Southwest Airlines Expands Hawaii Plans

Nevertheless, Southwest Airlines remains committed to becoming an even bigger player in Hawaii once its fleet of 737 MAX regains its position. In fact, the airline announced last weekend its intention to add Hilo to its network of routes in the near future. This would give the popular low-cost airline five destinations within Hawaii, compared to its previous four-plane plan.

The inter-country market is starting well

When Southwest Airlines decided to fly to Hawaii for the first time, it was mainly considering flights from some of its largest west coast markets (Oakland, Sacramento, San Diego and San Jose) to Hawaii's top four tourist destinations. (Honolulu, Kahului, Kona, and Lihue).

<p class = "canvas-atom web-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "However, the carrier has later decided to d & # 39; enter the Interisland market as well. Hawaiian Holdings (NASDAQ: HA) has dominated inter-island travel in recent years, and Southwest management has seen an opportunity to stimulate demand through lower fares. Southwest Airlines began making four daily round trips between Honolulu and Kahului at the end of last month and added four daily roundtrips between Honolulu and Kona on May 12th. market as well. Hawaiian Holdings (NASDAQ: HA) has dominated inter-island travel in recent years, and Southwest management has seen an opportunity to stimulate demand through lower fares. Southwest Airlines began operating four daily return flights between Honolulu and Kahului at the end of last month and added four daily return flights between Honolulu and Kona on May 12th.

More

Southwest Airlines recently began its second inter-island link in Hawaii. Source of the picture: Southwest Airlines.

Southwest Airlines CEO Gary Kelly recently said the carrier's inter-island service "is doing amazingly well". Thus, it should not be surprising that Southwest wants to further develop its network of inter-island routes.

Flights to Hilo arrive

When Southwest Airlines announced its initial flight schedule for Hawaii, it announced that service to Lihue on the island of Kauai would be operational at a later date. On May 11, the carrier revealed that it will also be flying between Honolulu and Hilo, on Big Island, Hawaii. Southwest is likely to serve this route four times a day, starting this fall.

Initially, Southwest will not offer non-stop flights between Hilo and the mainland. The same is true for Kona. Thus, the inter-island links of Honolulu to Kona and Hilo are designed to serve customers connecting from the mainland as well as local traffic to Hawaii.

How big is the threat for Hawaiian Airlines?

With the recent launch of its Honolulu-Kona line, Southwest Airlines already holds nearly 10% of the inter-island market. Assuming that the carrier also flies four times a day on Lihue and Hilo, its share would double to nearly 20% once these routes begin.

<p class = "canvas-atom web-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The rise of a serious rival on the roads inter-island is clearly a threat to Hawaiian Airlines, which has benefited in recent years from the disappearance of its main competitors based in Hawaii. "data-reactid =" 43 "> The rise of a serious rival on inter-island routes is clearly a threat to Hawaiian Airlines, which has benefited in recent years from the disappearance of its main competitors based in Hawaii.

However, the threat may not be as great as many investors assume. Hawaiian Airlines offers service almost every hour between Honolulu and Hilo, with a maximum of 16 daily return trips. It offers even more frequent flights on the inter-island links from Honolulu to Kahului, Kona and Lihue. This gives it a big advantage for business travelers – and for anyone who has to keep to a tight schedule.

The story continues

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "On the other hand, the low rates of Southwest Airlines and" " Flights are free. "This policy is likely to be of interest to vacationers and locals who visit the islands from time to time to visit friends and relatives. Even before the arrival of Southwest in Hawaii, Hawaiian Airlines experience the sweetness of the demand data-reactid = "49"> On the other hand, the low fares charged by Southwest Airlines and its policy of "free baggage circulation" will probably appeal to pleasure travelers and locals who occasionally travel between Before the arrival of Southwest Hawaii, Hawaiian Airlines was facing weak demand from these groups on its inter-island routes, especially to Big Island.

With one-way fares as low as $ 29 on some days, Southwest Airlines is likely to stimulate a strong rebound in inter-island travel demand. Thus, the two airlines could play complementary roles in the inter-island market, Hawaiian continuing to serve the business world and other frequent travelers, while Southwest developed the leisure market by making travel between the islands less expensive.

More

Source of the picture: Hawaiian Airlines.

Hawaiian Airlines can rise to the challenge

Until now, Hawaiian Airlines is matching Southwest fares on some flights, which will put some pressure on its unit revenues. It is also reasonable to assume that having a major competitor in the inter-island market will reduce Hawaii's pricing power. Nevertheless, as long as Hawaiian maintains its dominance in the business travel market, its inter-island connections should remain extremely profitable.

Thus, the real threat to Hawaiian would be that Southwest Airlines significantly expand its inter-island calendar. Fortunately for Hawaiian Airlines, Southwest only controls four doors at Honolulu International Airport. Given its ambitions for continental flights to Hawaii, Southwest Airlines would need more gates – hard to find – to expand beyond four daily roundtrips on its inter-island routes.

In addition, Southwest plans to operate most of its Hawaii flights in the future with the 737 MAX 8. However, many travelers remain concerned about the 737 MAX and plan to avoid this type of aircraft. This will allow some travelers to fly with Hawaiian Airlines, at least temporarily.

It is still early, but until now it seems that the Hawaiian inter-island service of Southwest Airlines will flourish. And while it may be necessary to make some adjustments in the beginning, Hawaiian Airlines should also be able to thrive in the inter-island market alongside its new rival.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " More from The Motley Fool "data-reactid =" 77 "> More from The Motley Fool

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Adam Levine-Weinberg holds shares in Hawaiian Holdings and Southwest Airlines. Motley Fool owns shares and recommends Southwest Airlines. The Motley Fool recommends Hawaiian Holdings. The Motley Fool has a disclosure policy."data-reactid =" 85 ">Adam Levine-Weinberg owns shares in Hawaiian Holdings and Southwest Airlines. Motley Fool owns shares and recommends Southwest Airlines. The Motley Fool recommends Hawaiian Holdings. Motley Fool has a disclosure policy.