In the battle of Hawaii flights, things continue to go downhill. Both in terms of pricing and profitability. How long can it go on? We don’t know for sure, but we have some fascinating insights to share.
1. Analysis of a $39 airfare.
When you look at the current price point for $39 interisland fares, did you know that only $26 goes to the airline? The remaining $12+ is a combination of taxes and fees in which they do not participate. But the $26 is before the advertising cost.
2. Google ad cost.
We were in Google search, shopping for flights to bring you more airline reviews when we stumbled onto this competing pair of Hawaiian And Southwest Google Ads. By our estimation, the carriers pay anywhere from $2-15 for each click on one of these ads. That’s a huge percentage of their $26 part of a $39 airfare.
3. Aggressive expansion hasn’t benefited Southwest yet.
As one investment analyst said this week, “Southwest is bleeding cash in the interisland market. Southwest Airlines will probably rein in its interisland ambitions eventually, but it might not be soon.” In terms of blood, Southwest has much more they can afford to lose than Hawaiian.
4. Southwest Hawaii flights adjusted by rapidly adding and deleting flights.
First, we announced in July that Southwest had cut 10 routes. Then we reported that they had nearly doubled their daily interisland flights from 38 to 60. After that, Southwest canned the previous plan and re-added 4 mainland routes previously deleted.
5. Mainland Hawaii routes seem to be working for both airlines, but not interisland.
We recently paid $188.50 for our Southwest flight from Hawaii to San Jose. And we’re paying about the same for a Hawaiian Air flight next week. At those prices, Southwest and Hawaiian didn’t lose money. On the other hand, we have been and will be flying around for $39 on both airlines, and that isn’t sustainable, as we’ve already said.
6. Island hopping has never been easier or cheaper.
Even at $39, there appears to be inadequate demand to fill flights, further exacerbating the financial loss. If you’re traveling to Hawaii this fall, this is the best time ever to consider adding another island to your itinerary. Flights are readily available and the prices can’t be beaten.
I recall that in the early 2000’s, Go!/Mesa Airlines Group ran Aloha Airlines out of business after AQ (and HA) emerged from post 9/11 bankruptcy by offering….(gasp) $39 fares!
It will be intriguing to see Southwest’s 737-800’s and 8Max aircraft utilization as those larger 737’s are simply not built for interisland flying compared to the 737-200’s Aloha used, which were much more suitable for interisland flying, like Hawaiian’s 717’s.
Would love to see if Hawaiian would evaluate and eventually choose the A220 for its 717 replacement in the future. Especially if it performs well in Hawaii’s climate.
While the Boeing 717 is a perfectly fine plane, Hawaiian ruined their aircraft after installing the plastic chairs. Yuck. Less value still more dollars to pay for airfare.
Southwest came in with bigger, newer planes and better seats. Plus lower airfare, 2 bags fly free and no change fee… For interisland.
Can’t beat that.
Southwest bullied/pushed their way in to a market that did not need the additional lift. The unfortunate thing is that Hawaiian (the home carrier) suffers as a result of southwest’s greed.
Competition is good for the marketplace. Hawaiian certainly became greedy in interisland after Aloha Airlines, Island Air, Go and the Hawaii Superfetry all died. Hawaiian was one of the players that helped kill the ferry.
Then in 2015 Hawaiian downgraded their Boeing 717s by replacing soft seats with horrible plastic chairs. They wanted to squeeze in 4 or 6 more passengers per plane, but still kept the monopoly prices.
Enter Southwest in 2019 and now interisland travel is cheaper and more comfortable even without the $39 fare.
🤙if not for southwest , you would be paying triple today.
I absolutely love Hwaii. I love the people and the vibe.I would like to see the better part of the islands returned to the Hawaiian local natives because they got screwed back in the day.I will never stop visiting and we’ll always respect the native customs and traditions.
What do you mean by this? Like give a hotel away to someone with a Hawaiian address?
If you’re from let’s say Illinois, but your family hails from France and England generations ago, should you give up your home to someone who can trace their routes to a Native American tribe that lived within the boundaries of the modern day state?
While I think your intentions are good, as a country and society we need to look forward rather than backward. Sure some wrongs were done, but that’s the case wherever you go across the globe.
