Northern Pacific Airways gained the headlines earlier this year with an ambitious project: a low-cost carrier with a hub in Anchorage, Alaska, connecting destinations in the United States to cities in Asia with Boeing 757s.
The airline is a spin-off of Ravn Alaska, a local operator connecting cities in the state with a number of Dash 8s.
During World Routes 2021, in Milano, Aviacionline sat down with the new airline’s CEO, Rob McKinney, talking about the startup, its plans and intentions for the future. The executive had meetings with airports and tourism authorities during the event.
Aviacionline (AL): So, tell me a little bit more about yourself, your career, and how did you get here now.
Rob McKinney (RM): That’s a long story. I started out life as a pilot and I worked at several different companies. The last one, just being a pilot. I was at FlexJet flying in the Learjet 60s. And, for me personally, there was something more, I wanted to be more of a value, so I went back to school, got my MBA, kind of transitioned in airline management and then have been working myself through airline management to several companies, ever since then. And I was starting a different project in early 2020, with my business partner. And COVID kind of stopped that ambition at the same time. We thought, you know, there’s probably other airlines that are struggling and I was familiar with Alaska having done business in Alaska prior. And I kind of mentioned in advance. We should take a look at Ravn Alaska, ‘cause I bet they’re struggling.
And it was not just two weeks later when they had to file for bankruptcy. So, my business partner and I went to work raising investors and were successful, buying Ravn Alaska out of bankruptcy. And so, this past year have been working on that project and getting Ravn to back up, which is doing great now. And two, three months ago, I went to our lead investor and our other investors that had pitched an idea that a friend of mine had been working on for a couple of years to use Anchorage as a connector between Asia and North America, similar to the way Icelandair uses Iceland as a connector between Europe and North America. And so we started working on this idea using narrow bodies to fly to points in Asia, over Anchorage and then over into the continental US.
AL: So what is the plan now? What is planned for a startup in terms of fleet and destination? Do you feel you are already certain in terms of which destinations you are going to serve?
RM: Well, we’re fairly firm, you know, I’d never used the words, like «always», «never», «maybe», «certain» in the aviation industry, but, right now we’re, we’re focusing on, Narita and Tokyo, Osaka, Nagoya, Incheon and Seoul over Anchorage. And then in the continental US, we’re looking at the Ontario airport in LA, SFO, LAX, JFK and Orlando, and then maybe Houston Intercontinental Airport.
AL: So, just US and Canada to the Pacific, right?
RM: Well, not even Canada, so it’s just Anchorage is the hub. And so, it’s Asia connecting to the continental US.
AL: Why not Canada?
RM: Well, we might look at that next, but we’re, we’re a US domestic airline. So the goal was to leverage that ability to get people to clear customs in Anchorage and then take Asians on, into the U S after they’d cleared customs and immigration, so…
AL: When do you plan to start?
RM: We are hoping for proving runs as early as April of next year and then commercial service to start around August.
AL: But why the 757 – is it a matter of cost of ownership that defined them?
RM: Well, it’s a matter of which one can do the mission. So there’s not so many airplanes out there that can make those stage links, and this is definitely one of them. And it’s available versus like, you know, a newer model, a 737MAX 9 or MAX 10, or Airbus 321 XLR would be a better, more efficient airplane, but they’re not available. You can’t get them. And we really believe that our opportunity is to be a first mover in a post-COVID world. So, 757 was really the only thing that was still a narrow body that could do the mission and is available.
AL: So what is the plan in terms of cabin? Is there going to be a lot of business class seats or more economy?
RM: It’s gonna be way more economy, it’s not gonna be like a ULCC, but it’s probably going to be more in the LCC space. So, we’re going to have 185 economy seats and probably twelve premium.
AL: And why is that?
RM: Well, that’s the most density that we can really squeeze in there and make the stage links that we need, and our goal is to offer a lower price product. So, our goal is not to go compete with the JALs and the Deltas in the premium space. Our goal is to stimulate newer traffic people that maybe can’t afford to fly right now or create a better experience. Like if you’re [in] Nagoya, [you] have to do two or three stops [to get to the US]. You can do maybe a one-stop trip.
AL: Does the Anchorage airport buy into this idea – how are you dealing with them?
RM: With them? It’s very much so, the Anchorage Airport has been great supporters. They’ve been great to work with. They were a great help and great partners as we brought Ravn back to life out of bankruptcy. And they’ve been continued to be supportive of this project. Yes. Then it’s a win-win situation, the entire north terminal in Anchorage is just sitting empty, essentially, right now being unused. And, you know, we’re proposing to bring it back to life.
