Recent huge challenges to Hawaiian Airlines and Southwest Airlines have grossly disrupted the Hawaiian travel industry, causing airfares to ramp up sharply.
The island staple of Hawaiian Airlines in air travel (not understandable) is now deep in a possible acquisition by Alaska Airlines. Any decision pending, an informal decision (the word decision comes twice in one sentence, kindly omit one and rephrase accordingly )n from the DOJ could dictate in as few as four weeks. That uncertainty is likely to be what drives Hawaiian’s pricing and strategic decisions.
Even though Hawaiian Airlines is outperforming Southwest on inter-island routes with moderate demand only, the former operates more flights with the largest market share in this segment to recent reports. Activist investor Elliott revealed that Hawaiian still has a solid 74% load factor on its inter-island flying, which has held relatively flat over the last five years. That is as compared to Southwest, whose load factor is some 36 percent below Hawaiian’s.
The price landscape has changed drastically, too. Southwest initially chopped the prices of interisland flights, and currently, they are at an average of $38. For Hawaiian Airlines, the current average price per ticket is $54; it had its own average of $74 prior to Southwest’s entry into operations. Pricing combined with the load factor—higher for Hawaiian—proves that Southwest can barely sustain a business in the interisland market.
A recent personal experience illustrates a lack of choices in inter-island travel. When seeking an alternate way to fly from Maui to Lihue after being notified that a Southwest flight attendant had fallen ill, Hawaiian Airlines was the only carrier with early evening choices available. Travelers were willing to pay almost $200 per person one way—an additional cost of $29 for seat assignments.
Pricing strategies of Hawaiian appear to be working as premium pricing is commanded by the interisland flights, largely full, and Hawaiian’s seat assignment fees (not understandable). It’s very similar to the pre-Southwest days, for which many Hawaii travelers have mixed memories. In the absence of an Alaska Airlines acquisition, it may then have to pursue a course involving a Chapter 11 reorganization—reorganizing around financially viable businesses like interisland flights.
Southwest has underperformed in Hawaii. Some recent analysis, coupled with a little bit of anecdotal evidence, suggests that they really are struggling when it comes to interisland flights. One flight ran at just 30% capacity, and a returning flight reached just 62%. Those are major contributors to the overall rise in inter island airfares, as Southwest really drags the competition down.
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That said, Southwest’s continued two-free-checked-bags policy holds its weight, especially for visitors who need extra luggage space. For locals-who often take these flights as a bus replacement and typically don’t fly with checked bags-not so much. (sentence is incomplete)
With all the troubles Southwest has experienced, industry observers indicate that a pullback of its inter-island flight offerings could be imminent. As this story continues to unfold, fliers can look for even more shifting in Hawaii’s air-travel scene and, likely, higher prices sooner rather than later.