Isle airlines’
revenues dive

Aloha and Hawaiian
have lost $100 million
in revenue since 9/11
and want state help

By Russ Lynch

The state's interisland airlines have lost a combined $100 million in annual revenue since Sept. 11, 2001, as passenger volume plummeted, Aloha Airlines chief Glenn Zander told a state Senate committee yesterday.

Zander said Aloha supports a resolution in the Legislature asking Hawaii's congressional delegation to push for a broad antitrust exemption allowing Aloha and Hawaiian Airlines to divide up particular routes and schedules, not just total interisland capacity.

The resolution would have no legal force of its own and would act primarily as sort of an official request.

But Zander, Aloha's president and chief executive, expressed doubt that such a broad exemption could be granted, particularly with Congress deeply involved in talks about the possible war in Iraq. The existing exemption, which allows Hawaiian and Aloha to divide total capacity in the interisland market equally between them -- but not discuss individual routes or schedules -- is working well after a rocky start, he said.

Keoni Wagner, vice president of Hawaiian Airlines, said his company supports lengthening the term of the existing exemption but believes it would not be practical to share schedules and routes.

"We believe that the federal exemption has helped to accomplish its stated intent, stabilize the interisland transportation," Wagner told the Senate Committee on Transportation, Military Affairs & Government Operations.

But state Attorney General Mark Bennett said his office opposes expanding the exemption beyond its scope because broadening it could "bring about a situation where the market could be divided by island or by city." He said it could lead to Hawaiian and Aloha deciding, "We'll take Hilo and you take Kapalua," and that could only harm the traveling public.

"That could never be in the interests of consumers," he said.

Zander said Aloha is aware some residents are upset the airlines cut some evening flights, shortening the traveling day.

But he said it is impossible for the airlines to maintain the same level of service with a dwindling market.

Counting all travelers on all segments among all airlines flying interisland, 9.5 million passengers were carried in 2000, Zander said. In 2002 the volume fell to 7.5 million.

"So you've seen the disappearance of 2 million," he said. Estimating that a fare, not counting taxes and fees, would come to about $50 a person per segment, that adds up to $100 million, he said.

Zander acknowledged to senators that interisland travel was "a shambles" in December, when Aloha and Hawaiian were first trying to divide capacity after the antitrust exemption went into effect.

Now traffic is a lot smoother. "Schedules have actually matched capacity to demand extremely well," he said. Complaints have diminished, island residents have become accustomed to booking a little more in advance and only a small number of people have been inconvenienced, he said.

"We recognized early that attempting to get Hawaiian and Aloha to coordinate actual schedules was going to be impossible," Zander said.

The resolution under discussion in the Legislature calls for that, but Zander said the airlines are so different that it would not work. "We would not oppose some way of extending the day" with an antitrust exemption to coordinate some later flights, he said.

Hawaiian's Wagner said that the permission to discuss only interisland capacity with Aloha has turned out to be "a pretty elegant solution."

Both airlines said they have to get business from tourists in order to survive, but still feel residents are their main market.

One neighbor island member on the committee, Sen. Rosalyn Baker (D, Lahaina), complained that holders of coupons for Hawaiian or Aloha cannot get seats when they want them, and "that offends me."

The airline officials said consumers have had to get accustomed to changes, such as booking more in advance, but that is an unavoidable result of the carriers having to respond to continuing losses.

"The interisland market is our core business," Wagner said. "We will never leave here, even though we are losing tens of millions of dollars" in the interisland business.

The resolution still has some distance to go in the Legislature, and if it does get final passage, it will still be only a recommendation to Hawaii's delegation in Congress.

Aloha Airlines
Hawaiian Airlines"

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