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The first signs of weakness appeared Tuesday in the juggernaut that has been Hawaii’s tourism market.
The state’s No. 1 industry, which has led Hawaii’s economic recovery while posting record numbers, could see a drop in arrivals in the second half of the year as airlines cut back on seats flown to the islands.
Hawaiian Airlines, United, Alaska and Allegiant will trim capacity to Hawaii this fall after a rapid expansion left them with a glut of seats.
Mark Dunkerley, president and CEO of Hawaiian Airlines, on Tuesday blamed a $17.1 million first-quarter loss largely on an industrywide 11 percent gain in seat capacity from the mainland to Hawaii.
That comes on the heels of a 13 percent increase in the second half of last year. Most of the glut came from the West Coast, Dunkerley said.
Dunkerley said the state’s major airlines are reacting by cutting flights. Air seats from the West Coast will be reduced by 2 percent in the third quarter and 6 percent in the fourth quarter, according to published schedules.
The reduction in seats has state tourism officials concerned.
Mike McCartney, president and CEO of the Hawaii Tourism Authority, said the agency is feeling the pressure to step up marketing to fill the seats.
“We need to pay very close attention to what’s going to happen over the summer and into the fall,” McCartney said. “There is concern to make sure that we continue the momentum that we achieved this last year. There’s no question we are concerned with the third and fourth quarters of this year, and we want to make sure that we can help facilitate the booking pace.”
Hawaii welcomed a record 7.99 million visitors in 2012, and the HTA set 8.5 million as the goal for 2013.
McCartney said first-quarter visitor numbers, which will be released Thursday, will show that the state is still on track for a record year. However, he said it’s too early to tell whether the record projection for this year is in jeopardy.
“We need to make sure those seats coming to Hawaii continue to be filled, because in some markets there’s more seats than demand,” McCartney said. “We’re … coming up with some programs to stimulate the market. We must remember we’re in a fragile and competitive world, and the health of airlines is very important to us. We need them to be profitable, too.”
United Airlines is planning a 6 percent reduction in mainland-Hawaii flights during the second half of the year, according to a flight schedule obtained from the Hawaii Visitors and Convention Bureau, the state’s tourism marketer for North America.
Alaska Airlines, which flies 21 percent of its route schedule to the islands, is paring back 7.4 percent of its flights.
Allegiant, which flies primarily from secondary cities, will suspend service to Hawaii from seven of the nine mainland destinations it serves beginning Aug. 14.
Hawaiian Airlines is trimming its new daily service to John F. Kennedy International Airport in New York to five days a week from mid-September through mid-December but plans to operate the flight daily during the Thanksgiving and Christmas holiday periods. Hawaiian also is reducing service to Las Vegas and to San Jose, Calif., and will cease four-days-a-week service to Manila on July 31.
“We’re working with everyone to ensure that we can keep a healthy supply of seats to Hawaii and to do our job to drive demand in those markets,” McCartney said. “But this is part of what we saw coming: a flattening out. We have 954 flights per week from 53 cities that connect directly to the Hawaiian Islands from 20 different carriers, and there is no other place in the world that has that kind of access. It is very important strategically to Hawaii that we have this lift (number of seats) to make sure we continue to not only give business to tourism, but to give people in Hawaii access to the world.”
Hawaiian’s route to New York, which began in June, had been seen as a coup for the state in its effort to increase flights from the U.S. East and provides access to the nation’s largest city. It also was Hawaiian’s first nonstop flight to the East Coast.
“What happens with any new route is that we discover things about the market once we’re operating in it,” Dunkerley said. “What you’re seeing is us making a decision to better match the supply of seats to demand.”
Alaska is cutting back during the second half of the year on Oakland, Calif., and San Jose service to Honolulu, Kona and Lihue; and its Sacramento service to Kahului; but is adding flights between Seattle and Honolulu, and between San Diego and Lihue.
United is reducing frequency on its Washington, D.C., and Los Angeles routes to Honolulu, and its San Francisco route to Kahului.
Airline analyst Bob McAdoo said he’s not surprised that the airlines are pulling back.
“There was a vacuum coming out of 2008 (following the shutdowns of Aloha and ATA airlines), and the airlines kept adding flights and finally got to the point where they were on top of each other, and that just doesn’t work,” said McAdoo of Los Angeles-based investment bank Imperial Capital. “This (cutback by airlines) was not unexpected. It was something that Hawaiian had talked about last quarter. Alaska and Hawaiian were trying to compete against each other in the smaller California markets and realized they had too much capacity.”
McCartney said HTA is particularly concerned about maintaining service on the West Coast from San Diego, San Jose and Oakland, as well as the East Coast.
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Mainland-to-Hawaii flights to be cut in second half
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