Closing Bell - Manifest Space: Hawaiian Airlines Strikes SpaceX Partnership (Part 1) with Hawaiian Airlines CEO Peter Ingram 2/8/24

Episode Date: February 8, 2024

For the first time ever, Hawaiian Airlines is rolling out WiFi services to passengers. Partnering with SpaceX, the airline will equip its first Airbus A-321 with free Starlink Internet service for passengers to use. On this episode, Hawaiian Airlines CEO Peter Ingram joins Morgan Brennan to discusses the rollout, the decision to partner with SpaceX in April 2022, and how Hawaiian’s pending acquisition of Alaska Airlines will affect the company’s broadband ambitions.

Hawaiian Airlines has officially begun rolling out Wi-Fi to passengers, marking the first time it's ever offered the service. Almost two years in the making, the company is working with SpaceX to do it. It's not meant to replace the authentic Hawaiian hospitality that really is our hallmark, but really to give people another reason to come and fly Hawaiian Airlines. We think it will ultimately lead to an increase in demand, and that's going to accrue to our bottom line. And we're excited about that. But it really, for us, is about looking for ways to enhance the experience

for people who are traveling and acknowledging that expectations have changed. We all want to be connected all of the time. And this is an opportunity to do that in a very high quality way. The first Airbus A321 is taking to the skies today, equipped with Starlink service that is free to passengers on board. Hawaiian Airlines CEO and President Peter Ingram says over the coming months, more of the fleet will tout the offering. Chad Gibbs, SpaceX's VP of Starlink business operations, adds that Hawaiian is the first major commercial U.S. airline to adopt Starlink for in-flight connectivity.

Historically, the amount of bandwidth available to the plane has been an incredibly scarce resource. So a little bit of the game is making it a bit painful so fewer people use it. And so at least those people can have something. We now have a totally different paradigm, which is we have incredible amounts of capacity and bandwidth that we can bring to the plane. So our goal is actually the opposite, which is how can we make it as easy and seamless to get as many people and as many devices connected without friction. And so it's, I guess, when you can bring the technology that brings, that unlocks this crazy amount of bandwidth, you can approach the problem totally differently. On this episode, Hawaiians Ingram discusses the rollout, the decision to partner with SpaceX back in April of 2022, and how Hawaiians' pending acquisition to Alaska Airlines will affect

these broadband ambitions. I'm Morgan Brennan, and this is Manifest Space. Joining me now, Peter Ingram, CEO and president of Hawaiian Airlines. Peter, it's so great to speak with you. And of course, you have an announcement. And that is the fact that you have now officially or are poised to officially start flying customers and giving them access on one of your aircraft to the Starlink service from SpaceX that you announced almost two years ago. I guess walk me through this moment, this milestone. Yeah, it's great to be at the point where we're actively in the installation of the Starlink system on our A321 fleet. In fact, as of yesterday, we've got six of the airplanes completed and have the system installed. We've got a total of 18

A321s and we've got 24 A330s that we expect to equip later this year, starting in the second quarter. So it is great to get to the point where we're deploying this product. We think it is really going to set an entirely new standard for connectivity on airplanes. And when people get a chance to experience it, they're really, really going to find it terrific. Okay. So when we talk about this new standard, what does that mean in terms of Wi-Fi speeds and just sort of what that interaction is going to look like in flight? Well, the Wi-Fi speeds are going to be like what we're used to at home now. And that's a big difference from what the standard expectations around aircraft Wi-Fi speeds has been. It's going to mean not only can you

catch up on your email, you can be on social media, you can be streaming Netflix if you want to stream Netflix on the airplane. And we had a test flight the other day with one of the aircraft that had been installed. We had 130 people on the airplane. I think at the peak, we had a total of 260 different devices banging on the system as hard as people could. And it really went wonderfully. So we're excited to unveil it to our customers here in the next couple of weeks. And it's going to be free for customers. What does that mean in terms of the costs you absorb to roll this out on your fleet? Well, we're not talking about the costs, but the costs of this have gone down from what the early Wi-Fi systems were. And I think,

you know, it's another challenge that guests have faced when they want to use connectivity on airplanes is traditionally it has been priced very high. Part of that is because of the costs of providing it. But part of that, candidly, is because with those less capable systems, people really don't want you using it all that much because if too many people are logged on and using it, it's not going to perform very well. And SpaceX has really cracked the code, literally, in terms of the technology to be able to deliver a wide bandwidth of very high quality connectivity to an airplane with a global reach. And we're excited to be the first major airline in the U.S. that's going to be able to deploy this and share it with our guests.

