Southwest closer to launching Hawaii flights: impact on unique markets


As Southwest Airlines inches closer to launching flights to, from and within the Hawaiian islands, there's no shortage of speculation about how the airline's entry into the market will affect overall dynamics.

Southwest is launching flights at a time when current operators between the US and Hawaii cite a period of overcapacity in the market, and there's no doubt the pricing pressure created by that excess supply will continue once Southwest firms up its initial schedule and injects promotional fares onto those routes.

Although Southwest could shake up the inter-island market from a commercial perspective, Hawaiian Airlines has already weathered numerous competitors in the market and obviously has a strong local following. In the short term, passengers will benefit from solidly lower fares until a new competitive equilibrium settles in.

  • Southwest Airlines' entry into the Hawaiian market could further depress yields due to introductory fares.
  • The inter-island market in Hawaii is unique, and it remains to be seen if Southwest can replicate its success on those routes.
  • Southwest has gained FAA certification to operate flights to Hawaii after delays caused by the US government shutdown.
  • The airline will initially launch services from California to Honolulu, Maui, Kona, and Lihue, as well as inter-island routes.
  • The US west coast to Hawaii market has experienced increased capacity, leading to yield pressure for airlines.
  • Hawaiian Airlines dominates the inter-island market, but has seen some softness in demand and expects a decrease in capacity in 1Q2019.


  • Southwest's intro fares in the Hawaiian market could further depress sagging yields in the marketplace.
  • The Hawaiian inter-island market is a unique entity, and it remains to be seen whether Southwest can replicate its short haul success on those routes.

Southwest enters Hawaii as other competitors cite heightened industry capacity

Southwest has yet to formalise a schedule for its service to Hawaii (as of the time of this writing), a situation driven in part by delays in gaining necessary certifications to operate over water to the islands; delays that resulted from the partial US government shutdown that spanned more than 30 days from late 2018 to early 2019.

The airline has now garnered the FAA's blessings for those flights and can move forward in launching services from its California strongholds in Oakland, San Jose, Sacramento and San Diego to Honolulu, Maui, Kona and Lihue, as well as services between the islands.

From those airports in California Southwest holds a commanding ASK share (as of late Feb-2019) and has solid brand awareness in the state. There's no doubt that Southwest will initially draw solid passenger numbers for its new services to Hawaii as it is very likely to lower prices in the market with its introductory fares.

Southwest has obviously internally estimated the time necessary to build up revenue generation on its routes to Hawaii, but the airline is launching flights at a time of heightened capacity from the US west coast to Hawaii.

Alaska Air Group, as a sizeable presence between the US west coast and Hawaii, has stated that industry capacity between the US and Hawaii grew 8% year-on-year in 4Q2018, which obviously pressured yield.

Routes to North America represented 52% of Hawaiian Airlines' passenger revenue in 2018 and industry capacity for the full year in those markets increased by 11%. Recently, Hawaiian executives unsurprisingly remarked that the competitive capacity created a challenging environment for generating revenue growth.

Hawaiian's management also stated that yield pressure would continue during the seasonally weak period of 1Q2019, and Alaska's executives have said that while capacity from US west coast to Hawaii is less elevated in the first quarter of 2019, it is generally a weaker period.

Question is whether Southwest can find the right short haul formula in Hawaiian inter-island markets

Hawaiian has remained steadfast in its inter-island operations as many challengers have come and gone, including Island Air and Mesa's Go!.

But even as Hawaiian is now the dominant airline in Hawaiian inter-island operations, in early 2019 it cited some softness in demand on those routes and forecast that inter-island capacity would drop 6% year-on-year in 1Q2019.

The airline stated that it had stepped up its marketing and promotional activities to support those weaker conditions.

Hawaiian operates Boeing 717s and ATR turboprops through its subsidiary Ohana. The airline's 717s feature 128 seats and its turboprops are configured with 48 seats. Hawaiian is one of the most bullish 717 operators, having previously declared that the aircraft is ideal for inter-island operations in Hawaii.

Southwest plans to operate 175-seat Boeing 737 jets to the Hawaii and on inter-island routes, according to Bloomberg, and it remains to be seen whether those routes will sustain higher capacity jets. Southwest executives recently told the publication that it could offer a limited number of frequencies at peak times and essentially fill its aircraft.

Hawaii's inter-island market is a unique entity that Hawaiian Airlines arguably has a mastery of. Passengers often travel on day trips between the islands for a range of activities and air travel in those markets is likened to the operation of a local bus or train system.

Southwest's initial strategy seems to be using inter-island flights to increase daily utilisation in between flights to and from California.

Those flights would still raise capacity in inter-island markets and Hawaiian, as the market leader in inter-island operations, is unlikely to pull its capacity significantly down on those routes, since it holds strong brand awareness among passengers travelling on those routes.

Southwest's entry into inter-island markets will no doubt generate interest among those passengers; however, it remains to be seen whether Southwest can replicate its track record of short haul success in a market that has innately unique characteristics.

Southwest may drastically alter competitive dynamics to and within Hawaii

Southwest's approach to Hawaii has been drawn out - both from the airline's decision to keep mum on its initial schedule and also the more public delays in gaining necessary certifications to launch flights in the market.

Although the market from the US west coast to Hawaii is small, it is not inconsequential.

Southwest's entry is a milestone, and as 2019 progresses it will be interesting to see how the airline alters the competitive dynamics on routes to Hawaii and in the inter-island markets.

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