AL: And we know that Anchorage is a cargo airport. Do you plan to benefit on that, not necessarily on full freight airplanes, but on the 757 [cargo belly]?
RM: We don’t think that that’s going to be much of a… of a piece of the business only because of the stage length that, you know, we’r going to be at max takeoff weight for the 7 57. And so there’s not going to afford much space to do belly cargo. If we ever expand into widebodies within, that’ll become more of an opportunity.
AL: So you’re going to need a very high load factor to break even. When do you expect to be profitable?
RM: We think [from] our projections, we can be profitable shortly after the first year of operation.
AL: How many aircraft are you going to have by then?
RM: We planned to launch service with twelve airplanes.
AL: Leasing or some are yours?
RM: We’re still working with potential lessors, but our goal is to have them all be leased.
AL: Why is that?
RM: Just to preserve capital, to tie up the amount of money to have an owned 757, either capital could be best to use other ways.
AL: In terms of capital, have you raised enough already or how is it going?
RM: We’ve raised about a third of what we need. So we’re in the process of still raising money right now, our target is we believe we’re going to need around a hundred million [dollars] to get this going. And we’re, like I said, we’re about a third of the way there.
AL: Who is your largest investor?
RM: That’s the same as what it was for Ravn, Josh Jones is the lead investor. And he’s the biggest investor in the new venture as well.
AL: I’ve heard that you were going to work with cryptocurrency. Tell me more about it. That’s a very interesting project because nobody does it so far.
RM: We really hope that that piece of the project is gonna be transformative in the industry. So instead of when people fly, just earning a point or a mile that has maybe has very limited use and expires and have all these limitations, we’re actually going to offer them real cryptocurrency that will never expire and is a lot more tangible. So you can trade it into other cryptocurrencies. You could trade it back into fiat currency. And we’re part of a partnership with Anchorage Airport [where] they have agreed that all the vendors in Anchorage Airport will actually accept «Flight Coin», which is gonna be our cryptocurrency for frequent flyers.
AL: Instead of [just] doing cashback, why will you do that?
RM: We believe it’s a value added to the customer that, you know, as things progress, that businesses need to add more and more value to, to what their customer is. And we think that having cryptocurrency is gonna be transformative as far as what people will then expect. It’s like, that’s gonna be the new norm, like, why would I go fly and get a point? That’s just gonna be good on that airline; when I could get a «Flight Coin» that I could use for almost anything that I want.
AL: So you’re really focusing on the younger traveler here, right?
RM: So definitely the younger
AL: But you are a startup. Nobody knows your brand – how are you gonna sell yourself to the market?
RM: Well, the beauty is we’re a startup when we’re talking about this division and this service, but we’re not a startup as an airline. So we already have Sabre as a PSS. We already have a IATA code we’re already fully distributed in all the GDSs and all the OTAs. So we already have the full distribution that a startup airline wouldn’t necessarily have. So as people do searches to do travel, however they would search, we believe by being the lowest price alternative [we] will float to the top. And that people will just see us. We’re also in the Asian markets, working with several GSAs, that’ll be out there and be our sales agent in those markets.
AL: So you don’t expect too much direct sales. You think it’s going to be more GDS.
RM: To begin with, it’s gonna be more GDS kind of driven, but eventually once people have flown [us], then we believe that they will come back to np.com to buy their ticket.
AL: And the loyalty is going to be all based on cryptocurrency.
RM: Correct.
AL: And tell me more about saving Ravn Alaska. How did it work? It was just before COVID and some three established carriers bid for the airline, but they opted for your offer.
RM: You know, I know we ended up being the highest bidder, and I can’t speak to why the others stopped when they did or what their rationale was, we didn’t have a lot of visibility into the actual auction process. So I don’t know exactly why the others did what they did, but we were the high bidder. And I think a lot of it had to do though with, we made it clear that we were gonna bring Ravn back to life and we were gonna rehire people and we were gonna re-hire their service. And some of the other bidders were private equity firms and they were just gonna split it up and sell it for the, for the parts. And I think, for as far as the state went, that they would prefer to know that somebody was gonna bring the airline back and reestablish those jobs and reestablish the service in the state.
AL: So locally, you are profitable now, in Alaska.
RM: Yes.
AL: Do you think that you can connect the two airlines, Ravn and Northern Pacific in the future? Or is it gonna be too much residual, the traffic from one to the other?
