Southwest are inching closer to the start of their flights to Hawaii. With a reputation for super low fares (albeit with a basic as you like service), how can a full service carrier like Hawaiian be expected to compete?
As Southwest prepare for take-off to Hawaii, we’re asking; how will their entry into the market affect the local flag carrier? Can Hawaiian Airlines survive the Southwest Effect?
What threats do the Southwest Hawaiian flights pose?
While there’s something of a crossover in terms of destinations, the product we’re expecting from Southwest on Hawaiian routes will be a completely different deal. Their typically all economy, budget offering is not in the same league as Hawaiian.
Regularly praised for their outstanding service, which includes a full meal and drink on flights to and from the islands, Hawaiian frequently tops the on-time carrier list in the US. They also boast some of the fewest cancellations, baggage handling issues and over sales problems, and as such have been rated as the best carrier serving Hawaii by Conde Nast and others.
Although no details have yet been released in terms of pricing, we fully expect them to price aggressively low. It’s not yet known what their amenities will consist of, but it’s unlikely passengers will be satisfied with a packet of nuts for a six hour flight.
We already know they’re launching from Californian gateways, including San Diego, Oakland, Sacramento and San Jose. They’ll be landing at Honolulu, Maui, Kona and Lihue, although timings and frequencies are yet to be announced.
Southwest have also indicated they plan to start inter-island flying, which would compete directly with Hawaiian’s network. Right now, Hawaiian flies 202 flights every day between the six populated islands using a fleet of 20 Boeing 717 planes. It would be hard for Southwest to try and compete with such a slick operation, but perhaps they aren’t trying to.
Indeed, from the outside looking in, Southwest’s inter-island venture appears to be more about increasing useful flying time of aircraft which have arrived from the mainland than a real shuttle service. For a start, the 737-800s and MAX’s they’re starting service with would be too large to operate at the frequency necessary for local commuters.
So, is there a risk to Hawaiian Airlines?
Essentially, not so much. The two services promise to be something very different from one another. However, Hawaiian are already under pressure in terms of fares, since other airlines increased service to and from the islands. Southwest’s entry is potentially over capacity, which will further put pressure on already stretched fare tiers.
The biggest worry at this time is what’s known as the ‘Southwest effect’, an aviation phenomenon first observed back in 1993. It describes the considerable boost in air travel resulting from Southwest’s (or similar airline’s) entry into that market. Supply increases with lower priced fares, forcing competitors to lower their fares too. It remains to be seen whether the Hawaiian market can withstand any further squeeze on fare prices.
Hawaiian currently gain a great deal of business from the Asian market, something which has been enhanced by their recent Joint Venture agreement with Japan Airlines. They also codeshare with China Airlines, Korean Air, Philippine Airlines and Air China, and has 20 Dreamliners on order to service the long distance market.
While this doesn’t compete directly with Southwest, it does provide much of their bread and butter earnings. Despite their relatively comfortable position, there’s no doubt Hawaiian are wary of what Southwest will bring to the mix.
Amid shrinking profits, Hawaiian have taken some steps to mitigate the Southwest effect. They’ve expanded code sharing with JetBlue in a bid to snag domestic passengers from Southwest, and recently introduced a basic economy ticket level, taking return flights from the west coast to under $200.
At the end of the day, no one understand the Hawaiian marketplace better than Hawaiian Airlines. Although Southwest will certainly change things somewhat, Simple Flying don’t think they’ll have any major impacts on Hawaiian’s share. What do you think? Will Southwest damage Hawaiian, or can both co-exist peacefully?