Southwest Airlines: Hawaii services continue to beat expectations


Although most of Southwest Airlines' focus in 2020 will remain on reinstating service of its Boeing 737 MAX fleet, its routes launched to Hawaii will continue to mature, and it will be interesting to see how the added capacity will continue to affect older incumbents in the market.

The airline made a push into Hawaii in late 2019 that is continuing into 2020, upping competition with Hawaiian Airlines and Alaska Air Group in many of its markets and creating yield pressure for its rivals.

By the airline's own account, Hawaii is performing up to, or exceeding, Southwest's expectations. The airline has highlighted some interesting observations about connections from the US west coast, and customer satisfaction with Southwest's onboard product, given the length of its flights to Hawaii.

  • Southwest Airlines' routes to Hawaii are performing better than expected, creating yield pressure for rivals Hawaiian Airlines and Alaska Air Group.
  • Southwest has rolled out inter-island markets and several routes to Hawaii, solidifying its presence at major airports in the state.
  • The capacity injection by Southwest has put pressure on yields in the Hawaiian market, impacting competitors' pricing strategies.
  • Southwest has observed interesting trends in its Hawaiian markets, including increased demand and connections from the US west coast.
  • Despite longer flight durations, Southwest's onboard product on Hawaiian routes has received positive customer feedback.
  • Southwest's entry into the Hawaiian market is seen as a permanent fixture, requiring competitors to navigate the dynamics with a large-scale competitor.


  • Southwest touts better than expected results on its service to Hawaii while its rivals Hawaiian and Alaska continue to dig in.
  • Southwest has noted some interesting trends in its Hawaiian markets, citing demand that was not present before its launch.

Southwest has rolled out Hawaiian inter-island markets and several markets to Hawaii

Southwest announced its highly anticipated service to Hawaii in Mar-2019, but its roll-out of service to the islands has been slowed by the worldwide grounding of the MAX.

Recently, Southwest executives highlighted that the airline offers 14 daily flights to Hawaii from the California cities of Oakland, San Jose, Sacramento and San Diego, and approximately 38 daily flights on inter-island markets.

The airline made a push into Hawaii in late 2019 that is continuing into 2020, upping competition with Hawaiian Airlines and Alaska Air Group in many of its markets. Southwest's new additions to Hawaii in 2020 include flights from Sacramento to Honolulu, Oakland to Kona and Lihue, and San Jose to Kona and Lihue.

Over the course of its roll-out to Hawaii, Southwest has amassed a solid presence at Hawaii's main airports, taking the second largest spots measured by seats in Kona and Lihue and the third largest in Honolulu and Maui.

Southwest Airlines' seat share in Hawaii's main markets as of late Jan-2020

Airport Southwest's seat share Southwest's Ranking
Honolulu 10% 3rd
Kona 14% 2nd
Lihue 15% 2nd
Kahului 11% 3rd

Southwest's capacity injection into the Hawaiian market has created yield pressure for its rivals.

At the end of 2Q2019 executives at Alaska highlighted "significant seat increases year-on-year" in the Hawaiian market and said that the airline was "filling the airplane", albeit at cheaper fares. Alaska's management said that the company's new tiered fare structure, which features its version of basic economy, was helping the airline to combat some of that softness in fares.

Hawaiian stated that capacity for 2019 between North America and Hawaii will be 17% higher than for 2017 and given the level of that increase, it is not surprising that industry pricing remains below levels airlines achieved in 2016 and 2017.

See related report: US-Hawaii air market: Southwest Airlines raises competitive pressure

At the beginning of 2020 Southwest president Thomas Nealon said that demand and load factors in the company's Hawaiian markets had been "very, very good", even as, due to the MAX grounding, "our ramp up, honestly, has been a little slower than we originally expected". The airline has calculated that it transported approximately one million passengers in 9.5 month of operations to Hawaii.

However, there must still be a degree of pricing pressure remaining in the market due to Southwest's entry and its capacity ramp-up.

At the end of 3Q2019 Alaska Air Group stated that it had posted a modest unit revenue increase in its Hawaiian markets during the quarter, "Notwithstanding the fact that the industry capacity and our own capacity were both up 7%".

See related report: Alaska Air Group: post merger strength setting in

Both Alaska and Hawaiian believe their versions of basic economy provide some shield against the continuing pricing pressure created by Southwest. Alaska has fully rolled out its Saver Fares, while Hawaiian is gradually rolling out its Main Cabin Basic and has previously calculated that it could generate USD25 million annually from its tiered fares.

Southwest's connections from the US west coast to its Hawaiian markets

One of the most interesting aspects of Southwest's launch to Hawaii, according to Mr Nealon, is that the airline is "creating demand that we didn't even see as being there". He explained that for Southwest there are more connecting itineraries within the US west coast.

The airline has touted its strength in two of California's major markets - the Los Angeles basin, with a 29% share, and the San Francisco Bay Area, with a 33% share. It is the largest airline in both Oakland and San Jose Mineta, as well as at Burbank, Orange County and Ontario International. Southwest is also the largest operator at Sacramento International airport.

Mr Nealon said that while Hawaii is only approximately 2% of Southwest's overall business, "…It has a really important role that it really supports our California business, so it's succeeding in every dimension".

Southwest concludes that its onboard product is well received on Hawaiian routes

Mr Nealon explained that Southwest is often asked how the company feels about its product performance on longer haul flights to Hawaii.

For example, the distance from Oakland to Honolulu is 2,093nm. Southwest's president has stated that scores for the customer experience and brand on the airline's flights to Hawaii are actually higher than the total system.

Southwest has no intention of altering its product offering, even as segmented fares are now a mainstay in the US marketplace.

"I don't ever see us charging for bag fees", company CEO Gary Kelly declared. "We're not going to do basic economy…there have been a couple of media stories that were way off. So we've tried to clean some of that up".

Southwest is now a fixture in Hawaii and is sticking to a consistently positive message

Southwest's arrival in Hawaii has no doubt created some challenges for operators in achieving pricing traction. But the airline has consistently communicated a positive message about its service to Hawaii and is maintaining that stance as 2020 gets under way.

As Southwest reaches a certain level of market penetration in Hawaii, its rivals may need to continue to dig in and navigate dynamics with a competitor the size and scale of Southwest as a relatively permanent fixture in the market.

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