Southwest plans low-cost interisland service

Southwest Airlines, which created ripples through the state last year when it announced it would begin serv­ice between the mainland and Hawaii, said Wednesday it intends to offer interisland service as well and will set prices lower than currently available.

Hawaiian Airlines dominates the interisland market with more than a 90 percent share, and many interisland travelers would welcome added competition.

Dallas-based Southwest said when it enters a market, prices historically come down in part because of the airline’s policy of no bag fees and no change fees.

Southwest President Tom Nealon, who is in Hawaii to meet with community and business leaders, said he recently purchased an interisland ticket and that it was “very expensive.”

“We will come in with lower fares, and not introductory fares. We have the structure to offer low fares,” he said ahead of today’s official interisland announcement.

“We will price low because we have a cost structure that allows us to compete very aggressively and still have good unit growth and a strong operating margin,” Nealon said. “It’s got to be a price that’s competitive and the lowest price in the market.”

In opting to offer interisland flights, Southwest will be venturing into an airline graveyard of sorts that most recently has seen Aloha Airlines, go! and Island Air all go out of business while trying to compete against Hawaiian Airlines.

Nealon said Island Air’s shutdown in November had nothing to do with Southwest’s decision to venture into interisland service.

“We make our decisions based on what we can do in the market,” he said. “This is the market we want to be in and we think it’s underserved and lacks competition even with Island Air (previously) in play. We think we can provide a great serv­ice. We’ve been meeting with different community groups and we’re hearing loud and clear there’s not a lot of competition in the market.”

“Our intent is to begin service to interisland once we get the network built up and have enough airplanes on the ground here to have enough frequencies to make the service meaningful,” Nealon said.

Nealon said Southwest plans to ramp up Hawaii serv­ice pretty quickly after it receives aircraft certification to begin flying from the Federal Aviation Administration.

“The first step is receiving ETOPS (extended operations) certification,” he said. “The second step is launching service from California to four Hawaii locations. And once we get enough aircraft here, the third step is to execute interisland service.”

Nealon reiterated that Southwest intends to begin selling tickets between the mainland and Hawaii before the end of 2018, adding that a target of offering interisland service “within a year would be fantastic.” He said mainland-Hawaii flights initially will come from California, where Southwest has a strong customer base and transports 63 percent of the customers who fly routes within California.

“The best-case scenario would be that it would be absolutely incredible if we’re flying (to Hawaii) by the end of this year,” Nealon said. “Working toward that stated objective, if we publish a schedule toward the end of the year, it really implies that we’re operating early next year. Whether it takes a month or two longer, in the grand scheme of things it really doesn’t matter. Once we enter the market, we’re making a commitment to ourselves emotionally and our operations. It’s a commitment that we’re not a passing fancy and we intend to win and do very well.”

Southwest plans to serve Hawaii with 175-seat aircraft, initially starting with the Boeing 737-800 and then switching to the more efficient Boeing 737 MAX 8.

“On Day One you won’t see us launching a blitzkrieg of aircraft,” he said. “We’ll start slow and build up. In the first two to three months, you’ll see a pretty significant number of flights that will increase over the balance of the year and you’ll be pretty pleased with the number of flights we bring into Hawaii.”

He said flights from California to Oahu, Maui, Kauai and Kona on Hawaii island “will be spaced out.”

“We expect to roll into interisland flying once we’re comfortable with the scale we’re bringing in from the mainland,” Nealon said. “There won’t be an overly extended gap between California flying and interisland flying.”

Southwest also plans to conduct local hiring but has no specifics yet, according to Steve Goldberg, senior vice president of operations &hospitality.

“We expect to hire locally at all four airports and blend in some of our employees transferring over from the mainland,” he said.