The Hawaiian travel landscape is facing significant turbulence again as both Hawaiian Airlines and Southwest Airlines navigate through major challenges, leading to inevitable sharp increases in airfares we are already witnessing.
Hawaiian Airlines’ acquisition by Alaska Airlines?
Hawaiian Airlines is currently in the midst of an acquisition plan with Alaska Airlines. This deal remains uncertain as we await an initial decision from the Department of Justice (DOJ) within the next four weeks. The acquisition’s uncertainty adds a layer of complexity to Hawaiian’s operations, undoubtedly impacting their pricing and strategic decisions.
Higher performance of Hawaiian Airlines on interisland flights.
Moving against only moderate demand for interisland flying, Hawaiian Airlines is achieving far better performance than Southwest on interisland flights. According to our recent article about Southwest investor Elliott, Hawaiian operates more flights and commands the greatest share of this market.
According to activist investor Elliott, Hawaiian Airlines maintains a robust interisland load factor of 74%, which has remained virtually unchanged over the past five years. In contrast, Southwest Airlines struggles with a significantly lower load factor, about 36% lower than Hawaiian’s.
After cutting the price of interisland flights significantly, Southwest’s average ticket price has only seen a rise to an average of $38, compared to Hawaiian’s current average of $54, a reduction from their pre-Southwest average of $74. That, according to Elliott.
This discrepancy in load factors and pricing highlights Southwest’s big challenges in maintaining sustainable operations in Hawaii’s interisland market at their current level of operations. Of course, this leads to the question of just what Hawaii course correction is in the cards for Southwest.
Last week, during a flight back from Maui to Lihue, we experienced firsthand the limited options for interisland travel. When seeking an alternative flight back to Kauai after a Southwest flight attendant fell ill, Hawaiian was the only airline offering early evening options. We were prepared to pay nearly $200 per person one way, including the $29 for the remaining seat assignments.
Hawaiian Airlines’ pricing strategies are working.
Hawaiian Airlines is not only charging premium prices for their largely packed interisland flights but is also, as noted, adding up to $29 for seat assignments. This pricing strategy is reminiscent of pre-Southwest days, a period many Hawaii travelers recall without great fondness.
Should the acquisition by Alaska Airlines fall through, Hawaiian may be forced to consider a Chapter 11 reorganization, focusing on the financially viable segments of their business, which will include interisland flights.
Southwest Airlines’ performance
According to our recent analysis and the article on investor Elliott, Southwest is struggling with its interisland flights. Anecdotal evidence from our recent trip supports this, with one flight operating at just 30% capacity and the return flight at 62%.
Southwest Hawaii challenges contribute to the overall increase in interisland airfares as it struggles to maintain a competitive edge. However, Southwest’s policy of offering two free checked bags remains a significant benefit, particularly for visitors needing extra luggage space. On the other hand, residents often use these flights as a form of bus-alternative transportation and usually fly without checked bags.
Given Southwest’s multiple issues, a cutback in their interisland flights may be imminent.
Conclusion about Southwest and Hawaii.
The ongoing issues with Hawaiian and Southwest Airlines resulted in a significant rise in airfares, impacting travelers across the islands. As we wait for the DOJ’s decision and observe how both airlines navigate their respective challenges, the future of interisland travel remains largely uncertain. For now, travelers can expect to pay more as these airlines adjust to the evolving Hawaii market dynamics.
Please share your thoughts! Mahalo!
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All still great and cheap, safe and reliable air travel. Uber cost $75 plus tip to go from windward to town so a plane flight being that cheap or cheaper to go much farther and much more quickly says a lot.
I am booked for RT smf to ogg Nov/Dec. Do you BOH, foresee any problems with my flight or nothing significant until next year regardless of outcome? Thanks
We miss the Aloha Airlines commuter ticket book which gave discounts for local residents. We wish Hawaiian would do the same and give islanders a break!
That would be great except HA is losing money so wouldn’t expect it, SWA coming has made it worse for them and probably part of the reason Alaska is buying them. Should be the state subsidizing its locals, can’t tell a business who is in debt and at risk of failing to lose more money. The state of Alaska pays a subsidy to Alaska Air to go to certain destinations to make it worth their while.
I recently vacationed in Hawaii most islands .for a major tourist destination the airports are appalling. Even most small Caribbean island nations ha e better Kona is the worst
Small Caribbean island airports are third world, most are trailers, Hawaiian airports by comparison are first class
Hawaii needs to resurrect Aloha Airlines. A true local competitor to Hawaiian Airlines is what is missing from our local air transportation environment. Aloha (TPA) airlines was just that.
