of man’s flight or running an air carrier. My unbridled passion for aviation in all its forms gives me a deep perspective on the industry as a whole and an abiding appreciation for what it takes day in and day out to deliver good, safe, efficient air transportation that customers actually enjoy.
What drew you to an airline that was in bankruptcy?
If you’re going to work in the airline industry, you’ve got to be prepared to take risks and rise to challenges. It was a personal risk. But the underlying market position of Hawaiian was stronger than its performance suggested. So it was an opportunity to improve the business, to fulfill the latent promise of the franchise.
How did you accomplish that?
In a company in trouble, everybody’s confidence is at a low ebb. Companies rarely do well one moment and find themselves in deep trouble the next. Generally, there is a multiyear erosion of performance. Everybody in the company becomes aware that things are getting worse and worse and worse. So it’s important to find a way of changing how employees view themselves and view the company. And the secret is to find something relatively short-term and easy to accomplish, and you set that as a target. You can get people focused and start building confidence. For us, that issue was on-time performance.
You felt that would be “easy” in an era of notorious delays?
When you’re a little carrier like Hawaiian and you’re surrounded by major airlines, it’s pretty easy for people to imagine you’re less good than everybody else — that you don’t have the same depth of resources, the fleets of hundreds of airplanes and so forth. But what we do have is the ability to get really focused on delivering service. I believed — and we’ve subsequently proven — that we could be the most punctual airline in the land. We set that as the task, and we did it one day at a time. There was no magic bullet. A lot of people worked very hard. But pretty soon we were the most punctual. We did that to communicate internally that this is a better airline than employees were apt to feel it was at the time. But what’s interesting is that this subsequently became a valuable external message. It was never intended as such.
So you boosted morale. But what were some of the other fundamental problems you needed to fix?
Getting people to rally around a long-term vision. When you’re in trouble, all of the focus is on the short term. It became very, very important to get employees to understand that there was a long-term vision and that by making short-term decisions — which by themselves didn’t sound all that momentous — they were contributing to building a long-term vision.
What was that vision?
I wanted our people to focus not only on the interisland business but on carrying people back and forth to the U.S. mainland. I wanted to diversify away from our traditional core and also to deliver a level of service that exceeded our competitors’. And we did that.
Speaking of the need for diversification, what about another important mainland: Asia?
To continue to diversify, we had to take a step back and ask, Where in the long term — not the short term — would visitors to Hawaii come from? It doesn’t take much investigation to conclude that Asia is the source of the tourists of tomorrow. Then the question becomes: When do you start flying to Asia? If you do it too soon, the demand isn’t there and you lose a lot of money. If you do it too late, somebody else beats you to it and you’re left out in the cold. What has been very fortunate for us is that, alone among U.S. airlines, we’ve been profitable through the high fuel prices and this last recession. And by staying profitable, we’ve been able to keep to our long-term plan. So we’ve been able to expand into Asia, order airplanes and build relationships there. Our timing should be pretty good.
How much of your sales come from Asia now, and what’s your goal?
International revenues are about 10 percent — small. Our goal for the long, long term is upward of 30 to 35 percent.
You’ve grown consistently in an industry riddled with failure. How?
Our company has done a really good job of making the most of opportunities. For example, the U.S. and Japan agreed to allow four new routes between the U.S. and Haneda Airport in downtown Tokyo. Everybody else uses Narita Airport, which is a long way out of town. All the major airlines competed for the routes, and many analysts doubted we would win one. But we did, and the reason is that we were better prepared. We articulated how this was part of our long-term strategy, and we demonstrated how we were ready to exploit the opportunity fully.
How do you keep your customers happy?
Our employees are absolutely terrific, and they deliver service with real caring, empathy and a smile. We carry roughly 8 million customers a year. Let’s say a customer has an interaction with us a dozen times on average. So that works out to 100 million individual transactions a year. And we’re a very small airline. Well, there is no way you can script 100 million transactions. You have to rely on the goodwill, efficiency and dedication of frontline employees to deliver good service.
What are the big issues facing your industry?
One is the increasing regulatory burden that’s befalling us. And there doesn’t seem to be much distinction being made between issues of transparency that allow consumers to make informed choices, which are generally good for competition, and other regulations that are outright edicts. Thou shalt do this, and thou shalt not do that. However well-intentioned they are, they generally have negative consequences. The other issue is that now that we’ve gone through a period of great economic uncertainty and businesses are trying to find their feet in more stable times, we’re seeing regulatory and legislative uncertainty replacing economic uncertainty. That can be every bit as damaging.
Which rules and regulations have the biggest impact on Hawaiian?
We are an industry that deals with an unbelievable volume of regulatory requirements. Air carriers are commenting right now on proposed new consumer regulations. Obviously, there is a lot of safety regulation. Being a public company, we are also dealing with all of the financial regulations that were created over the last decade. We deal with a lot of employee- and union-related regulations. In almost every facet of our business, we face a veritable telephone book’s worth of complex regulations. There are some that we can more easily see the cost-benefit of than others.
In light of all the controversy over executive pay, do you see CEOs’ compensation in general as maybe excessive?
First, I don’t think you can say that on the whole CEOs are overpaid or underpaid; it’s very much a case-specific question. Second, in terms of my own situation, I’m enormously fortunate. Most people that are able to become CEOs of companies are very, very fortunate. It would be wrong to characterize the way we feel about pay as somehow a sense of entitlement.
But do you ever get frustrated by the public perception of CEO pay?
I don’t lose any sleep over it. I don’t spend a lot of time focused on the characterization of some bank CEO’s pay, because it doesn’t really have anything to do with the work that we as airline CEOs do.
What has the financial crisis taught you?
That we’ve been very lucky — we’ve been profitable throughout it. The crisis underscored that you need to make sure that you are not the weakest in your industry. What happens when difficult times come is that the weakest perish, and that creates opportunities for strong participants. So it’s very important — even when you think times are actually pretty good — to make sure that when you look at the league table of your competitors, you’re not on the bottom of that table.
The U.S. has a serious unemployment problem.
Where do you see the jobs of the future coming from?
It’s more difficult for the Western economies — not just the United States — to produce and manufacture things that have low intellectual-property content, so the Western jobs of the future are likely to come in the service industry. They’re likely to be jobs associated with the fact that for the next few decades the center of consumption is likely to remain in the Western economies. So jobs that are close to the consumer — as opposed to close to the raw material at the other end of the spectrum — are likely to be where Western employment comes from. I think there is a question about whether the Western economies as a whole are focused on that economic reality and are really doing what they can to prepare for it.
The centers of consumption will really be in the West?
The trend is for the global share of consumption to drop in the West compared with the developing world. But it’s going to take decades before we’re living in a reality where that share of consumption is at parity.
You recently negotiated with your own labor unions.
How are your relations with them?
We’re very fortunate to have good relations with our unions. It’s a very different environment here than at most of our competitors. Quite candidly, it’s taken a lot of hard work on the management side, but it’s taken hard work on the union side as well. The relationship between unions and employers has everything to do with whether both parties are negotiating to prepare for the future or negotiating to preserve the past. The changes in the global economy are irreversible and inexorable, and they should be embraced rather than resisted. Negotiations characterized by trying to preserve the past are destined to fail.
What’s going to keep Hawaiian Airlines flying high?
We have identified our unique selling proposition — we sell Hawaii — and we understand our marketplace better than any other participant does. Our future success is going to come from positioning that unique understanding in a broader marketplace, and we believe there is ample scope for expansion of our business model.
