Isle travel on verge
of new era?

Every other month, Jovina Neal takes a 170-mile flight from Oahu to the Big Island to visit family. Her husband, Travis, often stays home because they can't afford another $200 round-trip ticket.

"It's ridiculous but there's not much we can do but pay," she said last week as she waited to catch an Aloha Airlines flight from Honolulu to Kona.

Hilo businessman John Schulte takes a 45-minute flight to Honolulu every week. His most recent roundtrip ticket on Hawaiian Airlines cost $300.

"Luckily, I'm getting reimbursed for it," he said. "What can you do? This is our interstate highway."

The cost of traveling from one island to another in Hawaii has soared in recent years, with some round-trip tickets costing almost as much as a flight to Las Vegas.

But Hawaii's interisland travel industry is about to undergo a transformation when a low-cost airline and an interisland ferry enter the exclusive market dominated for decades by Hawaiian Airlines and rival Aloha Airlines.

"It's just a very dynamic time in Hawaii," said airline industry analyst Bob Mann of New York-based R.W. Mann & Co. "Arguably, it's the best time for consumers because they're going to get the benefit from carriers who very much need to generate cash flows and maintain market share.

"So for consumers, it's going to be a banner year."

FlyHawaii Inc. and Hawaii Superferry Inc. say they'll reconnect the state and make it easier and much cheaper to hop around the islands.

"In many ways, we're trying to lasso these islands and pull them together," FlyHawaii chief executive James Delano said.

The startup airline announced plans this month to launch service in early 2006, and aims to keep costs down with a fleet of ATR-72 turboprop aircraft, which can carry 68 passengers each. The company is marketing itself as a commuter airline offering fewer restrictions and one-way fares for as low as $50.

Hawaii Superferry plans to operate two giant catamarans carrying 900 passengers and 250 vehicles each between Oahu, Maui, Kauai and the Big Island. Passengers will be able to travel with their vehicles and more of their belongings for about half what the airlines charge. The first ferry is scheduled to begin operating in early 2007.

Hawaiian and Aloha, both in Chapter 11 bankruptcy, basically dismiss their new competitors, and note that others have tried to enter the interisland travel market in the past with little success.

Discovery Airways was forced out of business within two years. Mahalo Airlines flew from September 1993 until October 1997 but went broke. Seaflite launched a hydrofoil system in 1975 and ceased operations three years later.

"We've seen other interisland carriers come and go, leaving their customers holding worthless tickets," Aloha spokesman Stu Glauberman said. "Aloha will always be competitive and going forward, we will have a lower-cost structure that will enable us to meet new competition head on."

Mark Dunkerley, Hawaiian's president and chief executive officer, said his company "welcomes competition as another opportunity" to show travelers the benefits of his company.

Delano expects the skepticism.

"They think we're a joke, and that's fine," he said. "Perhaps they shouldn't be concerned because we may be in a market for additional customers, not taking customers away from them."

Travelers say they'll happily go with "whatever is cheapest."

"I bought a ticket to Kona for $200 and last year I flew to Kentucky for $400," said Travis Neal, a Marine who lives in Kailua. "It's almost cheaper flying to the mainland than to the Big Island."

Neal said bringing his car on the ferry would save money on rental cars, especially on longer trips.

Maui resident Jose Carrizosa said it costs a fortune now to take his wife and two children on the 25-minute flight from Maui to Honolulu. If fares were lower, Carrizosa said he would travel more often to see friends, go shopping or even fill up on gasoline on Oahu, where a gallon of unleaded is typically cheaper.

FlyHawaii's Delano said there's a lot of "pent-up demand" for interisland travel. He noted that travel between islands has declined, despite a tourism boom.

"The overwhelming reason for that is lack of frequency and lack of access to lower fares," he said. "I think if we bring that back, the market will go up."

Delano said residents "will need to be retrained," because many stay home now because it has become so costly to travel.

"If I called you up and said, 'Let's go have lunch in Kona,' you would think I was out of my mind," he said.

Hawaii Superferry -- which bills itself as "H-4" after Oahu's H-1, H-2 and H-3 highways -- is also targeting the local market.

"No matter how we price against somebody else, we're a tremendous value," CEO John Garibaldi said. "We afford people to bring their vehicles, the freedom to move luggage, golf carts in a very convenient and unfettered process. And there's a lot of anxiety taken out of air travel."

Garibaldi said there's been a 20 percent drop in Hawaii residents flying interisland in the past five years.

"So, there's still market out there to be stimulated," said Garibaldi, a former financial officer for both Hawaiian and Aloha.

Mann expects the jet carriers to respond with a fare war, but believes FlyHawaii could survive, just as low-cost Southwest Airlines has in other cities.

"What generally happens is, the number of people traveling doubles, triples or more because of the unrestricted low fares," he said.

Mann said that only about 130 passengers a day flew the Baltimore-Chicago route when it was served by two major airlines. But then Southwest came in, drove prices down and now there are about 600 people who travel in that market, he said.

"If the markets in Hawaii were to behave the same way, you'd find enough room for traditional carriers and a new variety of carriers that try to operate like the subway," he said.

However, Mann said only a handful of startup carriers actually survive.

"There's a great saying in this business: 'It all depends on execution.' You could have the greatest plans in the world, but if you don't execute, you don't get the results," he said.