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Ohana is Coming

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Ohana is Coming

Ohana is Coming
February 12
10:00 2014

MIAMI — Hawaiian Airlines has loaded schedules and fares for its new inter-island turboprop operation, Ohana. Ohana will launch with five new daily flights from the carrier’s home base at Honolulu International Airport to the neighboring islands of Lanai and Molokai. Thrice daily flights to Molokai will begin on March 11th with schedules as follow:

Flight Route Departs Arrives Start Date
MOLOKA’I SERVICE
HA610 HNL-MKK 7:00 a.m. 7:25 a.m. 12-Mar-14
HA611 MKK-HNL 8:05 a.m. 8:30 a.m. 12-Mar-14
HA614 HNL-MKK 12:15 p.m. 12:40 p.m. 12-Mar-14
HA615 MKK-HNL 1:20 p.m. 1:45 p.m. 11-Mar-14
HA618 HNL-MKK 5:30 p.m. 5:55 p.m. 11-Mar-14
HA619 MKK-HNL 6:35 p.m. 7:00 p.m. 11-Mar-14

Twice daily flights to Lanai will begin three days later on March 14th with schedules as follow:

Flight Route Departs Arrives Start Date
LANA’I SERVICE
HA612 HNL-LNY 9:30 a.m. 10:00 a.m. 18-Mar-14
HA613 LNY-HNL 10:40 a.m. 11:10 a.m. 18-Mar-14
HA616 HNL-LNY 2:40 p.m. 3:10 p.m. 18-Mar-14
HA617 LNY-HNL 3:50 p.m. 4:20 p.m. 18-Mar-14

The routes will be served by Ohana’s fleet of three 48-seat ATR 42-500 turboprops operated by Empire Airlines, though the carrier has only taken delivery of two aircraft at this time. Hawaiian has planned its initial schedules such that that the entire schedule can be flown by one aircraft, that too, with plenty of slack for that one aircraft thanks to 40 minute turns at small outstations. The aircraft could also likely fly an additional daily flight in the morning and in the evening for a total of 7 daily roundtrips.

The flights are priced at introductory fares of $59 each way, though fares rise to $85 each way further out, signficantly above the pricing of existing operators Island Air and Mokulele Airlines (not to be confused with go! Mokulele, that carrier’s joint venture with Mesa Airlines that was disbanded in 2012 – the former JV still operates as go! operated by Mesa Airlines).

The new flights will operate out of gates 49 and 50 at Honolulu Airport, allowing passengers to connect seamlessly with Hawaiian’s inter-island, US, and trans-Pacific network at Honoulu. Hawaiian expects the operation to create about 100 jobs initially, with the potential for several more.

hnl-terminal-map

With Ohana, Hawaiian Airlines is hearkening back to its early days with Ohana, as its first ever air route between Honolulu and Hilo Airport via Maui stopped at Molokai along the way using Sikorsky S-38 flying boats. Over the years, the carrier continued to serve secondary Hawaiian airports with Dogulas DC-3s, Convair CV-340s, NAMC YS-11s, Shorts 330s, and de Havilland Dash 7 turboprops. However, service to Lanai, Molokai, Kamuela, Hana and Kapalua Airport on the west coast of Maui was ended in 1994 when the carrier retired its fleet of Dash 7s.

Today, Hawaiian Airlines’ inter-island operations are centered around the five major Hawaiian airports: Honolulu, Kahului (on Maui), Kona (on the Big Island), Lihue (on Kauai), and Hilo (on the Big Island). Honolulu is clearly the primary hub with close to 70 daily departures, but the carrier also operates a secondary inter-island base at Kahului. From Honolulu and Kahului, the carrier offers flights between the two hubs, as well as to Lihue, Kona, and Hilo with daily departure counts as follows (on a random day in Winter 2014).

Honolulu Kahului (Maui)
Destination Daily Flights Destination Daily Flights
Kahului 26 Honolulu 26
Lihue 16 Kona 3
Kona 15 Lihue 2
Hilo 12 Hilo 2

Hawaiian’s inter-island operations are run on a fleet of 18 Boeing 717-200 aircraft configured with 118 ( 8J / 110Y ) or 123 ( 8J / 115Y ) seats. They are the only mainline operator and the proverbial “500-pound gorilla” in the market, though for much of their history, they faced competition from the venerable Aloha Airlines. Aloha operated Boeing 737-200s on inter-island routes and was a pioneer in using Boeing 737NG (-700 and -800) aircraft to serve the US West Coast with narrowbody aircraft before ending passenger service in 2008, a strategy later employed by Alaska Airlines.