Instead just be a courteous traveler, enjoy the beaches and amenities, and if a Hawaiian visits your state hopefully they will not wish you to give up your land.
Southwest really has no business island hopping in Hawaii. The 717s that Hawaiian Airlines uses is more than enough. I feel like Hawaiian Airlines is being robbed with all due respect.
Odd. We live on Kauai and just last night I heard neighbors saying that when SW or HA advertise a $39 deal, you have to immediately book it. They said only a very limited number of seats are available at the $39 fare and then prices jump.
This story begs a bigger question… that you might want to address in future coverage: How damaging is Southwest’s entrance into the Hawaiian market–and their subsequent “fare ware”–to the environment? If they are flying planes around the islands–and across the Pacific–at a loss–that means they are burning tons of fossil fuels and adding to the global warming problem–for no good reason–other than to harm the other airlines that fly those routes. Capitalism 101 dictates that supply and demand are constantly seeking equilibrium–and price is the tool that generally achieves that end. If demand increases, prices rise until someone adds capacity–which should cause prices to drop again. Adam Smith probably never envisioned this.
My best guess is that SW is not out to do in Hawaiian. Don’t forget that SW has a team member that came from Hawaiian. My thinking is that SW has allotted a certain amount of both time and money to let people know they are in the Hawaii market. SW business model is different from that of other airlines. SW usually does not fly out of the big airports with the exception of LAX and even that is a different model. Enjoy the cheap fares while you can, it’s not going to last. The guys at BOH knew this and took advantage of the inexpensive fares while they could.
SW flies into/out of O’Hare, PHX, Vegas just to name a few of the bigger airports they fly out of.
Those are in limited numbers, many of their larger number of flights come out of Oakland and smaller airports. They were coming out of Phoenix too but, they cut their number back.
I agree with you about Vegas, that is a big market for SW.
OK, let me put this in a different way. Southwest will serve a large city like LA in two ways. First they do fly into LAX and secondly they will fly into Burbank and Orange County. This allows them to serve a city like LA at much less cost than just flying just into LAX. SW uses this model for many of the larger cities throughout the country.
Aloha
Southwest does not have direct flights from ANY Los Angeles area airport to any Hawaiian destination. I have checked and if I want to start a trip to Hawaii on Southwest my first stop will be in Oakland, or Salt Lake City or Phoenix. Makes no sense to me. We will continue to fly Hawaiian from LGB or LAX. I just wish Hawaiian would fly the A330 our of Long Beach!
Just flew on Hawaiian Air to Hawaii and back to San Diego. It was incredible. Love Hawaiian Air.
I was on a OGG-HNL flight a couple of days ago and it only had 35 passengers. The plane had that new plane smell, mod lighting, nice seats, lots of room, and with three or four flight attendants aboard. It was like we had private butler service for 23-minutes. All in all an excellent flight. The flight attendants were engaging and funny. The other bonus, as my American Airlines flight was on time, then delayed and then on time again. I was able to change my connecting flight on Southwest via the App for no charge, three times, in real time. That will spoil you.
Make reservations now. This won’t last forever?
Before Hawaii opened back up during the pandemic, I was on many SWA inter island flights that had more crew than passengers!
Both Hawaiian and Aloha were always locked into some pretty aggressive fare wars over the years. Back then neither carrier was very well off financially.
Mid PAC, Go,Mahalo, Discovery and finally Aloha all came and went. Back then inter island was a much larger part of HA’’s business. Now they have an extensive transpacific market. Seems to me SWA is simply trying to break into the market. They know HA isn’t leaving Hawaii. I’m guessing they just want a Hawaii operation that justifies their investment and a handful of west coast flights doesn’t do it. Yes SWA has deeper pockets but they didn’t become successful bleeding cash. They’ll always be the Texas company trying to do business in Hawaii, HA will always have the hometown advantage.
Boy that’s the truth. The powers at be had my Southwest OGG-HNL flight departing out of gate 5 at OGG. It was worse than a third world country with plywood, windowless hallways, wires hanging down, fluorescent light tubes, mysterious turns, paper signs taped on the wall pointing this way which actually pointed to doors that would take you out onto the tarmac, which said do not enter. Even the gate agent had to make jokes about how abysmal and far away we were. Hawaiian in the mean time departed from the closer in gates, much more convenient but still abysmal as the entire airport is very third world. With 1/3rd of the ticket price going to government related taxes, it’s not going to the airport.