RM: Well, they have way different target markets with the exception of, we really believe that we’re impressed with what Icelandair has been able to accomplish and the whole stopover concept of people spending… instead of connecting in 90 minutes, connecting over two or three days. And so, yes, we believe once they realize, ‘oh, maybe I don’t want to spend an entire week to see what Alaska all is about, but I want to spend three or four days’, [then] yes. And so, then we can connect them from Northern Pacific onto the Ravn fleet and take them to Dutch Harbor or take them to Fairbanks or take them some place where they can go dog sledding on a glacier.
AL: So this sort of integration, that stopover, are you planning to do from the off?
RM: Well, we believe that’s probably gonna take longer to build up – that kind of knowledge and people understanding – [but] that’s a possibility. So out of the gate, our goal really is just the connectivity between Asia and the continental US, which I get the question all the time, like, ‘aren’t you worried about seasonality’ or ‘how many people do you want to, you expect to go to Alaska’? Well, we’re not counting on anybody just wanting to go to Alaska. We’re counting on people that are already going to fly from Asia to the US and US to Asia. And we’re not really taking them out of their way. It’s gonna be about the same stage length, even with the stop and Clear and the customs and immigration; Alaska is going to be a far superior experience than clearing customs in LAX or SFO.
AL: So I’m gonna ask you too, aren’t worried about seasonality?
RM: I’m not worried about seasonality just for what I explained.
AL: So, do you plan to compete with the domestic carriers in the way to Anchorage or not? Or you want to be the only airline in the routes you’re going to serve domestically. What’s the plan?
RM: The only city pair where we fly on top of anybody is Las Vegas to Anchorage and Alaska Airlines does that seasonally, but everywhere else that we’re serving, there’s nobody else that does that, that O&D [origin and destination]. So, we’re not. We specifically felt that there was enough business for everybody. So, we didn’t go in on top of somebody else.
AL: So are you seeing the PDEW [passengers daily each way] numbers? Like, do you plan to rely also on the O&D between these cities and Anchorage? What’s the plan?
RM: Yes. We’re counting on zero O&D from Anchorage out of the gate. So, only PDEW numbers between the cities and Asia and the cities we’re serving in the US.
AL: So if it goes, it’s better, but you’re not really thinking about it, yes?
RM: Exactly about it. It’s yes, it’s great, but we’re not counting on it.
AL: And in terms of partnerships, what is the plan like in, in both sides, either in North America or in the Pacific, are you, talking with any airline at the moment or not?
RM: We are, we’re talking about the Value Alliance in Asia to both feed our passengers into them and then get feed from them. So we think that’s probably something that we’re gonna be looking at out of the gate. We’re currently partners with Alaska Airlines, and we’re hopeful that that will continue, that that relationship will continue to benefit both airlines.
AL: So you’re partners with Alaska. They‘re going to expect you will be feeding [them], because you don’t really compete, right.
RM: This really doesn’t compete with them. So we believe that. And we designed it that way [so it] is not directly a direct competitor with them, because they have been a good partner to us.
AL: Are you in conversations with them about this new project?
RM: They’re aware of it, you know, but there are the antitrust laws in the US, it’s a difficult conversation. So conversations have been tangential. I gave them a heads up before the news, so they knew of it before we went public with it, but then that’s about it.
AL: And the last question, where do you see this airline in five years?
RM: My mandate from the beginning is to grow to fifty airplanes in five years. So, we’re going to continue to add frequencies, continue to add destinations so that, you know, we, can be around, fifty tails in that period of time
We just realize that’s a 20-year-old airplane and there’s no way to scale to fifty airplanes. So we’re in talks with Airbus and Boeing right now to see, well, what’s gonna be the next generation. What’s gonna make sense. And it’s gonna be one of those two things. I mentioned either the 737 MAX or the 321 of some versions. But that’s gonna be, you know, probably once we want to go beyond twenty airplanes, we think we can get to 20 757.
AL: When that’s gonna be?
RM: We’re talking right now because it’s a long lead time to buy airplanes like that.
AL: Are you talking to lessors?
RM: I’m talking directly with Boeing and Airbus.
AL: Are going to buy it from them?
RM: We want to make sure we’re going to be the driver of what kind of airplane is it. And then we find the lesser partners to go purchase the planes.
AL: And then [are there] plans of going public, or you’re gonna raise cash privately?
RM: Right now, we’re just looking at private, you know, in five years, we might look at, you know, an IPO kind of situation, but you know that that’s a way down the road.
AL: Can you grow that much only with private injections of cash?
RM: Yes, we believe we can.
