Can Hawaiian Airlines Survive the Southwestern Entrance to the Hawaiian Market?

[ad_1]
<div _ngcontent-c14 = "" innerhtml = "

It happens. Originally scheduled for late last year, Southwest Airlines flights to Hawaii from the United States are expected to begin "shortly".

This week, Southwest has completed two validation flights to Hawaii, as part of the FAA clearance process. Southwest intends to start flying to Hawaii with a Boeing 737-800, then with the 737 MAX-8.

(Full Disclosure: I own shares in Southwest Airlines and Jet Blue.)

While United, American, Delta, Alaska and Hawaiian are already flying to the islands, there is great anticipation for the Southwest entry, due to the "Southwestern effect", the downward trend in fares when the airline enters a market. And while other US airlines generally charge $ 30 per bag for flights to Hawaii, Southwest said he will continue his policy of not charging up to two checked baggage.

A 2017 study found that "Southwest Effect" provides for an additional 15% discount on the market price and a corresponding 28% to 30% increase in traffic since the introduction of non-stop service by Southwest … Average fares on a market average are $ 45 lower when Southwest serves a non-stop market than when it does not. "

But Hawaii, a leisure market with a resident population of only 1.4 million people, has not been proven. The low-cost airline Allegiant Air, whose Hawaiian service once included ten routes from nine mainland cities, stopped serving Hawaii in October 2017.

As airlines enter and leave the Hawaiian market constantly, it is feared that the Southwest entry will affect Hawawian Airlines as the aviation equivalent of a Walmart ("still low price") landing at the airport. Oahu.

Nevertheless, Hawaiian Airlines, which flies around the islands since 1929, is used to competition. "Hawaiian is used to getting people in and out of the market all the time," says Helane Becker, General Manager, Industrials / Consumer-Airlines at Cowen. "They are doing a good job of responding, they have a solid track record and continue to grow their business, build what they do, replace older aircraft with new ones, and deliver a great product to their customers. "

Hawaiian is renowned for its services, such as providing a meal and a drink to pbadengers heading to the islands. The airline has has won numerous awards, including the recognition of the US Department of Transportation for its # 1 performance on time, 2004 – 2017.

The airline has three main market segments: flights from the mainland, inter-island flights and international flights to and from Asia, Oceania and the South Pacific. Hawaiian is buying new aircraft and will have 18 more energy – efficient Airbus A321neos next year for its West Coast – Hawaii links. Hawaiian operates 24 Airbus A330s and orders ten Boeing 787 Dreamliners.

A large part of the income comes from Asian tourists. The company recently signed a joint venture application with Japan Airlines. Inland, Hawaiian has established code sharing partnerships with Jet Blue from its Boston and New York gateways.

Southwest has not yet announced its intention to offer competitive service between the islands, but it may have difficulty replicating the well-oiled Hawaii inter-island system. Hawaiian flies 202 flights daily between the six populated islands, including 178 Boeing 717s.lights between Honolulu, Maui, Hawaii and & nbsp;Kaua & # 39; iand 24 departures with ATR-42 aircraft serving Moloka'i, Lana'i, and& nbsp; Kapalua to West Maui.

"Southwest [inter-island] The service seems to be more related to the increasing use of their aircraft between Hawaii and the mainland, rather than to a dedicated fleet that provides the shuttle service that Hawaiian provides, "notes Savanthi Syth, general manager of the Global Airlines division of Raymond James. "The Southwest 737-800 and MAX models are too large to service the island between islands with the frequency needed for commuters."

Nevertheless, will Southwest's low prices create a tsunami effect, sweeping away established carriers? Hawaiian is the tenth largest US carrier, with only 1.6% of & nbsp;United States market share,& nbsp; While Southwest ranks second with 17.9% of the US market. Hawaiian currently holds about 18% of the Hawaiian market.

"They serve a niche, which is why they are so small," Ms. Syth said. "However, it is useful to be bigger and have & nbsp; a wider and more diverse network. Over time, the sector must consolidate further and Hawaiian will probably be part of it. "She asked if Alaska Airlines or JetBlue could become a potential fusion partner for Hawaii," said Syth: "JetBlue seems to be a good choice for the Airbus fleet and JetBlue's smaller presence on the west coast. But it's not something I'm waiting for in the next few years. "

Despite its relatively small size, Hawaiian serves the islands by 12 mainland cities, more than any other carrier. Southwest says it will begin with four "initial bridges" in California, namely Oakland (OAK), San Diego (SAN), San Jose (SJC) and Sacramento (SMF). Among the most notable absentees are LAX, Burbank, John Wayne and other airports serving Los Angeles and Orange County.

Southwestern Hawaiian destinations will include Honolulu Airport (HNL) Kahului on Maui Airport (OGG) Lihue on Kauai (LIH) and Kona (KOA). Fares, ticket sales date and schedule for the first flights have not yet been disclosed by Southwest.

Cowen's Becker notes that while Hawaii and other competitors offer seats in first or business clbad, Southwest, with its seats entirely reserved for coaches, "is a different product. We do not know what the Southwest offer will look like. People expect more than a bag of pretzels for a six-hour flight. "

Southwest, however, "will certainly be aggressive with the price," says Becker. It is interesting to note that "we think the first flights will be low-income flights, as the Southwest frequent flyers have saved miles."

On the other hand, Southwest has a & nbsp; very activeSouthwest Vacations& nbsp;site, and with Hawaii considered the top "bucket list"For many Americans, the airline has every interest in creating a travel and destination experience for its customers.

For Syth, the biggest problem with Southwest's entry may well be potential overcapacity, "even tougher rates already reduced due to last year's capacity increase."

