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.
We’d love to hear your input on Southwest Hawaii and how things are evolving.
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Boyd R. says
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.
Chris R says
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.
md q says
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.
John says
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.
Keith M says
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?
TomK says
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.
Liam G says
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.
RodW says
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.
Ieufaka says
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.
Tony S. says
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!!!
Rob I says
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.
Liam G says
I like how it’s predatory when sw and Costco come in but not predatory when the consumer is getting gouged and ripped off. Just because something has the word hawaiian on it doesn’t mean it is there to be your friend. If anything they’ll take advantage of you. Have you seen the Hawaiian airline prices? $170 one way to move to a slightly bigger seat? Charge for luggage and the original prices is twice that of sw. without Costco half the island couldn’t survive. The Costco at dole is the busiest Costco in the world. And has only a million people on island. If Costco wasn’t around to keep prices in check half the population would need to move.
Tuco H says
I thank God Costco , Wal-Mart and Southwest came to Hawaii Nei ! If not, we would still be at the Mercy of Hawaiian Airlines having a Monopoly here ! Southwest levelled the Playing Field !
LUNAKANAWAI H says
Remember when aloha airlines did not get the same support that hawaiian air did?
Remember when aloha airlines closed then hawaiian airlines and united airlines began gouging hawaii and its people?
If you did, let me remind you!!!!!
Thank god for competition.
Support competition, please remember your hawaiian history and be on the right side of history.
Sally U says
I remember the evening my husband and I took the last Aloha flight from OGG to HNL. The last. Remember flight coupons?😃Im not sure Aloha didn’t get support though. HA started flights to the West Coast and that may have put Aloha on the back foot. Aloha needed to upgrade their fleet, I think they just ran out of financing options.
Tuco H says
Amen and well said. Also, Aloha could have been saved for $ 35 Million, and they couldn’t get a Loan to help them. It put a Lot of Great employees out of work !
Ron J says
I’m not convinced that Costco is gouging. Their current gas prices in Kahului are cheaper than at Costco in Los Angeles. Per Gas Buddy, it looks like Kahului gas stations have lowered their prices to stay in the ballpark of Costco.
Lots of the prices in-store are similar to Los Angeles Costco prices, too, and often better than local Maui competitors like Target or Walmart.
Liam G says
Hawaiian is out of touch. $160 for a slightly better seat is ridiculous plus add bag fees can be $500 for two one way !!!!!! That’s not including the price of a ticket !!!! Or I can go southwest and pay none of that. Not saying Hawaiian needs to be what swa is but they are pricing themselves out. But it’s the typical us company vision of short term.
Ernie S. says
With the HWA and SWA competition going strategically in favor of SWA, people must realize that HWA could have been rewarding flyers all of this time with lower pricing, just nowhere near what they’re charging now. This will be determined by Who “Blinks” First with the winner claiming the prize position. The Low Fares will be gone but the winner is in a tough spot, customer service and satisfaction Need to be kept up! Over time they both will refill their war chests full of money, this may not be a “One and Done” War!
Chris H says
HA has too many fleet types, too little money in the bank and limited scale. That’s why they operate at a loss. SW is not predatory. HA is with their monopoly pricing wherever SW does not compete. The HA price match is called the SW effect. SW has 1 fleet, Billions in the bank and an efficient operation. If it’s predatory, it’s because the prey is weak and incompetent. If HA loses this battle, it’s management’s fault.
Jankenpon says
Fair statements. But small businesses are always at risk against larger businesses. Some level of protection should exist. (I.E. no big box superstore in the islands). Local can and do compete, but if Amazon and Walmart sold particular products at a loss for an extended period of time literally until they crushed a competitor out of existence. I think crying foul is fair. In the end, You’ll get a SWA monopoly that will either charge monopoly market rates or will subsidize the locals existence by taxing customers of other routes (as they are doing now). You decide what is more likely.
Guy L says
The non-predatory way to go about pricing the airfares should have been for them to charge what it would cost for them to make a slight profit and if their business model prevailed, then great! In my opinion, the predatory plan is to be the only inter-island carrier. Then they could acquire all the very scarce airport space statewide and charge whatever they want.
Frank says
Well stated, Liam! We’ve been visiting the islands since the 90’s and remember when there was no Costco. And Walmart wasn’t all that great back then. Let’s face it, having Costco has made for big changes. It’s amusing watching the “local food” trucks stock up at Costco first thing in the morning.
