Should Hawaiian Change its Model?
Airlines have mobile assets and can go where the demand is. But Hawaiian has changed very little over the years.
After I wrote about Hawaiian's April earnings call — I absolved the airline for its recent stumbles, as many of its issues were outside its control — an astute subscriber criticized my take. Yes, this reader said, Hawaiian could not control Southwest's expansion into the interisland market, and it had no say over competitive capacity dumped into Hawaii. And Hawaiian could not control when Japanese vacationers would decide to return to Oahu or Maui or Kona.
But at a certain point, this subscriber said, perhaps airline managers should not blame outside forces for all of their revenue issues. Airlines have many problems other companies do not, but they have one clear advantage: Their assets are mobile. When an airline's home market is in peril, smart managers don't wait for recovery. They chase revenue that does exist, which is how AirBaltic ended up with a base in the Canary Islands, and Finnair began a robust wet-leasing business, sending aircraft as far away as Australia.
Hawaiian has more potential advantages than most airlines forced from their home hub. Demand is booming across the United States, and Hawaiian owns one of the most coveted licenses in aviation — a U.S. operating certificate. It could have flown charters for vacation package companies, or set up scheduled point-to-point service in the continental United States, or added codeshare deals with carriers that want to enter the U.S. market. Instead, Hawaiian mostly stuck to its model, losing $240 million last year, and nearly $100 million in the first quarter of this year.
Given how long Hawaiian has been stuck losing money, I see this reader’s point — maybe Hawaiian could have gotten more creative to stem the bleeding.
Now, luckily, it’s not as dire as it was a few months ago. Profitably remains elusive, but business is improving with Japan opening up and competitive capacity declining on U.S.-Hawaii routes. The interisland competition with Southwest, though, is still a big problem.
Last week, I interviewed CEO Peter Ingram and chief revenue officer Brent Overbeek at the IATA Annual Meeting in Istanbul. As you might imagine, they preferred to talk about Hawaiian’s rosier future and not my subscriber’s ideas. But I tried to push them on whether they considered more aggressive measures, because I believe my subscriber has a valid criticism.
"As we sit here right now, we can talk about woulda, shoulda, coulda in 2020 or 2021, but the markets are largely back," Ingram said.
That wasn’t the most satisfying answer, but eventually Ingram gave more details about Hawaiian's pandemic approach, sharing why the airline didn’t mimic AirBaltic or Finnair. He and Overbeek also discussed Hawaiian's new Boeing 787 product, the airline's network philosophy, and the pace of the Japanese recovery.
Paying subscribers can read on for details from that interview.