Amazon Pursues Investing in Hawaiian Airlines Under New Airbus Freighter Deal

Photo credit: An Amazon Prime Air Boeing 767 Flickr / Aero Icarus

Amazon could become a significant minority shareholder in Hawaiian Airlines under a new deal that will see the carrier fly freighters for the e-commerce giant’s Amazon Air division.

Hawaiian will operate up to 10 Airbus A330-300 freighters for Amazon beginning next year, the airline and Amazon announced Friday. The carrier will open a new pilot base in the mainland U.S., which will complement its existing bases in Hawaii, to support the new operation that will grow its 61-aircraft strong fleet by more than 16 percent.

But, importantly for Hawaiian, Seattle-based Amazon will take 9.4 million warrants in the airline that could be converted to an up to a 15 percent equity stake. The investment would be worth roughly $110 million based on the closing price of Hawaiian’s stock on Thursday.

“This relationship provides a catalyst to grow our business and the unique opportunity to diversify our revenue sources while capitalizing on our established strengths,” Hawaiian CEO Peter Ingram said.

Air cargo boomed during the pandemic. Described as a “lifeline” by many in the airline industry, it single handedly kept carriers like Korean Air in the black during the worst of the crisis. Some carriers, including Air Canada, Azul, and WestJet, even opted to make their pandemic freight operations permanent parts of their businesses.

But Hawaiian’s new deal with Amazon really is taking a page out of Sun Country Airlines’ book. The Minneapolis-based discounter began carrying packages for the e-commerce giant in 2020 under a deal unveiled the year before. That moved proved a prescient one as passenger air travel all but shut down in the early days of the Covid crisis.

“We believe that our diversified and flexible business model allowed us to mitigate the impact of Covid-19 on our business better than any other large U.S. passenger airline,” Sun Country said in reference to its dual cargo and passenger businesses in an initial public offering filing last year. The contract with Amazon provided it with “consistent, positive cash flows” during the slowdown.

Hawaiian has struggled during the pandemic. Strict travel restrictions in its namesake state all but closed the market to the visitors that the airline relies on until 2021, and forced it to shut its regional subsidiary, Ohana. Its international business, particularly from Japan, has only begun to comeback in the second half of this year. And Hawaiian has yet to return to the black after two years of pandemic losses.

Ingram, speaking on the Airline Weekly Lounge podcast in September, said the airline was “making progress” on its recovery but was not “where we want to be yet.”

As Sun Country’s experience shows, and Ingram noted in his remarks: Operating freighters for Amazon should create a new diversified and stable revenue stream for Hawaiian. Additional benefits include a more competitive offering to recruit pilots with as the U.S. faces a shortage, and greater scale in sourcing parts and other goods for A330 aircraft. Hawaiian already operates 24 passenger A330s.

Elbe Flugzeugwerke GmbH, which is partially owned by Airbus, will convert the A330-300s to freighters. Amazon is leasing the aircraft from Altavair.