Lower air fares will cost isle residents more later
BOTH of Hawaii's interisland jet operators have gone through very difficult times during the past three years. Hawaiian Airlines and Aloha Airlines have recently emerged from bankruptcy with new investors and cleaner balance sheets. But running an airline remains a perilous business.
A perfect example of this is the arrival of Mesa Airlines as a new competitor in Hawaii's interisland market. This will no doubt ignite a "turf war" with Hawaiian and Aloha that likely will result in lower fares between the islands.
If so, enjoy it while you can because three jet carriers flying between the islands is a tight squeeze for this market. Almost certainly, in time, we will be back to two. The question is, which two?
You can bet that both local airlines will protect their business with determination. Hawaiian is a public company and, along with Aloha, has new investors who expect a return on their investment.
In past years, Hawaiian and Aloha outlasted Mahalo, Discovery and Mid-Pacific airlines, each of which failed to catch on during times when travel between the islands was relatively robust.
It's going to be a much tougher fight for survival today because the market has gotten a lot smaller. Interisland air travel, which relies heavily on visitors, has declined sharply in recent years due to the proliferation of direct flights between mainland cities and the neighbor islands. In addition, there's been a slowdown in travel by residents due to fare increases driven by higher fuel costs.
Contrary to what some people choose to believe, Hawaiian and Aloha's interisland profit margins are thin. Investments in cost-saving technology and, in Hawaiian's case, new, more efficient aircraft, have not managed to overcome the changing market dynamic, or the rising cost of jet fuel. As always, the two airlines compete fiercely with each other. Nobody is hauling cash to the bank.
Mesa, which is based in Phoenix, is accurately described as a low-cost, discount carrier. It started with a clean sheet of paper and has relatively low overhead, using nonunion employees with pay and benefits below most other airlines.
In contrast, Hawaiian and Aloha cope with costlier overheads in part because of higher wage and benefit packages that have been negotiated over the years between labor unions and management. The result has been long careers, a dedicated workforce and economic stability for thousands of local families.
The recent bankruptcies of these two airlines forced some painful belt-tightening on employee compensation that has brought their costs more in line with today's realities. Both organizations are leaner and more efficient than ever before and continue to raise the bar of their performance.
But it might not be enough.
If Mesa's low fares take customers away from Hawaiian and Aloha, or the two local carriers suffer financial losses from having to underprice their services, it's almost certain they will feel pressure to seek additional pay and benefit cuts from employees. No one will enjoy doing this again.
It's also possible that one of our local carriers could become a casualty of this low-fare game of chicken. If so, we might be worse off as a community. For the gain of a few dollars saved flying interisland we risk the loss of several thousand local jobs and the failure of a carrier headquartered in Hawaii that also provides vital air service to the mainland.
Let's not forget that Hawaiian and Aloha have faithfully served Hawaii's needs for many decades. These kamaaina companies are upstanding members of our community with a generous history of philanthropy.
In the long run, we will enjoy greater control of our destiny as an island state by supporting Hawaiian and Aloha in their efforts to become stronger and more stable mainstays of our local air transportation system.
Paul Casey is former president and CEO of Hawaiian Airlines.