Patrick says
Before SWA showed, didn’t Hawaiian have a monopoly?
Jeff S. says
They were the only major inter-island carrier since Aloha folded, I believe, but many airlines fly between the Islands and California and other places.
PegM says
I’ve flown American and Alaska for years. So, no.
patrick says
I was referring to the inter-island monopoly.
Daniel says
They only held a monopoly for about 18 months. Did you support Island Air? If more did, it would still be here.
Ernie S. says
I totally agree with you! There’s a problem at HWA, are they too top heavy? The Money is going somewhere. A Solid Restructuring Plan may be a part of the Answer but will they be willing to do it? SWA may have Billions to “Invest” and if They Do, why doesn’t HWA? I don’t want to hear about HWA being generous, they write profits down like everyone else. There may be some Tough Times coming for HWA very soon. Stay Tuned to BOH, they do an Amazing Job!
Beat of Hawaii says
Hi Ernie.
Thank you for saying that! And more than 400 comments.
Aloha.
Tuco H says
Agreed Chris, monopolistic greed
Liam P says
Hawaiian has 3 aircraft types, each serving these different markets:
A330 long haul including international and domestic markets
A321 NEO Intermediate haul domestic Hawaii-west coast shared with A330 aircraft
B717 interisland short-range aircraft
Aloha,
Liam
HNL
Brandon B says
Hey someone who know’s how business works.
Chris nailed it.
Belkis says
What is going on with the Hawaii ferry boats
Liam P says
Ferries don’t work. SuperFerry ran the largest of the ferries. The rough surf slowed them in the crossing to the point they damaged engines and increased ship maintenance costs.
Charles W says
Is there any resort that does not charge a resort fee??
Liam G says
Kahala and Halekulani. The Kahala used to not charge parking either but I think now it’s $40. I used to stay there because it’s a great hotel but by the time you broke down the fees at say a hilton the price was basically the same.
Ernie S. says
These fees just keep coming, increasing at a drop of a hat. Even those not really budget conscious are beginning to question the validity. With the Predatory Nature of these Businesses they Expect Customer Feedback but know that it will typically be brief and then go away. Parking fees can sometimes be minimalized by a short walk, 1/4 of the price is worth it. They are Recouping losses too quickly and they know that the choices are Nil, they all charge about the same. Their Aloha Spirit is a Ghost Named Ebenezer Scrooge!
Carol N says
I’m not so sure there is, which is (one of the reasons) why I rent condos when I visit the islands.
Ernie S. says
My concerned question is centered around a February Court Date and just how long will you be able to, unless you rent for at least 90 days. Will you invest in a Timeshare if the law stays in place, or rent a hotel room for your stay? Miraculously all of those are Exempt from the New Law. I’m hopeful that the Judge sees through all of the shady Laws and sends the Council Members Packing. The next objective, if this is successful, should be seeking relief from the Overburdened Taxes and Fees, they’re more than what Resorts and Hotels Pay!
Rod W says
I have a “resort” rule.
A hotel may call itself a resort or even “the greatest resort in the world” but it is not a resort unless it has these features, on site:
…a large enough gym to eliminate waits most of the typical exercise times (no I don’t use a hotel gym more than once a week or so)
…a large swimming pool (I was on my h/s swim team. But due to a specific surgery, I no longer go in the water, pool, lake or ocean)
…a golf course (if land is in short supply, then 2 or 3 hotels may share a golf course – I have not played golf in 15 years, first because of a move and 2nd, due to the surgery mentioned above)
So, things I want to do, but can’t. Still, without the above, it may be a hotel, but it’s not a resort. And, no resort fee!!
Ernie S. says
Sounds very Predatory the way you describe it, many Good Websites attempting to make a Sale will see your traffic and Lower the prices or cut a certain percentage off to get the customer. If this is what Hawaiian does, They seem to be playing Follow the Leadership in the State of Hawaii! Another Great Reason to Stay Away from Hawaiian Airlines. I guess it’s Easier to give a little bit back to Hawaii when You’re Trolling the Customers out of Extra Dollars like this.
Liam G says
Kahala and halekulani
Tuco H says
Halekulani is still the best Resort on Oahu, red carpet treatment from the time you arrive until you leave ! The Kahala now charges for Parking. Also, the staff seem very mercenary .