Comments get us going. This morning’s statement from Guy caught our attention about his take on Southwest Hawaii and Costco. Whether you agree or disagree, there are some excellent takeaways to consider.
Southwest is so predatory and will sell cheap seats to hurt their competitors. Remember when Costco was cheap. After they destroyed the mom and pops they now can charge whatever they want.
So is the comparison between Costco and Southwest accurate?
Costco made a move somewhat reminiscent to Southwest’s when they came to Hawaii starting in 1988, with ongoing expansion, including gas stations and stores on all the major neighboring islands. When Costco arrived here on Kauai, the neighboring gas stations lowered their prices in a single day by nearly $1/gallon. We’ve seen many mom-and-pops and grocery stores disappear too. Costco used its weight to create an advantage that competitors simply could not match. The smaller gas stations were gouging us before Costco. And now Costco seems to be raising its prices back up with little competition. Similar retail analogies might include Walmart and Home Depot.
Southwest’s Hawaii brainstorm came directly from Hawaiian Airlines.
SWA’s CFO Andy Watterson said that the plan is to go big. And, with enough flights to any given place, “The other airlines can’t really touch you… We needed to force a pace.”
Southwest’s CFO, who came to them directly from Hawaiian Airlines, said, “It sounds risky to open a bunch of new cities, but the alternative is worse.”
Throughout its 55-year history, the airline has encroached on rival territory while others struggled. And so it was that Southwest doubled down during Covid on Hawaii, among other places. While others were contracting, Southwest expanded.
Southwest looks for whatever holes present themselves and jumps right in. They tried that on a wide range of mainland to Hawaii flights before pulling the plug on 10 Hawaii routes just two weeks ago. But even retrenching like that doesn’t stop them in Hawaii.
The next opportunity Southwest saw was Hawaiian’s monopoly on interisland flights.
What did SWA do to press the point on interisland? They announced $39 for every seat on every flight throughout the rest of 2022. Talk about undercutting the competition. We do like that we can fly interisland for a reasonable cost. Hawaiian Airlines has stepped up to the plate to matched the $39 fare on times that compete with Southwest. Here’s the issue. We estimate that it costs the airline multiple times that $39 fare to provide the flight including fuel, airport fees, personnel, and so much more. So how long can and will they both keep this going?
In a near-perfect description of what Southwest is doing, the pilot head of SWAPA (Southwest’s pilots’ union) described the airline’s expansion strategy this way: “Predatory and opportunistic—which we like.”
Since Southwest Hawaii flights began in 2019.
After more than a decade of anticipation, so much has happened since Southwest Hawaii flights began in March 2019. That included Covid and the grounding of their 737MAX fleet after two deadly crashes.
When they came to Hawaii, Southwest saw this special opportunity.
First, they were thinking of expansion. Southwest long felt that Hawaii remained underserved by other low-cost carriers, some of whom, like Allegiant, had tried and failed. Then too, Hawaii represented a big gap in a network so focused on where their California regulars wanted to go.
The mainland to Hawaii market has been dominated by what Southwest thinks of as the premium airlines, Alaska Airlines, American Airlines, Delta Airlines, and United Airlines. That made Hawaii a perfect match for Southwest, with its keen focus on predatory pricing and demographics.
But did that work? Somewhat.
Southwest isn’t averse to trial and error. And so it was as if they just canceled routes from Los Angeles to Kauai and Kona, Phoenix to Kauai and Kona, Sacramento to Kauai, Kona and Maui, and San Diego to Kauai, Kona, and Maui. That comes as the airline remains constrained on any additional direct mainland to Hawaii routes. That is in large part due to the distance limitations of their 737MAX fleet.
Will interisland be part of the Hawaii prize Southwest desperately seeks?
We don’t know. They’ve said their current focus is on convincing Hawaii residents to move from Hawaiian to Southwest for interisland flights. Will that work, and can Hawaiian sustain the $39 prices? One thing is for sure. It simply isn’t sustainable for anyone in the long run.
Southwest’s real advantage is they allow us to change our flight without penalties. Thank you, Southwest!!!
