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Hawaiian Air Cancels A350-800, Converts to A330-800neo; Analysis

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Hawaiian Air Cancels A350-800, Converts to A330-800neo; Analysis

Hawaiian Air Cancels A350-800, Converts to A330-800neo; Analysis
July 22
15:26 2014

MIAMI — Hawaiian Airlines will acquire six A330-800neo jets in a memorandum of understanding announced on Tuesday. The jets will replace the carrier’s current order for six A350-800 XWB aircraft.

The deal sets Hawaiian as the launch customer for the -800neo, and includes options for up to six additional airplanes. If all options are exercised the deal is worth $2.9 billion at list prices ($242mil per -800). The jets will begin delivery in 2019.

“The A330-800neo’s fuel efficiency, additional range and commonality with our existing A330 fleet makes the A330-800neo an elegant solution to our need for growth aircraft toward the end of this decade,” said Mark Dunkerley, Hawaiian Airlines president and chief executive officer in a prepared statement.

The airline already operates a fleet of eighteen A330-200s, which will retain commonality with the coming neos.

Hawaiian’s deal is yet another nail in a coffin already sealed tight for Airbus’ A350-800. Hawaiian had been one of only a handful of carrier’s holding out for the jet, which has become increasing unpopular with carriers. It was widely expected that the airline would flip to the A330neo after the jet was announced last week at the Farnborough air show. Today’s announcement reduces the A350’s commitments to a mere 28.

While several customers for the A350-800 do remain, it is widely expected that they will either convert orders to the A330neo or up-gauge to the A350-900. Hawaiian was the one carrier that, at least publicly, was almost intractable in maintaining that it would take delivery of the A350-800 as ordered. While some viewed this position as an obstacle to Airbus killing off the expensive and (relatively) inefficient A350-800, it is now clear that the statements made by CEO Mark Dunkerly and other Hawaiian executives were mainly aimed at creating leverage to win a better deal for the A330neo from Airbus.

The substitution of the A330-800neo for the A350-800 is also a tacit admission on the part of Hawaiian that its strategy of aggressive expansion into markets around the Pacific has limitations. The airline has aggressively expanded into markets like Brisbane, Fukuoka, and Taipei over the past 3-4 years, and while some of these markets have been successful, they have also generated steady downwards pressure on Hawaiian’s revenue figures because they are low yield. Hawaiian has already begun to retrench to its core strength of flights between the US mainland and Hawaii, and some of the pressures on its passenger revenue growth have begun to recede. Thus the A350-800, which was billed as an avenue to long haul growth for Hawaiian, has become almost secondary to the airline’s more muted strategic outlook.

Indeed amongst the 20 largest Asian destinations by origin and destination (O&D) from Hawaii, only Singapore and Bangkok (as well as the pipe dream of European service to London) are beyond the capabilities of the A330-800neo. And as an added bonus, Hong Kong, which cannot be effectively served by the A330-200, lies well within the A330-800neo’s capabilities, thanks to a 400-nautical mile increase in range.

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