Hawaii could gain from airline merger

With the appointment of Paul Casey, an experienced and very capable airline executive as its helm, Island Air seems to signal that it will not be content to just be a shuttle service between Ho-nolulu and Lanai, but has far greater plans to become a fully-fledged interisland carrier, serving all Hawaii’s islands.

It might even be bold enough to spread its wings over the Pacific to the mainland — and if this would be the case, welcome the competition!

I have no doubt Hawaii will see an increase in air transportation and, despite all the cries to the contrary, one of the best things that happened to the industry has been airline deregulation. Deregulation was intended to stimulate competition, encourage new entrants and sharpen the quality of management. It was also intended to provide consumers with choices and affordable, quality products. In other words, real competition.

But the news that billionaire and Lanai owner Larry Ellison was negotiating to buy go! was puzzling. What is there to buy? Its aircraft are uneconomical and not well-suited for an interisland service. They are too small to have enough capacity and be a significant force in the market, and too costly to maintain and operate. Will these aircraft be returned to Mesa Air?

Now we learn that instead of purchasing go!, Island Air and Mesa Air (parent company of go!) may form a partnership where Island Air will fly under the Mesa air certificate, using Mesa pilots and some of its aircraft ("Air alliance likely to alter isle travel," Star-Advertiser, July 14).

But in order to be cost-effective, Mesa must provide the same aircraft that is operated by Island Air, so savings could be obtained with the fleet communality.

Mesa operates Canadair Regional jets, Dash 8 turboprop, Embraer and some other types of aircraft. Presumably Mesa will add ATR’s to its air certificate and train pilots, flight attendants, mechanics and other personnel. It seems a rather expensive and patchy partnership, which dominant Hawaiian Air is unlikely to lose any sleep over.

Before the arrival of the Internet, airlines used a tactic called "the Saturday surprise." Back then, most airlines’ advertising was done via newspapers and TV, so when an airline introduced very competitive fares, it would file them late Friday afternoon so the ad appeared in the Saturday and Sunday media, giving several days’ advantage until competitors could react and match fares. For a few days, at least, the consumer benefited from these fares.

Now with the Internet, the airlines monitor each other 24/7 and are able to match competitors’ fares within minutes. And, of course, the larger carriers that can offer more capacity and frequencies in the end win again.

Running an airline requires dedication, discipline, understanding of the market and the needs of the consumer and, most of all, a lot of capital. The right mix of frequencies and capacity are the key to success. Frequent flyer programs are a powerful bonus, and Island Air will have to establish ties with some of the major airlines to offer an attractive program.

But would this partnership between Island Air and Mesa create more competition, or will it bring us back to the old days of a cozy duopoly? Time will tell.

I hope they will bring real competition, with prices affordable to the consumer and able to secure the long-term prosperity of the airlines. That is to say, healthy competition without dropping prices to unrealistic levels.