Smaller regional players include Mokulele Airlines, go!, and Island Air (who was recently purchased by Oracle CEO Larry Ellison who also owns much of Lanai). These interisland routes are a bastion of strength for Hawaiian, who used them as a financial buffer during their recent long haul expansion in much the same way rival Alaska Airlines uses lucrative routes in the state of Alaska

ha-interisland-operation

Ohana represents an opportunity for Hawaiian to grow this base of interisland revenue. Air routes to the smaller Hawaiian islands are extremely high yielding, while the ATR 42-500 aircraft that Hawaiian has tapped to serve the routes have lower trip and seat-mile costs than the ATR 72-200s operated by Island Air, the Cessna Caravans operated by Mokulele Airlines, or the Bombardier CRJ-200s operated by go!.

Lanai and Molokai have proven demand given their existing service by other carriers. While Hawaiian Airlines is not matching the lower fares offered by those providers on the route, its frequent flyer customer base and overall network should allow it to win a strong share of traffic on the route. The integration with longer haul flights in particular should pay dividends in terms of yields.

While Lanai and Molokai are not visited by many Asian and mainland US travelers, the ones that do pay extremely high fares (often purchasing a separate ticket on Island Air). Now they can get to Lanai and Molokai on one itinerary, which should also stimulate demand some. The downside, of course, is that these routes are simultaneously served by Island Air, who is likely to be better-capitalized and highly competitive by virtue of Mr. Ellison’s presence.

Beyond the initial three aircraft, it is unclear if Ohana can easily get its hands on more ATR 42-500 aircraft. The -500 is ATR’s most up-to-date offering, and there are very few used ATR 42s available on the open-market, and lease rates for models from 2005 onewards are $105,000 – $170,000 per month (oldest to newest). That being said, Hawaiian could simply opt to order new turboprops from ATR, though the massive backlog for ATR 72s could extend the timeline on such an order.

Even with 3 ATR 42-500s, there is still plenty of room for expansion. As mentioned before, the carrier could add another two daily flights with the existing aircraft used for the inaugural schedule. This would allow for four daily flights to Molokai, and three to Lanai. Once the operation has gone through a few months with one aircraft held in spare, additional daily flights could be added to boost Molokai and Lanai to five per day. At that point, the next logical destination is Kapalua, on the west coast of Maui.

Kapalua Airport has an interesting history. It is actually the replacement for Kaanapalli Airport, which served the west coast of Maui north of the town of Lahaina. The area is home to many high priced resorts, though the local population of the area is sparse relative to Kahului. Hawaiian Airlines built the airport in 1987 to expand its inter-island operations with 50-seat Dash 7 , turning it over to the state in 1993 before ending service to the airport in 1994.

Resorts in the Lahaina area are popular in particular with Chinese and Japanese travelers, which means that two to three daily flights from Honolulu to Kapalua would also make sense. Connecting the dots with flights from the secondary hub of Kahului to Lanai and Molokai (twice daily in the vein of Hilo and Kona) would basically fill the flying for the second aircraft and spill over into the third.

Hana Airport is another former Hawaiian Airlines destination that could be a viable destination, though demand is somewhat sparse. Currently only served by Mokulele Airlines using Cessna Caravans to Kahului, Hana could maybe sustain a daily flight to Honolulu. And the airport of Waimea on the island of Hawaii is also a potential destination, though it will likely require Ohana to bid on the Essential Air Service (EAS) contract won by Mokulele Airlines for $580,000 over two years in July 2013.

So in sum, this is what the Ohana operation could look like one to two years from now.

  • Honolulu – Lanai/Molokai –> 5x daily
  • Honolulu – Kapalua –> 2x daily
  • Kahului – Lanai/Molokai –> 2x daily
  • Honolulu – Hana –> daily
  • Honolulu/Kahului – Kamuela –> daily

proposed-ohana-operationRegardless, Ohana marks an exciting new venture for Hawaiian Airlines. Alongside the carrier’s massive expansion to Asia and the South Pacific, a small turboprop operation to secondary Hawaiian islands could prove to be amongst its most lucrative.

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