And as I mentioned, you first announced that you were going to be doing this in April of 2022. I think the original game plan was to start rolling that service out as early as last year, and then it pushed to now here in early 2024. What has gone into the actual installation process and fitting your aircraft to be able to have Wi-Fi capabilities within Hawaiian Airlines for the first time ever? Yeah, so there were really two pacing items in terms of being able to get it deployed. One was to have SpaceX deploy more of their latest generation of low Earth orbit satellites, which they've been working on consistently over the last couple of

years. And the other one was getting FAA approval for the specific installation of the system on. And that approval has to happen on an aircraft type by aircraft type basis. So they've had it flying around on some other airplanes on a more limited deployment. We got the first approval late last year to to go through the renovation on our A321 fleet. And as I mentioned earlier, the next step for us is to get approvals on the A330 fleet and then ultimately on the 787s that we're about to start taking delivery of. And we'll soon be able to have it on all our long haul airplanes. I'm curious how you decided to work with SpaceX in the first place a couple of years ago. I realize we're talking about a mega constellation now in 2024, but they've grown it so dramatically in the last couple of years.

What went into the decision and I guess what went into the deal making for this to even become a possibility? Yeah, I think it's helpful to think about a little bit of the historic evolution of connectivity on airplanes. And, you know, frankly, at Hawaiian Airlines, we're late to the party in terms of deploying connectivity. That gives us an opportunity to leapfrog in technology. But part of the reason we were late to the party, if you think about it, is the very early systems were all ground based. And if you look at our network and look at where we fly between Hawaii and Asia, between Hawaii and the western United States and now to the eastern United States, the vast majority of the time our airplanes aren't over land. So we never even looked at that generation as the geosynchronous technology, the geosynchronous orbit satellite technology came online, they were really concentrated around big population centers. So they were expanding their coverage over land.

And that had started to make its way out to Hawaii. Often it would be spotty when you got over the ocean. But when we started looking at it seriously a few years ago, we were really intrigued by the new technology of low Earth orbit, which was predicated on not a single point of connectivity, but around thousands of satellites orbiting in low Earth orbit, which provides an equivalent amount of connectivity over the vastness of the Pacific Ocean as you get over land in the continental United States. And it really sparked our imagination, thinking about our network, that this was the technology we've been waiting for so that we can not just

deliver ho-hum Wi-Fi connectivity to our guests, but we can really shift the standard in terms of where the expectation is going to be 10, 15, 20 years from now, as opposed to trying to catch up to where things were five or 10 years ago. Yeah, it's pretty incredible. And I'm still wrapping my head around this idea that you're going to be able to get on a plane as a passenger, have free access to be able to stream videos in real time. I guess, is there, have you done the calculus

around the correlation between offering, you know, a service like this and what it means for consumer stickiness and what it ultimately means for prices that you can command for tickets? Is there a relationship there or you think you develop one and the other is going to come? Yeah, I think it's going to follow. I think people are, you know, just like other attributes of our service delivery, people will come to accept this as a part of our product that sets us apart from our competitors. And it's not meant to replace the authentic Hawaiian hospitality that really is our hallmark, but really to give people another reason to come and fly Hawaiian Airlines. We think it will ultimately lead to an increase in demand, and that's going to

accrue to our bottom line. And we're excited about that, but it really for us is about looking for ways to enhance the experience for people who are traveling and acknowledging that expectations have changed. We all want to be connected all of the time. And and this is an opportunity to do that in a very high quality way. And I would be remiss if I didn't ask, especially since you're fresh off of earnings, what you are seeing in terms of the demand picture for Hawaiian in 2024? Yeah, I think the demand remains pretty strong. Overall, we're seeing, you know, Hawaii is a destination that is aspirational for so many people. And we've seen a really strong recovery over the last couple of years. People are demanding premium leisure experiences, and that's what we aim to provide. And adding this new benefit to our guests when they're traveling

with us is one part of making sure we're continuing to move forward in terms of delivering on those premium experiences. And of course, pending acquisition of Hawaiian to Alaska Airlines as well. How does that affect, if at all, your investments and your rollout of the service for the fleet? It doesn't change what we're doing at all. We're continuing to invest in the future of the business. We've got the 787, the first one getting delivered this month. We're continuing that investment. We're investing in our lounge products.

We're investing in our airport experience. And we're investing in the experience on board our airplane. So all of those things are important to us, important to our guests. And it's important to Alaska as well as they look at what the benefits are of combining with Hawaiian Airlines. Okay. Any update on that front before I let you go? We've got our proxy is out right now. We've got the shareholder vote scheduled for less than two weeks from now.

And so that's the next milestone we're aiming towards. And you'll be seeing the news on that as it comes out. Sounds good. Peter Ingram, CEO and president of Hawaiian Airlines. Thank you for joining me to discuss the rollout of Starlink and more at Hawaiian Airlines. That does it for this episode of Manifest Space. Make sure you never miss a launch by following us wherever you get your podcasts

and by watching our coverage on Closing Bell Overtime. I'm Morgan Brennan.