Hawaiian, Aloha Hawaiian Airlines hopes that the new interisland capacity cuts it is working out with competitor Aloha Airlines will go into effect Dec. 1, John W. Adams, Hawaiian's chairman, chief executive officer and president, said yesterday.
coordination
to begin Dec. 1
The airlines will set seat
capacity for interisland routesBy Russ Lynch
rlynch@starbulletin.comAdams said that when the coordination begins, interisland travelers will experience two changes. "You're not going to be able to walk up to the counter with five minutes to spare before the flight," he said after a speech to the Rotary Club of Honolulu.
But, he said, interisland travelers will feel the benefits of being wooed by two financially sound competitors trying to win their business.
In his talk at the Royal Hawaiian Hotel, Adams said Hawaiian and Aloha have both been losing money in their interisland business, which led them to seek antitrust exemption to control seat capacity.
"We must reduce capacity in order to have it not such a drain on our financial figures," he said.
Both airlines have been using cash from the bigger-money mainland-Hawaii business to subsidize the interisland market, Adams said.
The one-year exemption from antitrust laws, which started at the beginning of this month and runs to Oct. 1, 2003, allows the airlines to share capacity information, come up with an agreement as to how many seats will be needed in the near future and agree to allow each airline to have half that capacity.
If one ends up using more than half the actual seats, it must pay the other airline according to a complex compensation formula.
The agreement allows the airlines to talk only about capacity and "not talk about price and not talk about schedules," Adams said.
Hawaiian is investing more than $300 million in new jets and the interisland market is crucial to its business, Adams said. Hawaiian and Aloha sought special permission to coordinate capacity because they both have too many empty seats in their current schedules, which run almost side by side at times.
Adams said after his speech that the discussions with Aloha are centered on figuring the total interisland capacity needed for the coming months, which is complicated by trying to assess holiday-season business.
Aloha said it would not comment on the capacity talks. But Stu Glauberman, an Aloha spokesman, said his airline would not argue with the Dec. 1 target date voiced by Adams.
In response to a question from retired stockbroker Phil Norris, who asked Adams his view of the failed talks aimed at combining Hawaiian and Aloha into one airline, Adams said eventually Hawaiian's board concluded the merger was not in Hawaiian's best interests.
Looking back now, Adams said, "I think it was a good decision" to break off the talks.
Since the merger fell through, both Hawaiian and Aloha have launched new mainland routes and expanded their fleets.
The airline business as a whole is in a period of "enormous overcapacity," with "more seats chasing fewer passengers," Adams said.
While that might be seen as a restraint on fare increases, airlines are also suffering huge cost increases, such as a rise in jet fuel prices due to a "war premium" because of the current threat to Middle East oil supplies. Hawaiian's fuel cost has risen from around 62 cents a gallon a year ago to more than 80 cents now, Adams said.
It costs Hawaiian about $1 million every time the cost of a gallon of jet fuel increases by a penny, he said.
Looking at the airline business as a whole, however, Hawaiian looks pretty good, Adams said.
"The view from where I am is a lot more pleasing than the view of the industry," he said. "So far leisure travel has not been affected as much as business travel has."