Hawaiian can he face the threat of the southwest? "No one knows the Hawaiian market better than them," says Becker. "Southwest" will expand the market, but will not necessarily damage Hawaii's market share. "

">

It happens. Originally scheduled for late last year, Southwest Airlines flights to Hawaii from the United States are expected to begin "shortly".

This week, Southwest has completed two validation flights to Hawaii, as part of the FAA clearance process. Southwest intends to start flying to Hawaii with a Boeing 737-800, then with the 737 MAX-8.

(Full Disclosure: I own shares in Southwest Airlines and Jet Blue.)

While United, American, Delta, Alaska and Hawaiian are already flying to the islands, there is great anticipation for the Southwest entry, due to the "Southwestern effect", the downward trend in fares when the airline enters a market. And while other US airlines generally charge $ 30 per bag for flights to Hawaii, Southwest said he will continue his policy of not charging up to two checked baggage.

A 2017 study found that "Southwest Effect" provides for an additional 15% discount on the market price and a corresponding 28% to 30% increase in traffic since the introduction of non-stop service by Southwest … Average fares on a market Average are $ 45 lower when Southwest serves a non-stop market than when it does not. "

But Hawaii, a leisure market with a resident population of only 1.4 million people, has not been proven. The low-cost airline Allegiant Air, whose Hawaiian service once included ten routes from nine mainland cities, stopped serving Hawaii in October 2017.

As airlines enter and leave the Hawaiian market constantly, it is feared that the Southwest entry will affect Hawawian Airlines as the aviation equivalent of a Walmart ("still low price") landing at the airport. Oahu.

Nevertheless, Hawaiian Airlines, which flies around the islands since 1929, is used to competition. "Hawaiian is used to getting people in and out of the market all the time," says Helane Becker, General Manager, Industrials / Consumer-Airlines at Cowen. "They react well, they have a solid balance sheet and continue to develop their business, develop what they do, replace older aircraft with new ones and offer a very good product to their customers."

Hawaiian is renowned for its services, such as providing a meal and a drink to pbadengers heading to the islands. The airline has has won numerous awards, including the recognition of the US Department of Transportation for its # 1 performance on time, 2004 – 2017.

The airline has three main market segments: flights from the mainland, inter-island flights and international flights to and from Asia, Oceania and the South Pacific. Hawaiian is buying new aircraft and will have 18 more energy – efficient Airbus A321neos next year for its West Coast – Hawaii links. Hawaiian operates 24 Airbus A330s and orders ten Boeing 787 Dreamliners.

A large part of the income comes from Asian tourists. The company recently signed a joint venture application with Japan Airlines. Inland, Hawaiian has established code sharing partnerships with Jet Blue from its Boston and New York gateways.

Southwest has not yet announced its intention to offer competitive service between the islands, but it may be difficult to replicate the well-oiled machines of the Hawaii inter-island network. Hawaiian makes 202 flights every day between the six populated islands, including 178 Boeing 717 lights between Honolulu, Maui, Hawaii and Kaua & # 39; iand 24 departures with ATR-42 aircraft serving Moloka'i, Lana'i, and Kapalua to West Maui.

"Southwest [inter-island] The service seems to be more related to the increasing use of their aircraft between Hawaii and the mainland, rather than to a dedicated fleet that provides the shuttle service that Hawaiian provides, "notes Savanthi Syth, general manager of the Global Airlines division of Raymond James. "The Southwest 737-800 and MAX models are too large to service the island between islands with the frequency needed for commuters."

Nevertheless, will Southwest's low prices create a tsunami effect, sweeping away established carriers? Hawaiian is the tenth largest US carrier, with only 1.6% of United States market share, Southwest ranks second with 17.9% of the US market. Hawaiian currently holds about 18% of the Hawaiian market.

"They serve a niche, which is why they are so small," Ms. Syth said. "However, it is useful to be bigger and have a bigger and more diverse network. Over time, the sector must consolidate further and Hawaiian will probably be part of it. "She asked if Alaska Airlines or JetBlue could become a potential fusion partner for Hawaii," said Syth: "JetBlue seems to be a good choice for the Airbus fleet and JetBlue's smaller presence on the west coast. But it's not something I'm waiting for in the next few years. "

Despite its relatively small size, Hawaiian serves the islands by 12 mainland cities, more than any other carrier. Southwest says it will begin with four "initial bridges" in California, namely Oakland (OAK), San Diego (SAN), San Jose (SJC) and Sacramento (SMF). Among the most notable absentees are LAX, Burbank, John Wayne and other airports serving Los Angeles and Orange County.

Southwestern Hawaiian destinations will include Honolulu Airport (HNL) Kahului on Maui Airport (OGG) Lihue on Kauai (LIH) and Kona (KOA). Fares, ticket sales date and schedule for the first flights have not yet been disclosed by Southwest.

Cowen's Becker notes that while Hawaii and other competitors offer seats in first or business clbad, Southwest, with its seats entirely reserved for coaches, "is a different product. We do not know what the Southwest offer will look like. People expect more than a bag of pretzels for a six-hour flight. "

Southwest, however, "will certainly be aggressive with the price," says Becker. It is interesting to note that "we think the first flights will be low-income flights, as the Southwest frequent flyers have saved miles."

On the other hand, the southwest has a very active Southwest Vacations site, and with Hawaii considered the top "bucket list"Destination for many Americans, it is in the airline's interest to create a travel and destination experience for its customers.

For Syth, the biggest problem with Southwest's entry may well be potential overcapacity, "even tougher rates already reduced due to last year's capacity increase."

Hawaiian can he face the threat of the southwest? "No one knows the Hawaiian market better than them," says Becker. "Southwest" will expand the market, but will not necessarily damage Hawaii's market share. "