Apr 03 2008
Hawaii’s Transportation Market: What’s Next, Other Than High Prices?
With this week’s demise of both Aloha and ATA, and with the Superferry still in dry dock, have we seen the last of the changes in our State’s now extremely liquid transportation market? Or is this just the beginning.
One thing is virtually for certain. The cost of inter-island transporation is about to go up, way up. Looking for tickets today already gave me an indication of where the carriers are heading. I expect the bottom one-way fares will be $59 (or higher) starting next week. However, most tickets will be quite a bit higher, in the $79-$89 range.
Having been an active observer of both our local market and international transportation for decades, here are some issues I am pondering:
Hawaii Superferry. I’ve seen estimates that the Superferry consumes three times the fuel per passenger when compared with air travel. Can that ever make sense in a permanently $100+/barrel fuel era? With their 35% fuel surcharge (which starts in June), Superferry will soon be the most expensive transportation option.
Superferry suffers from chronically bad PR. They feature slow and frequently uncomfortable rides due to rough seas in the channels. With so many problems, will HSF attempt to stay in Hawaii or will they look for an opportunity to move to another market (perhaps military)?
I remain doubtful about their long-term presence here. The boat is now expected to return to once-daily Oahu to Maui service on April 17, pending Coast Guard inspection. Superferry has been out of service more days than it has been in service, since its unforgettably rocky start last year. A return to Kauai and a planned second ship (and Big Island service), are still in question.
Go! Parent company Mesa’s stock closed at an all-time low today. Go! and Mesa face a myriad of problems including but not limited to poor management, personnel issues, pending lawsuits and investigations and declining key partnerships and load factors. Bankruptcy isn’t out of the question for them.
Under the circumstances, will Mesa keep their focus on our relatively small and difficult Hawaii market or will their financial situation cause them to retreat back to the mainland? Go! too suffers from chronically bad PR problems in Hawaii, which I’m afraid aren’t unwarranted. In addition, they fly cramped and uncomfortable planes, when compared with Hawaiian. I’d say it’s a crap shoot as far as their long-term presence in our market.
Hawaiian Airlines. Hawaiian is now the market’s only strong player (stock closed at a 3 ½ year high today). They stand to benefit most from all of the recent upheaval and, as we’ve previously indicated, could likely be sold in the next round of airline consolidation. We still favor Continental as a likely buyer, but other suitors remain possible. Hawaiian has equipment issues including lack of additional 767 and 717 aircraft with which to expand services, and lack of any 757 or 737 aircraft to serve smaller airports (such as Lihue and John Wayne).
Island Air. Our other beloved local carrier is likely to expand, especially if provided a government loan guarantee, such as is currently being proposed in the state senate. Their prior expansion plans were quashed by Go!’s entry. Island Air needs larger and more appealing planes than their current fleet of 37-seat Dash 8’s however, for long-term success.
New Players. With all of this fluidity, will we see new players enter the Hawaii market? And if so, who is likely?
- Southwest? Some have suggested Southwest as a company familiar with and successful in similar short-haul markets. Yet would they consider our inter-island market a chance worth taking? Alternatively, would they consider replacing their previous ATA code-share arrangement with direct Southwest flights to Hawaii? Or a combination thereof. We’ll see once they get off the FAA’s hot seat.
- UAL? United has contemplated entering our inter-island market for years but has always stopped short of doing so. They remain the largest transporter of mainland to Hawaii passengers. I believe they would be a welcomed presence in our inter-island market.
- Alaska Airlines? They added Hawaii service recently, and might consider expanding into some gap markets left by Aloha’s departure. However Alaska faces a huge problem in that Virgin America has entered their Seattle home turf. So I think they find themselves in quite a fluid and unsure state at this time.
With the most recent changes, opportunities exist for players in both the inter-island and trans-pacific markets. Yet, it is a historically difficult and competitive market, complicated with unprecedented fuel costs.
What do you think will likely happen in our state’s transportation marketplace?
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