And they (Aloha) failed as a business, so whatever they were doing was not succesful as a business. Hawaiian is the only one who has survived over the years interisland. Hawaiian is fighting to stay alive. SWA charges $226 one way to fly the same distance as Honolulu to Hilo on the mainland so pray they aren’t the only ones left standing.
We make a trip to the Big Island every November, and I’ve been watching air fares carefully. Usually about 150 days out the prices drop, but not this year. They are running almost double what we’ve paid in the past. Fortunately I have enough miles to help, and after reading your article on using miles prior to the merger, we decided to do that. Thanks for that tip.
It’s way too early to speculate on what these airlines will eventually do. The classic SWA move (if Elliot approves) would be to just kill off HI (and Alaskan if the merger is allowed). Then SWA will charge whatever they can and Decide the schedule. Especially with new management running the airline. Pray that the latest attempt to run boats inter-island works and isn’t torpedoed by HI’s government. The big fish always get to eat the minnows in the airline business. You’re wasting your breath right now.
Just like Hawaiian did when Aloha Airlines went out of business.
This claim gets made here from time to time. The reality is AQ and HA competed vigorously with each other for AQ’s entire existence. In fact Aloha was winning for much of the 90’s. Both airlines lost millions competing with inter island upstarts (Go, Midpac etc)who attempted to break into the market with unrealistic fares as low as 9.95(yes, you read that right, Midpac in the 80’s) Both airlines expanded beyond inter island, HA did a better job of it and better survived the rough patch after 9/11. A factor was the fact that AQ was privately owned and the owners had personal money at risk, HA was publicly owned and only the stock price was at risk.
If there is any learning point from the history stated here, there has proven to only be room for 1 true interisland airline to succeed financially, or they hurt each other until 1 fails as happened in the past. SWA is much deeper pockets so they can hurt HA until HA fails, but this merger changes that.
Hawaii’s interisland market is unique in that it is the only means of transportation connecting the major islands. It has always been a central theme of Hawaiian Airlines throughout its almost 95 year history but has never been for Southwest Airlines. Other airlines have entered the interisland market offering less than a robust daily schedule at relatively cheap fares. This of course, harms Hawaiian Airlines by requiring a match in airfare while maintaining a robust daily schedule we residents and tourist alike depend on. Let’s all be careful about what we ask for!
SWA needs to leverage routes that Hawaiian has eliminated, or reduced. This includes even Mokulele dropping the Hilo to Kahului route. I think they can take advantage of this, so local travelers – especially commuters, have a reason to fully commit. We’re not over that threshold yet.
But, Southwest has a huge business flyer advantage: cancel 10 mins before a flight, flight credits than you can rebook online, changes made online and in the app. No horrible credits like HA, calling in, call center, wait, wait, app only works half the time, no cancel in the HA app.
Aloha –
You are comparing load factors on aircraft with significantly different capacity. 100 pax on a 123 seat 717 equates to a 81% load factor, whereas those same 100 pax on a Southwest 737 with 175 seats is a 57% load factor. Pax count and more importantly, revenue, are the driving factors.
To your point Mark you are correct but it’s more than that. The 737 Max is very expensive to try and operate it the way SWA is doing, they also still have to try and sell seats cheaper than HA just to get the relatively small market share they have. HA’s losses are mostly driven by the slow return of their bread and butter Japanese routes, my guess is they are probably slightly profitable inter island at the current fares, SWA is losing a lot of money flying empty seats with cheaper tickets. Also bad for SWA is tying up a MAX for an inter island flight rather than using it more efficiently for max productivity.
Are you expecting these issues to further impact flights from the mainland as well as inter-island? Thanks for your work and any reply!
Hi Peter.
Yes we expect to see further contraction of mainland routes as well. Once the potential Alaska deal plays out, more will be revealed.
Aloha.
Contraction by Alaska/Hawaiian or SWA? Thanks.
The Alaska/Hawaiian combination creates huge opportunities, I would like to think they are smart enough to capitalize on that. Should be great for the us, the traveling public
Less tourist’s mean higher prices. Less flights. Less options. Start really screaming if Hawaiian,Alaska, Southwest, and others get to a point where there is only one and I mean One flight a day and One at night. At some point they will be operating at a loss and this might be the only answer left to stay profitable. Maybe it’s time to break out the canoes and catarmeran’s like traditional Hawaiian’s did when they traveled from island to island.
Hello,
My wife and I just recently visited Maui and will be traveling to Kauai in December. Kauai is our honeymoon island and have gone there several times since we were married in 1998. We have already purchased our Hawaiian airline tickets and hope nothing changes there. We are saddened with all the negativity towards tourists and will probably cut back our trips in the future to Hawaii unless something changes. We love Kauai!
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Great coverage. Simple goals I hope we can achieve: Safe flights, affordable for frequent use, assigned seating, at least one checked at affordable cost if not included in price.