Hawaiian to Jetstar: you don’t scare me

Hawaiian Airlines is confident that the Brisbane-Honolulu market can support two carriers, even when the second carrier is the Australian low-cost giant Jetstar Airways.

Source: Flightglobal

Source: Flightglobal

“I don’t think… we’re concerned about that,” said Mark Dunkerley, president and chief executive of Hawaiian, responding to questions on whether Brisbane could turn into a second Fukuoka with the entrance of Jetstar during an earnings call on 22 April.

Dunkerley cites robust demand and an “unmatched” competitive strength, which could refer to the Honolulu-based carrier’s codeshare with Brisbane-based Virgin Australia, in the market for his lack of concern.

Source: JetStar Airways

Source: Jetstar Airways

Hawaiian will end service to Fukuoka in June, after what it deems insufficient passenger growth since service began in April 2012. Strong competition from Delta Air Lines, which increased frequency in the market shortly after Hawaiian began service, is widely cited as the main reason for the demise.

The underlying characteristics of Brisbane are eerily similar to Fukuoka, despite Dunkerley’s assurances. Hawaiian offers four-weekly flights to the city while Jetstar plans to offer two- to three-weekly flights when it begins service on 15 December. This represents a 50% to 75% increase in weekly capacity – both carriers operate similarly sized aircraft – on the route.

This is a more significant increase in “incremental capacity” – as Dunkerley refers to it – than Fukuoka saw. In late 2012, he said that flights to the Japanese city ramped up “more slowly than prior Japan start-ups” due to an incremental capacity increase of two weekly flights – a nearly 17% increase in the overall market – by Delta following Hawaiian’s launch.

In addition, the Australian dollar and Japanese yen both remain weak compared to the US dollar. Unfavourable exchange rates with both currencies took a negative toll on Hawaiian’s international operations in the first quarter, Hawaiian executives say.

Jetstar has its own strengths coming into the market. Its new Honolulu flight will be supported by a large the largest domestic network in Australia when combined with that of its parent Qantas Airways (Jetstar and Qantas do not allow connections between their networks). It is also nearly 50% larger than Hawaiian in terms of available seat kilometres (ASK), Innovata FlightMaps Analytics shows.

The airlines compete on only one route currently: Honolulu-Sydney.

Hawaiian remains bullish.

“I think there are different strengths and weaknesses each of us bring,” says Peter Ingram, chief commercial officer of Hawaiian, during the call. “We are pretty comfortable with our competitive situation vis-à-vis Jetstar.”

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