We are curious how Hawaii airline competition will look after this period when US Airlines are in a veritable worst-case scenario. And why then is airline stock analyst Stifel saying that Hawaiian Airlines is well positioned, so much so that today they upgraded the stock from a sell to a hold recommendation? While we don’t own the stock and don’t have any take on that aspect, it does speak to what will happen with cheap flights to Hawaii going forward.
The airline’s upgrade was based in part on the recent downturn in the stock’s price, but more importantly and speaking to our point, the analysts said “Hawaiian Holdings will be well-positioned to serve the market and could witness a more benign competitive capacity environment for a period.”
Beat of Hawaii: For more on what we expect the future to look like, read When Hawaii Air Travel Will Resume: Expect Big Changes. It has been read over 50,000 times in the past two days.
2019 Hawaii airline competition at Honolulu.
We wanted to glean something about who has what share of Hawaii flights and available seats. We used U.S. government, Bureau of Transportation Statistics for 2019, indicating available seats to Honolulu from all domestic airports. Note that the data is slightly misleading in the sense that Hawaiian does not report data separately on interisland.
Alaska Airlines 495,000 seats
American Airlines 574,000 seats
Delta Airlines 616,000 seats
Hawaiian Airlines 4,057,000 seats (includes interisland)
Southwest Airlines 404,000 seats (includes interisland)
United Airlines 1,288,000 seats
Who might retract from Hawaii airline competition and Why?
We’ve already seen the airlines begin to posture about becoming smaller carriers in the future. Delta said, “We’re going to be smaller coming out of this.” United’s CEO said, “If the recovery is as slow as we fear, it means our airline and our workforce will have to be smaller than it is today.”
All the airlines that serve Hawaii are strong players and we expect all of them to survive. Airlines, however, will look forward to the routes with the most profitability, and that relates to a large degree to a “reasonable amount of competition.” The problem with flights to Hawaii is that the competition has been extraordinary, and as a result, the profitability has been dwindling. We’ve had airfares as low as $72 to and from the mainland, and $99 quite regularly. That is not sustainable. So something is going to be different.
Beat of Hawaii: We’d suggest that there will be contraction across all the airlines to at least some degree after this. That having been said, we’d expect all three legacy carriers, starting with United Airlines, then American and Delta, to pull back the most, followed by Southwest, then Alaska, or both.
We do not expect Hawaiian to contract significantly in the domestic market, nor did analyst Stifel. Hawaiian Air will refocus on domestic rather than international flights, since the return of international seems to be more in question. It is also interesting to note that while the Hawaiian Air fleet is small, it has become very versatile, with the current 24 A330 wide-body and 18 A321 long-range narrow-body aircraft.
The number of competitive flights has been excessive since last year, and that just won’t continue. So either the industry will find a way to compete differently and less, and perhaps get re-regulated to some degree.
We welcome your thoughts.