Fuel cost an easy excuse for airlines to raise fares
With reference to Hawaiian Airlines President Mark Dunkerley's remarks at the Star-Bulletin editorial board meeting reported by Dave Segal on Saturday, July 3, as a concerned frequent air traveler I would like to offer these comments:
Dunkerley said that "fuel has increased dramatically and therefore airfares must be increased."
It is a logical argument and an undeniable fact. The question is, By how much should the fares be increased? It seems to me that airlines are now rushing to cover all their past and present cost inefficiencies and financial mistakes under the convenient blanket of excuses provided by the fuel increase.
In fact, airlines were losing money even when the fuel was at 79 cents a gallon, simply because when it comes to cost control, airlines are among the most inefficient of industries. Ditto for productivity. But should consumers now pay for all their inefficiencies? I say they should not.
In order to be profitable, airlines need to achieve a balance between yield and load factor, but they also must be able to contain costs that are within their control. The consumer cannot be expected to pay for the airlines' extravagances. An indiscriminate fare increase will improve the yield, but it could drive consumers away, therefore upsetting the balance yield/load factor, and the end result could be the same, a loss.
Dunkerley also said that HAL will spend approximately $204 million more in fuel in 2008. A a very big number.
But HAL will carry about 7 million passengers in 2008. How much more should passengers pay per ticket to cover the additional fuel cost? One can do the math.
The most puzzling part of Dunkerley's remarks was when he said that, contrary to most airlines on the mainland, which are cutting capacity and laying off workers, Hawaiian is actually expanding and adding to its fleet. He said that this expansion would not have been possible if Aloha Airlines were still around. I guess that is one of the benefits of not having any competition. It was almost like he was saying: With Aloha gone, things are looking great for us now. Not so much for the traveling public, but great for us.
A subliminal endorsement of monopoly? What a frightening thought!
Franco Mancassola was the founder of Discovery Airways. He lives in Hawaii Kai.