Wednesday, December 19, 2001

Neighbor isles may be
affected most

Airlines anounce merger
Passengers value service, but don't want to pay more

By Nelson Daranciang

Reaction to a possible Hawaii airline merger was mixed from business and community leaders on the neighbor Islands, which may be most affected.

"It is scary at this point, and I'm going to be watching it very cautiously," said House Transportation Chairman Joe Souki (D, Wailuku).

Souki said neighbor islanders will certainly feel the brunt of that merger since air travel is their only means of transportation across the state. Tourism will also be impacted, he said.

But Kona-Kohala Chamber of Commerce executive Marnie Herkes saw only benefits from a merger.

"It will keep planes in the air. It's not good for us if they both go broke," she said.

Herkes dismissed fears of higher air fares. The purpose of consolidations is to reduce expenses and to have more efficient operations, she said.

With fewer costs, fares could go down, she said.

"The main goal of airlines existence is to encourage people to fly," she said. "They're going to have a lot of airplanes they need to fill. Higher fares would discourage that."

Farmers on Maui were fearful the merger would push up air-freight prices for perishable commodities, such as lettuce, beans, herbs, tomatoes and parsley.

Paula Rafanan, interim manager for the Maui Farmers Cooperative Exchange, said many island farmers were already having difficulty competing with mainland produce.

"It would affect us tremendously," she said.

Flower grower James Heid, the managing partner of Kula Vista Protea, said he doesn't want to see any airlines go out of business, but at the same time he's worried that freight prices will increase with no improvement in the quality of service.

Big Island Mayor Harry Kim said the merger may be an economic necessity, but if survival of the airlines is not at stake, he will oppose it.

"It removes competition. With any kind of monopoly, it's not good for the consumer. It is better for the person with the monopoly," Kim said.

Kim assumed that the proposal is a "direct spin-off" of the economic hardships caused by Sept. 11, but still questioned how long the proposal had been in the works before that.

Maui Mayor James Apana said he feels the merger could have a positive effect, if it results in service to smaller island destinations and keeps prices low.

"If it keeps our airlines solvent, it's a good thing," he said.

Apana said if the merger results in higher prices, a competitor will enter the Hawaii interisland market.

House Tourism Chairman Jerry Chang (D, South Hilo) questions whether the U.S. Justice Department will approve the merger because of the anti-trust issues raised.

"This is basically a monopoly. At first, it could have all this nice scheduling and convenient things, and all of a sudden, if it cuts into their profits...service is cut, scheduling is reduced," Chang said.

"How is it going to impact the fare structure? I don't know," said Big Island-based KTA Superstores owner Barry Taniguchi.

Only a few goods come by air cargo, but his buyers do a lot of traveling, he said.

At the Hawaii Island United Way, executive Helen Hemmes said nonprofits would be hurt by higher fares, especially those dependent on state funding.

That requires their people to maintain a presence at the Legislature, a burden for neighbor island agencies.

Another problem could be neighbor island school athletic teams wanting to go to statewide competitions.

"The cost of sending a team is horrendous already," she said.

Rich Broome, Hertz Rent a Car vice president of corporate affairs, said the economy affects sales more than any other factor and since Sept. 11 business has been down

"We've typically found that that type of activity (merger) doesn't not have a major impact if the total number of passengers remains the same," he said.

Reporters Pat Omandam, Gary Kubota and Rod Thompson contributed to this story.

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