Hawaiian Airlines Is In Hot Water But At Least It's Honest
It needs Japanese travelers to return and for Southwest to stop flooding the short-haul market with cheap seats. Also: why do so many Allegiant Air executives resign?
Let’s give Hawaiian Airlines some points for honesty. As much of its U.S. competition reports record revenue and steady (if not stellar) profits, Hawaiian lost $240 million last year, including $50.2 million in the fourth quarter, and its CEO admitted he has no idea when he can turn things around. "I can't project the timing of a return to profitability as precisely as I would like," Peter Ingram told analysts Tuesday.
Executives sometimes use a great deal of spin on these earnings calls, but Ingram played it straight, noting Hawaiian is uniquely poorly positioned to capitalize on the spike in demand other U.S. airlines are seeing. One reason is Hawaiian’s Japan franchise is struggling. "It's a national temperament issue," Ingram said, blaming overhang from the country's Covid policies for the drop in demand for long-haul travel. The other reason is Hawaiian’s inter-island operation is under intense competition from Southwest Airlines.
There are some other headwinds, too. A big part of Hawaiian’s business historically has been bringing Americans to the islands. During Covid, other carriers had nowhere to put their big wide-bodies, except Hawaii and other premium leisure locales. Some of that competitive capacity is receding, but not all of it. Last year, according to Hawaiian executives, industry capacity between the U.S. mainland and Hawaii was up 11 percent compared to 2019. Then there’s operations. Hawaiian is struggling with engine issues on its A321neos, with two of 18 aircraft grounded "for an extended period" awaiting new engines. It is using A330s on some routes, which leads to more capacity and less pricing power.
Airlines that underperform often take one of two approaches. They might try to grow into new businesses and markets, as WestJet has in Canada, adding fleet types and expanding beyond its Western base into Eastern Canada and Europe. Or, they focus on their strengths — a good example is American’s growth in its already profitable hubs, Charlotte and Dallas/Fort Worth.
As an established carrier with a U.S. operating certificate, Hawaiian could do just about anything. It is diversifying into the cargo business, flying Airbus A330s for Amazon. But on the passenger side, it is staying the course on its Hawaii-centric strategy, even though nothing stops it from operating any domestic route from the mainland, or any international one from the mainland to an Open Skies country. "Everyone at Hawaiian is keenly focused on winning in Hawaii," Ingram said.
Here are four of the airline’s priorities to improve profitability.