A bonanza for consumers. A deadweight for
airlines. A nonissue for many travel agents. That's the simplest
way to describe the fare war that's been raging among Hawaii's
interisland air carriers since June 2006, when Mesa Air Group
launched Go, a low-cost carrier, into the intensely competitive
From the start,
the new entrant deeply undercut competitors' fares, setting
published fares at $39 to $79 one-way. Some sales advertised fares
as low as $19 one-way. Aloha Airlines and Hawaiian Airlines
matched, and the fare war was on.
love the low fares comes as no surprise.
That the fare war
is excruciating for Aloha and Hawaiian, both of which emerged from
Chapter 11 within the last two years, also is no
fierce. Everyone's losing money," said Thom Nulty, Aloha's senior
vice president, marketing and sales.
Hawaiian Airlines CEO Mark Dunkerley, "It's clearly been painful
for both of the incumbent airlines."
The pain has
manifested as red ink on the balance sheets for both Hawaiian and
Aloha. Hawaiian Airlines reported an $11.9 million net loss for the
first quarter of 2007. Dunkerley attributed the loss to low
interisland fares and excess capacity in the transpacific
posted a $10.6 million operating loss in the third quarter of 2006,
the last time the privately held company disclosed
The fare wars are
of far less consequence to travel agents. Several said that the
interisland fare war is of little concern to them.
affect anything," said Judi Chaitman, vice president of Great
Getaways Travel in Leawood, Kan. "The flights between the islands
are the least important of anything [travelers] do, as far as
Chaitman said she
tells her Hawaii-bound clients about the published and discount
fares, which are considerably lower than the $80 to $100 fares she
gets through her wholesalers, but most can't be
On the West
Coast, the availability of nonstop service to Maui, the Big Island
and Kauai makes the interisland fare war a nonissue for clients of
Teri Sherman, co-owner of Pleasanton Travel in Pleasanton,
"They want to go
and come back; it's more one island, one week," she said. "That's
the trend from the West Coast. The only time we would book a
connection would be if we can't get the cheapest fare on the
nonstop, and it's a family of four."
this summer, clients who do want to travel among the islands will
have yet another option: traveling by sea. Hawaii Superferry plans
to launch daily service between Maui and Oahu and six-days-a-week
service between Kauai and Oahu later this year.
A 350-foot ferry,
which will carry 866 passengers and 282 vehicles, will make the crossings
in three hours. One-way fares have been set at $44 off-peak and $54
peak for adults, and $59 and $69 for cars.
Gene Ebanks of
Carrousel Travel/American Express in Richfield, Minn., said she
thought her clients might be interested in the ferry, until she
learned that the schedule doesn't allow roundtrips in one
Sherman said, "It
might be a fun thing if you have kids, maybe one-way."
thought, she added, "People are so rushed now. They want to get
there. The trend is shorter vacations, which means they don't have
time to spend on the ferry."
are said to be excited about the ferry service.
"I can't wait,"
said travel agent Wendy Goodenow, owner of HNL Travel Associates,
Honolulu. "Look at how [ferries] work in Seattle, how they work
Goodenow said she
thought the ferry would appeal to local families who wanted to take
their cars on interisland trips. "They're making it affordable,"
businesses are precisely the markets the Superferry is targeting,
according to director of business development Terry O'Halloran. He
projected that residents -- including school groups, sports teams
and cultural groups -- and business freight would constitute about
70% of traffic. Visitors will make up the other 30%.
Air wars rage on
impact, if any, the new ferry service will have on the battle
between interisland carriers is uncertain.
the ferry interjects "an element of the unknown.
"I think there
will be an element of competition and an element of complementary
activity," he said.
Ornstein, CEO of Mesa Air Group, wondered if today's low air fares
would make the ferry less viable than when originally
was designed under the economics of being charged $100 one-way [by
air]," he said. "Now the question you have to ask is, if you're
getting charged $39, is there really a need for a
responded by saying that the ferry is a "different value
"You really can't
compare our fares with airline fares," he said. "You've got to look
at the whole experience. We like to say we're bringing the fun back
to travel," a reference to the comfort and amenities of the
making multiple-day trips and bringing their own cars, even at
today's price-war fares, it becomes very affordable."
launch of the Superferry has echoes of the past. In the 1970s,
several companies proposed interisland ferry service. A hydrofoil
operated for several years before ceasing operations.
reverberates much louder on the interisland air front, where new
entrants have challenged Hawaiian and Aloha unsuccessfully several
times over the years.
Goodenow said her
agency's safe contains plates of four airlines that sought but
failed to find a foothold in the contentious market.
Robert Mann, an
airline industry analyst and consultant in Port Washington, N.Y.,
is among those who said there was no way all three interisland
carriers could survive.
"If you look at
the history, you can go back five or six challenges and see where a
third guy has disrupted [the market], created a consumer bonanza
but ultimately failed," he said. "It didn't matter who it was. It's
never been a three-carrier market."
For now, none of
the airlines is backing off, even though the long-term trend in
interisland air traffic is down, due in part to increased nonstop
service from the mainland to the Neighbor Islands.
bleeding to the point where they're willing to say, 'Enough,' "
month, Aloha's staying power was bolstered considerably when
codeshare partner United Airlines acquired a minority stake in the
carrier and indicated that it might expand that stake in the
"remains focused on our long-term strategy of providing quality air
transportation service," Dunkerley said.
Mesa has no
intention of leaving the fray, Ornstein said.
"We intend to
stay in the marketplace," he said. We're not going
Apart from seeing
its Hawaii service as "a very good long-term opportunity," the move
has other implications for Mesa, he said.
"This could be a
model for us in other cities," Ornstein said. "That's why it's
strategically very important for us that this works."
unknown in the interisland air battle is the outcome of lawsuits
that both Hawaiian and Aloha filed against Mesa last
Both suits accuse
Mesa of misusing confidential business data it obtained when each
airline was in bankruptcy.
Also at issue is
Mesa's pricing, which the rivals charge is below-cost and
"There is a clear
agenda by one of the competitors to drive another out of business
by pricing below cost," Dunkerley said.
to comment on the lawsuits, but he did say, "We are trying to break
into the market, and it's not unusual to have lower
charges that the fares set by Go are unsustainable, he said that
the carrier's structure of one-way published fares between $39 and
$79 "will in fact work for us."
true remains to be seen. But one thing Ornstein said is certain:
"It will definitely be interesting."
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