Southwest Airlines in Hawaii: capacity, competition still growing


Southwest Airlines made its highly anticipated and long awaited entry into the Hawaiian market in Mar-2019, but its expansion to Hawaii was curtailed by the grounding of the Boeing 737 MAX.

Despite a slower than expected roll-out of its service to the Hawaiian Islands, Southwest's entry has still created headwinds in the market as the extra capacity continues to pressure fares. Now Southwest plans to move ahead with the addition of more routes to Hawaii, which means that existing operators will continue to feel pressure from that additional capacity in the market.

Hawaiian Airlines is bearing the brunt of Southwest's expansion from the mainland to Hawaii and in inter-island markets. And that pressure shows no signs of abating for the foreseeable future.

  • Southwest Airlines' entry into the Hawaiian market has put pressure on fares, and the airline plans to expand its Hawaii network.
  • Hawaiian Airlines is facing the brunt of Southwest's expansion, both on mainland-Hawaii routes and inter-island routes.
  • Southwest has gained a solid seat share in its markets to Hawaii, particularly on routes from Maui and Honolulu to Oakland.
  • Hawaiian Airlines has seen a decline in yields and unit revenues, with lower promotional fares putting pressure on inter-island fares.
  • Hawaiian Airlines believes its frequency of flights in the inter-island market is a competitive advantage against Southwest.
  • Southwest plans to add more flights to Hawaii, which were previously delayed due to the grounding of the Boeing 737 MAX, while Hawaiian aims to maintain its forecasted capacity growth for 2019.


  • Fares have remained pressured between the US mainland and Hawaii since Southwest Airlines entered the market, and the airline now plans to expand its Hawaii network.
  • Hawaiian Airlines cites its level of frequencies in the inter-island market as a competitive tool against Southwest's entry on inter-island routes.
  • Hawaiian plans to maintain its forecast 2019 capacity growth, while Southwest aims to add new flights to Hawaii that were previously sidelined by the grounding of the Boeing 737 MAX.

Southwest Airlines' entry into Hawaii continues to pressure fares in the market

Southwest launched flights to Hawaii during 1Q2019; the airline operates flights between Honolulu and Maui, Kona, Oakland and San Jose Mineta airport (San Jose, California). It also operates from Maui to Oakland and San Jose Mineta.

Data from CAPA and OAG show that Southwest has built up a solid seat share in its markets to Hawaii, with the highest share from Maui and Honolulu to Oakland, where it has 51% of capacity. It competes with Alaska Airlines and Hawaiian on routes from the islands to the US mainland.

Airline seat share: Southwest's routes to, and within, Hawaii, as of early Aug-2019

Route Airline seat share
Honolulu-Kahului (Maui)

Hawaiian 81%

Southwest 17.8%

Mokulele 1.1%


Hawaiian 78.6%

Southwest 21.4%


Southwest 53.6%

Hawaiian 29%

Alaska 17.4%

Honolulu-San Jose Mineta

Hawaiian 35%

Alaska 32.5%

Southwest 32.5%

Kahului (Maui)-Oakland

Southwest 50%

Hawaiian 27.1%

Alaska 22.8%

Kahului (Maui)-San Jose Mineta

Hawaiian 36.1%

Southwest 33.5%

Alaska 30.4%

Management at Alaska Air Group recently remarked that the company continued to see softness in Hawaii, though it is less intense than during 1Q2019.

Southwest launched ticket sales to Hawaii in early Mar-2019, with promotional fares of USD49 one way. Although the promotion at those pricing levels was short lived, the added capacity in the market is still creating challenges in gaining pricing traction.

"I think what really we're fighting here is significant seat increases year-on-year in the marketplace [Hawaii]", said Alaska chief commercial officer Andrew Harrison. "…We are filling the airplanes, although, you know, at cheaper fares".

Southwest's executives remarked in Jul-2019 that its load factors to Hawaii were very strong and its "... fares are where we'd expect them to be at this point". But the airline's yields are likely in line with its competitors, since between them capacity has grown by double digits.

Hawaiian touts its inter-island schedule as pressure mounts from Southwest

Hawaiian Airlines posted a 3.7% decline in yields year-on-year in 2Q2019 and a 2.8% decline in unit revenues. The assessment of the company's management was that its passenger unit revenues on routes to North America and inter-island routes had declined by the mid single digits in the quarter, which contributed to a 7% decline in its domestic passenger unit revenues in 2Q2019.

At the end of 2Q2019 Hawaiian's executives remarked that lower promotional fares were persisting on a couple of important routes, which was creating some pressure on inter-island fares in the short term.

One defensive tool Hawaiian believes it can leverage in the inter-island market is its level of frequency on those routes. The airline believes that schedule appeals to both local and connecting travellers on long haul routes operated by both Hawaiian and its partners.

Hawaiian maintains a sizeable seat share on the inter-island markets where it competes with Southwest (see chart above), but Southwest has also touted a strong mix of local customers on its inter-island flights.

Southwest could also be adding inter-island flights from Hilo in the not too distant future, putting further pressure on Hawaiian in the inter-island market.

Hawaiian maintains capacity guidance as Southwest plans Hawaiian expansion

Southwest is also set to soon announce new services to Hawaii from the US mainland, having been forced to shelve its plans to add flights from Sacramento and San Diego due to the grounding of the Boeing 737 MAX.

But the airline recently stated that it was ending service from Newark, which will free up some aircraft (737-800s) for the launch of additional flights to the islands. The airline noted that it would be able to operate the -800s to Hawaii as long as the MAX remains grounded.

Hawaiian has recently launched new service from Sacramento to Maui, joining its existing flights to Honolulu. There is little doubt that Hawaiian will soon face Southwest on flights to Honolulu, and eventually to Maui.

Before Southwest outlined plans to kick-start its expansion to Hawaii, Hawaiian projected that its 3Q2019 unit revenues would fall between 1.5% and 4.5%, and the pressure on fares on routes to North America and on the inter-island market would continue throughout the remainder of 2019.

Hawaiian is planning capacity growth of 1.5% to 2.5% in 2019 and for now, is comfortable with that planned growth.

Even with the increased industry capacity, Hawaiian's management remarked that overall it has a nice revenue premium relative to its competitors. The airline stressed, through company SVP of revenue planning Brent Overbeek, that it was "focused on delivering the kind of the breadth and depth of schedule in Neighbor Island [inter-island markets] our customers have come to expect from us. And so, at this point, I don't think we see any material changes to that going forward".

The airline is working to combat the increasing competitive pressure, including laying the groundwork for USD50 million in annualised savings beyond 2019 and the debut of its version of Basic Economy during 4Q2019.

Previously, Hawaiian has concluded that its Main Cabin Basic product ('no frills', lowest fare tier) should help ease some of the pressure it has experienced on main cabin yields as competition has intensified between North America and Hawaii.

Hawaiian will face increased competitive pressure for the foreseeable future

Growth of competitive capacity in the Hawaiian market is nothing new for the operators on those routes, but Southwest's additional capacity will continue to create downward pressure on fares for the foreseeable future.

Hawaiian is taking all the right steps to combat the new competition from Southwest, but it appears that outsized industry capacity will be an overhang for Hawaiian through the remainder of 2019 and well into 2020.

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