OGG, until the end of the pandemic was the perfect air terminal for Maui. The problem is that when things opened travel boomed, and the infrastructure at OGG is not designed to take so many people, particularly during the late morning-afternoon rush.
Just a comment on #5. As a former airline finance person, I assure you that Southwest and Hawaiian are not making huge profits on $188.50 fares from Hawaii to the mainland. Hawaiian *may* make money from First Class, Comfort Seats, bags and ancillary fees. Southwest may make money selling early bird boarding and upselling to Wanna Get Away+, Business Select, etc.
Hawaii is a tough market to make alot of money in with hypercompetitive fares. But I wish all the airlines well. Southwest may have to stick with a smaller interisland schedule and focus on reliability.
Hi TL.
True. But $190 looks a lot better than $99.
Aloha.
Maybe the simple answer! SWA is draining HA of cash to buy them at a lower price. SWA needs route expansion from HI to their Midwest and east coast focus cities (DEN, ORD, STL, HOU, AUS, BNA. BWI).
HA’s Asia flight to HI would be a nice addition for SWA, HA’s Asia flights connecting with SWA’s mainland focus cities would be a nice fit (Japan to OAK, SJC, LAX, LAS, DEN, BWI, BNA). There are other obvious connections that would benefit SWA, because SWA carriers more mainland passengers then any other U.S. airline. SWA also needs HA’s long-range aircraft and international experience. All of this happens over years, not months.
If Hawaiian has to sell, the Justice Dept will insist on someone other than SWA, due to a competition reduction.
Very true Rod…anyone who knows how the justice department works knows there is no way SWA would be allowed to buy HA…. That said, if another carrier was allowed to buy Hawaiian it would be a devastating blow to Hawaii. Having a local airline is crucial to the state. There are so many positives HA brings to the table that mainland ownership would destroy.
HAL forgot what they did to Aloha & SWA is now reminding them??? Never pays to do what you don’t want others to do unto you!
I think it was before BOH’s time this happened. But most locals remember…was not nice.
Hi Nancy.
We have been publishing Beat of Hawaii for 15 years. And we were here for that.
Aloha.
You guys do realize Aloha was just as competitive as HA or vice versa …I know enough about the industry to say unequivocally
you can hardly call HA the bad guys who put Aloha out of business… both airlines were doing what they could to survive on very slim profits…Aloha failed because they were privately owned and the investors said no more when the economy took a major downturn not long after 9/11. The merger failure was also definitely not HA’s fault.
Hi John.
We actually never thought or said that. We’ll save our take on Aloha’s demise for another article.
Aloha.
Wasn’t it go!/Mesa air and poor financials that ultimately killed aloha? Not saying that HA didn’t contribute but the predatory tactics that southwest is employing is not the same nor will it end well for the people of Hawai’i. What’s to stop southwest from raising fares once they kill off Hawaiian? What we really need is for all airlines to compete fairly but that isn’t profitable or good business so it won’t happen.
Nancy, it was Go! Airlines that did it to Aloha, not Hawaiian. They did some sneaky stuff by claiming to want to buy Aloha to see their financials, then used that info to drive them out of business.
You guys are exactly right about Go being the final straw….They in fact did do enough illegal stuff that HA
took them to court and won…Aloha could have too but didn’t…who knows why but perhaps their investors didn’t want to take the chance of losing. Perhaps another example of the limitations of their private ownership.
Both Hawaiian and Aloha were vowing to match each other’s price. Aloha’s mistake was letting their aircraft become ancient in the process. They also were too proud to utilize the bankruptcy court and subsequent reorganization till it was way too late. Hawaiian bought new aircraft and utilized the system to greatly re-negotiate leases and purchases.
What did HA do to AQ? If you remember correctly, AQ use to dominate HA years ago. Then things leveled out. Then Go! Airlines and tried to destabilize a stable Neighbor Island market. Go! lead to the demise of AQ, not HA. Get your facts right please.