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Southwest Airlines Set and Ready to Begin Long-Awaited Hawaii Launch

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Southwest Airlines Set and Ready to Begin Long-Awaited Hawaii Launch

Brandon Farris

Southwest Airlines Set and Ready to Begin Long-Awaited Hawaii Launch
March 16
09:00 2019

OAKLAND – Many of these markets within A321neo reach such as Denver, Las Vegas, and Phoenix have been Southwest strongholds for a long time and now Hawaiian has the chance to consolidate its presence in them before Southwest eventually launches them from Hawaii.

Additionally, with the addition of inter-island flights, Southwest will find itself competing face-to-face with Hawaiian Airlines on its dominating market, carrying over 80% of all the interisland traffic within Hawaii.

The general local population has excitedly awaited the arrival of Southwest on Inter-island flights hoping for lower airfares in what has traditionally expensive market due, largely, to lack of competition.

However, there remains a large a sense of pride and loyalty towards Hawaiian on a significant percentage of the population that, rather than welcoming Southwest, see it as a threat to one of the island’s most recognized symbols.

Whether or not Southwest will be able to resist the competitive pressure against Hawaiian on inter-islands routes in the long term remains to be seen.

Nevertheless, having a low-cost airline operating within the islands for the first time since the demise of Aloha in 2008 will, without doubt, reshape the market and force Hawaiian out of its comfort zone if it wants to retain its market strength.

In fact, in light of Southwest’s arrival, Hawaiian has already reportedly lowered their fares on key inter-island markets such as Honolulu-Kahului, where Southwest will initially offer up to four flights in each direction.

But to Hawaiian’s relief, two key limitations that could potentially hinder Southwest’s inter-island strategy are schedule and equipment.

As the airline plans to rotate their aircraft from the mainland to perform the inter-island flights before returning back to the mainland, the inter-island operation is scheduled based on aircraft utilization rather than demand, as pointed out on crankyflier.com.

The majority of the inter-island tourist demand focuses around noon, whereas most of Southwest’s flights will take place in the morning and evening. In contrast, Hawaiian is able to offer a much more competitive schedules to capture a much wider portion of the demand.

It is expected, however, that the inter-island network will be consolidated over time with more frequencies as Southwest increases its presence in Hawaii with new flights to the mainland to complement the inter-island operation.

As far as equipment goes, Hawaiian undeniably has the advantage. Their unique fleet of Boeing 717s was built for missions exactly like the Hawaiian inter-island market and are able to perform efficiently and reliably, having one of the highest fleet utilization statistics in the entire industry supported by an extensive maintenance and staff infrastructure throughout the islands which Southwest simply cannot match at this point.

While efficient in their mainland network, Southwest’s fleet of 737-800s planned for Hawaii are too big to be competitive on the inter-island market with the high frequency required to make it profitable.

However, the intra-island market is a gold mine worth digging into, and Southwest knows it.

The airline has been able to generate demand in the mainland by virtue of its own presence that forces the market to lower their fares in order to compete.

Assuming a similar effect taking place in Hawaii, it could open the door to a potentially successful and profitable venture in a market that experiences its lowest degree of competition in history following the demise of Aloha, Go!, and Island Air.  

While not as threatening as United and Hawaiian -who together dominate up to 3/4s of the Honolulu market- to Southwest’s Hawaii operation, American Airlines and Delta Air Lines still control large portions of the market share from the mainland channeling thousands of passengers a day through their hubs to the island, often offering a more superior hard product than Southwest’s.

But perhaps the largest competitor Southwest will face in Hawaii is none other than West Coast-archenemy Alaska Airlines.

Originally launching Hawaiian service back in 2006, it was deemed a questionable experiment at the time and many doubted that it could succeed.

However, to the surprise of many, not only did Alaska succeed but it became one of the largest airlines between Hawaii and the mainland.

Today, the Seattle-based airline operates over 175 flights a week from Seattle, Portland, San Francisco, Los Angeles, San Diego, Oakland, San Jose, Sacramento, Anchorage, and Bellingham to Honolulu, Kahului, Lihue, and Kona.

With a remarkable presence in most of those airports, including hubs in San Diego, Los Angeles, and Oakland, they are the perfect markets for Southwest’s Hawaiian operation.

Additionally, both Southwest and Alaska have large, loyal customer bases and enjoy a great reputation in the West Coast.

Competing directly in those markets will be certainly be challenging to both airlines sharing so many similarities.

However, had Southwest launched Hawaii service a decade ago and faced Alaska before their consolidation in the market, it would have given them the chance to dominate it and win it over.

With so many markets overlapping, both Southwest and Alaska will have to rely heavily on offering lower fares in order to remain competitive and make Hawaii work, which will ultimately benefit the consumer.

While Southwest’s business model has been incredibly successful within the continental United States, it still remains unclear whether the consumer will be as receptive to it on flights of such duration.

However, there is only so much to be done in terms of offering low fares without adopting an Ultra Low-Cost model, which Southwest no longer has.

On the other hand, with the legacy carriers offering important perks in medium-haul markets such as better premium cabins, superior hard product, charger ports and frills such as meals for sale, Southwest cannot charge similar or higher fares without the risk of jeopardizing their strategy.

Another remarkable limitation that has become evident at such an early stage of their Hawaiian operation is the lack of eastbound connections from Hawaii to Southwest’s Midwest and East Coast network.

Under the current schedule, customers can easily connect through Oakland and San Jose onto Hawaii from a large number of points within the Southwest network outside the West Coast.

Eastbound, however, the possibilities are not as plentiful. The initial schedule proposes a 9:00pm arrival into Oakland from Honolulu for the daily frequency which would only provide customers with connection to key cities throughout the western half of the country.

A second daily frequency with a 5:15pm arrival into Oakland is scheduled to begin a week later on March 23rd, which would enable customers to catch certain early evening connections to Los Angeles, Seattle, Phoenix, Las Vegas, or, Houston, among other cities. However, even with this second frequency, the proposed initial schedule still leaves out the Midwest and East Coast markets almost entirely.

Capturing the huge -and loyal- customer base it possesses in the Midwest and East Coast without the launch of red-eye flights that would enable plentiful connections to those markets will prove challenging when legacy carriers such as United or Delta can conveniently link hundreds of cities all across the country through their hubs with service to Hawaii.

However, Southwest’s Hawaiian adventure has just begun. As more cities in their network gain nonstop service to the islands and as red-eyes are added to their schedule, the size of the market available for Southwest to consolidate itself into will grow significantly.

After Oakland and San Jose, San Diego and Sacramento can be expected to follow in becoming Southwest’s gateways to Hawaii. Other West Coast cities could potentially be included as part of future expansions.

Once the 737 MAX-7 and MAX-8 begins flying to Hawaii it will open the door for important Southwest hubs such as Las Vegas, Denver, and Phoenix to gain service to the islands.

While there are not many points further east that could be considered for future Hawaii service due to the range limitations of the 737 -even the MAX-, the majority of Southwest’s network can be conveniently linked through these cities.

While the Hawaiian market has proven to be an aggressive one, there is no doubt that Southwest Airlines possesses an optimal combination of marketing power, unparalleled customer loyalty and general reputation with the North American consumer that allows them to challenge it with triumphant optimism.

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Carlos Lugo

Carlos Lugo

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