Hawaii Airfares expected to drop with Southwest's arrival in Hawaii By Robert Silk / October 23, 2017 Share 1 From left, Southwest COO Mike Van de Ven, managing director for culture Cheryl Hughey and CEO Gary Kelly toast the airline's news that it plans to serve Hawaii. Gov. David Ige and Southwest president Tom Nealon joined via satellite from Waikiki Beach. -- When it begins flying to Hawaii, likely in the latter half of next year, Southwest will certainly shake up the marketplace. The only unknown at present is how much. "What may happen is that airfares will go down, bringing more people," said Gary Leff, an airline analyst who writes the View From the Wing blog. "But that may be balanced by more people driving up hotel prices once you're there."Southwest, which flies the most domestic U.S. passengers of any airline, made the long-anticipated announcement this month about launching flights to Hawaii, but the carrier offered few details. Yet to be revealed are the routes and frequencies Southwest will fly as well as precisely when the service is to launch. First, Southwest must work its way through the process of getting Extended Operations Service (Etops) authorizations from the FAA for each of the Boeing 737 Max 8 and 737-800 aircraft it intends to use for Hawaii service. The Dallas-based carrier did say that at least some of its routes to Hawaii will fly from California -- no surprise, considering that Southwest is the largest carrier in the Golden State -- and that it is considering intra-island service. In addition, chief revenue officer Andrew Watterson told Hawaiian media that Southwest's future competitors in Hawaii are charging fares that are above what it would charge in identical markets. Those competitors are plentiful. Data provided by the airline industry analytics company OAG reveals that carriers are scheduled to fly a combined average of 118 roundtrips per day between the continental U.S. and Hawaii in the first quarter of 2018. The lion's share of the flights serve either Honolulu, Maui, Kona or Lihue. United, which will increase frequencies on eight Hawaii routes this winter, will claim the top market share, with 28%. The other big players are Alaska, Hawaiian, American and Delta in that order, with each slated to operate between 14% and 20% of mainland-to-Hawaii flights this winter. If Virgin America, the other carrier in the marketplace, is included in the share of its sister airline, Alaska, the combined airline's share jumps to nearly 25%. In a piece he authored for the CAPA Centre for Aviation, OAG analyst John Grant predicted that Southwest would begin Hawaii flights with service to the Islands from California airports in Long Beach, Orange County and Oakland, plus Phoenix and Las Vegas. If the carrier follows its usual pattern when entering a market, Grant wrote, it would fly twice-dailies from those West Coast bases, adding an estimated 8% to Hawaii market capacity. With its extensive connecting network on the U.S. mainland, Grant said that Southwest could be positioned to do the most damage to Hawaiian Airlines, which has a small mainland network. To counter that advantage, Hawaiian might need to heavily play up its substantially better on-time performance over Southwest. Hawaiian's flights were on time 87.7% of the time in the 12 months that ended in September, compared with Southwest's 78.5%."Perhaps some strong marketing messages highlighting the poor punctuality of the new market entrant may be only the beginning of a battle they would have preferred to avoid," Grant wrote. Southwest has pondered an entry into Hawaii since at least 2010, when it advertised for an Etops manager, Leff said. Its decision to finally submit an Etops application was driven, in part, by the carrier's receipt of its first 737 Max 8 aircraft, which offers more range and better flight economy and efficiency than its 737-800s. Southwest expects to have 14 Max 8s in service by the end of this year.Leff said another key factor is the push from Alaska Air Group since last year's Alaska-Virgin America merger for more California market share. "Now that they're in a real battle for the West Coast and supremacy in California, this is a huge hole in their route network," he said. Southwest operates more than 30% -- more than any other carrier -- of flights that arrive in or depart from California en route to another U.S. state, Watterson said at the Boyd Group International Aviation Forecast Summit in August.Hawaii fares have held relatively steady in recent years, even as the number of flights to the Islands has increased. Hawaii-to-continental U.S. capacity will rise 6% year-over-year in 2017, according to OAG. Meanwhile, the average roundtrip, domestic budget fare to Hawaii is $616, just $1 more than last year, according to the airfare tracking app Hopper. (Hopper identifies budget fares as the lowest 10% of the fare quotes it tracks.)Grant said he expects prices to decline when Southwest enters the market."One thing is for sure," he wrote. "The surf is going to be going higher than the yields."