Growth in airline capacity to Hawaii will slow, analyst says
Airline capacity to Hawaii is projected to keep growing, but the number of seats being added is expected to slow and fares are projected to come down as carriers strain the limits of what the airport and hotels can handle.
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Airline capacity to Hawaii is projected to keep growing, but the number of seats
being added is expected to slow and fares are projected to come down as carriers strain the limits of what the airport and hotels can handle.
“There can be only so much capacity and it starts to affect yield (the average fare paid by customers per mile), so fares start to come down and carriers will pull seats,” said airline consultant Brad DiFiore, who spoke Thursday on the final day of the Global Tourism Summit at the Hawai‘i Convention Center.
“When one airline adds a lot of seats, another one says I’ve got to cut some seats.
So there will be some sort
of balance, but we will see growth,” added DiFiore, managing director of Ailevon
Pacific Aviation Consulting, in an interview after giving a keynote address at the event.
DiFiore said Hawaii will get a big boost when United Airlines increases its service to the state by 20 percent beginning in December. All of the additional flights will go to the neighbor islands. He said if newcomer Southwest Airlines ultimately comes to
Hawaii, there wouldn’t be a major change in the market dynamics.
“If Southwest were to come to Hawaii, there’s a capacity situation, an infrastructure situation,” he said. “No airline is going to come to Hawaii and have this huge capacity advantage. In general, Southwest is a different kind of airline. They’re not the traditional low-cost airline that they used to be. They’re relatively a midtier-cost airline now. What they do to compete is they serve markets point to point. They’re very big in a lot of cities. And because they serve places nonstop, and have fantastic reservations and customer service, and their philosophy about fees, they have a very, very loyal customer base.”
DiFiore said Southwest is interested in Hawaii because of the importance of the state to the airline’s network.
“Southwest is the No. 1 carrier on the West Coast,” he said. “But I don’t think you’ll see some sort of dramatic change. Hawaiian is probably a lower-cost airline than Southwest is. So Southwest doesn’t have a competitive advantage where their cost structure is so low that they can just destroy the competition. They’re going to be fine but they can’t have access to 10 gates and they can’t add 50 flights. There will be an impact obviously from a PR standpoint.”
DiFiore said the state economy has gone from recovery mode following the shutdown of Aloha and ATA airlines in 2008 to a sustainability mode. He said the battle to win the West Coast is driving Hawaii’s growth.
“Now we’re at a point where the market is in good shape,” he said. “We have diversification (in markets). We have carriers wanting to come to Hawaii, wanting to add service, and now we’re sort of playing off that higher base. We’re in good shape now and there won’t be a lot of rapid growth moving forward, not as rapid as has been the last few years — mainly because there’s not capacity to do it.”
He said international capacity has grown 60 percent over the last decade but that international growth will slow compared to recent years because yields indicate that recent capacity growth has not been fully absorbed. Furthermore, he said limitations in the China-U.S. bilateral agreement that restrict the number of flights between the two countries will hurt future growth.
“Japan went through a relatively tough period when the yen was devalued but it’s recovered a lot,” he said. “Australia and New Zealand have been pretty strong. South Korea has improved. China is a challenge because the yields are low. The Canadian dollar was weak and that prevented people from coming, but now the Canadian dollar has improved, and we’re starting to see a little bit of a recovery. The key markets are in pretty good shape overall and we’re waiting for the yields to start coming up.”