Hawaiian Airlines profits are set to shrink even more into 2019, as rivals Southwest are set to start their new routes to Hawaii.
Hawaiian, who have made their entire business model around flying to and from the island state is not in a great place to beat off the competition, leaving investors worried.
What are the details?
Just last Tuesday, Hawaiian’s parent organization (Hawaiian Holdings) released an earnings report that was below expectations and reevaluated the 1st quarter of 2019 earning to be much lower.
Management essentially blamed a downtown in inter-island domestic activity and overcapacity on international routes. Two of the major challenges so far this year has been the Southwest announcement, which whilst tickets have not gone on sale, as prompted fares to fall. The second has been the code-share agreement between Jetblue and Alaska to bring travelers to the island.
Plus, not only does Hawaiian compete with US carriers, but with international foreign carriers as well. News like ANA pressing three A380s on the Japan – Hawaii route only adds fuel to the fire.
But management remains optimistic.
Hawaiian delivered another year of strong financial results in 2018, with an adjusted pre-tax margin in the top tier of industry performance. … 2019 will be an important year for Hawaiian. Successfully dealing with all of 2018’s twists and turns gives me tremendous confidence in our ability to sustain and build upon our achievements in the years ahead. – Statement from CEO Peter Ingram, Hawaiian Holdings
What is Hawaiian planning for in 2019?
To help combat these new challenges, Hawaiian has implemented a variety of new strategies:
The first is to create a new fare class, Basic Economy. This fare allows passengers to fly for cheap, without all the extras you might expect. This fare will not include luggage, passengers board last, not be able to change reservations and not be able to select seats. Basic economy passengers will however still be able to earn Hawaiian Airmiles.
The second is to expand their inter-island cargo routes. Cargo is a very profitable business for airlines and an expansion in 2019 could secure Hawaiian with a much needed expanded source of revenue.
Additionally, Hawaiian managed to phase out their fuel-hungry Boeing 767 aircraft and replace them with much more fuel efficient Airbus A321neo aircraft. With the largest cost of airlines being fuel, reducing their expenses will go a long way to profitability.
Lastly, Hawaiian is waiting on the FAA to approve a code-share partnership with Japan Airways. Not only will this allow Hawaiian to reach deep into Asia, but also combat the new routes by ANA to the islands.
Overall, Hawaiian management is positive that these steps will steer the company away from a stormy future.
What do you think, will these plans be enough to save Hawaiian?