Funny anecdote – I was in Phoenix awaiting a flight to Hawaii. I had glanced at the big screen and found the gate for my departure time, went to the gate, and sat down to relax before boarding. I usually like to board last – why be a sardine before its time? …. After awhile an airline employee came out and began an officious harangue – ‘don’t do X it’s a Federal offense,’ ‘don’t do Y or you’ll be arrested’ etc. I thought, this doesn’t sound like Hawaiian Airlines (they’re usually courteous and respectful, that is, they have aloha!). I went to desk, waited to be served, and asked ‘what airline is this?’ Southwest. Holy moly! I had to run to the other side of the whole airport to make my Hawaiian Air flight departing at the same time.
The hundreds of flights I have taken on Southwest I have Never heard that announcement. Maybe it’s in response to the run of unruly passengers lately. I’ll find out on the 20th when I fly Southwest back to Hawaii on the 20th.
Competition is good. Without SWA, Hawn would continue to charge the high rates they normally do. Having SWA around w/ lower costs provides opportunity for the poorer to travel even if just to our other islands.
Hawaiian airlines prices was crazy for inter island flights. They ran others out of business. Now Southwest is giving them some of there own medicine! Hawaiian had a monopoly before, kind of like Young Brothers for shipping. They need competition like Matson or others delivering direct to other islands.
If you recall, Hawaiian used the same predatory pricing strategy to drive Aloha Airlines out of business.
The airline business is extremely competitive, leading companies to try different routes u til they find a profitable niche. We left the world of regulated airlines in 1978, resulting in lower air travel costs. Are you suggesting we return to a regulated structure which would result in higher air fares?
The non-Southwest oligopoly of airlines flying to Hawaii have continued to raise prices and extra service charges like comfort seats, baggage and cancellations. Southwest Airlines has brought their proven culture of terrific service, lower refundable prices, and two free bags. I’ve flown with Southwest Airlines on 20 round trips per year for many years and have not been disappointed, except for weather-related conditions. Travel issues happen to all airlines, but workarounds on Southwest seem to be less painful, in my opinion.
Southwest getting treated like the superferry where the unions and elite drove them out because they were a threat to their power. Conned locals that they were the bad guys and as usual hired protestors to make it look like there was an issue. Same con as always.
I’m a capitalist, so this is only a knee-jerk reaction to the article. Perhaps a legal definition of predatory pricing could be developed and if the provable predatory pricing could be responsible for the failure of some percentage of competitors, the predator company could be mandated to retain its destructive pricing for, say, 10 years.
Hawaiian Airlines has promoted itself as island friendly to the island residents … but ever try and see what is a predator when it comes for booking flights from Honolulu to Hilo and back during the Merry Monarch event on the Big Island. I can see that this airline goes into the ‘supply and demand’ mode just like the rest of them. Then, too, over the years, Hawaiian customer service has ended up being mediocre at best. Southwest Airlines customer service is based on good customer service. For the great part of my travels with this Texas based carrier, it has been surprisingly friendly and cordial.
To say that SW is not predatory indicates a lack of understanding of what predatory behavior connotes. Predatory pricing is when an entity prices its service under what it legitimately costs to produce that service with the Intent to drive competition out of the business. SW has a history of that kind of behavior (read about their efforts in Newark, NJ over 10 years). That behavior is even more illegal when the effort uses returns from other markets to subsidize the market entry. SW has been in the inter-island business for 3 years. It still advertises their low prices as due to the new operation and giving consumers a chance to try the airline. That’s BS and a cover for their strategy to drive HA out of the market. Predatory!!!
Southwest is getting more and more passengers flying in Hawaii and out of Hawaii. They are definitely the only way to fly. Have you seen the difference in flight attendant service? Hawaiian Airlines flight attendants union don’t allow them to do anything. Next time you fly on rip off Hawaiian push the call button and see how long it takes for an attendant to come and see what you might need. Southwest attendants are much more friendlier and majority are not even Hawaii locals. Continue to pay high prices on Hawaiian and you will miss the boat on Southwest. Southwest is the only way to fly.
So True . The last time I took Hawaiin Airlines to Hawaii from Oakland z. I paid extra for Business Class and when I got up to go get another drink , the lead rude flight attendant said we are getting the cart ready you will have to wait. Couldn’t even get a water . Really ? So glad Southwest and their great service started coming to Hawaii.