Hawaiian Airlines' flights to Japan, a key destination to the carrier's growth in Asia, have not performed as well as executives had hoped, due to weakness of the Japanese yen and capacity growth between Japan and Honolulu, say executives.
"We don't think we've performed as well as we should have," Mark Dunkerley, Hawaiian's chief executive, says of the Japan routes.
"Our sales presence has not fully matured in the market," he adds in comments made during the carrier's first quarter earnings call on 23 April.
Dunkerley says the Japan routes have seen a notable increase in capacity in recent years, a trend confirmed by data from Capstats.
Since 2010, when Hawaiian launched service to Japan, capacity between the country and Honolulu has jumped 131% to 1.9 million seats, according to data from Capstats.
Seven carriers serve the routes, including Hawaiian, All Nippon Airways, China Airlines, United Airlines, Delta Air Lines, Japan Airlines and new entrant Korean Air.
In September 2013, Capstats shows that airlines plan to offer 177,000 seats between Japan and Honolulu, a 160% gain from September 2010.
* Source: Capstats
Japan is a relatively new destination for Hawaiian, which began service from Honolulu to Tokyo-Haneda airport in late 2010. The carrier's first destination in Asia, Tokyo marked the start of Hawaiian's expansion in region.
Since then, Hawaiian has added service to three additional Japanese cities - Sapporo, Fukuoka and Osaka - as well as flights to Seoul, South Korea and Manila in the Philippines.
Though Hawaiian recently announced it will end its Manila service this summer, the Asia expansion continues, with plans by Hawaiian to begin flights to Sendai, Japan in June, Taipei, Taiwan in July and Beijing, China in April 2014.
But Hawaiian's 24 weekly flights to four cities in Japan account for the majority of its service to Asia, and a large share of its revenue.
Executives say 80% of the carrier's international passenger revenue comes from its Japan and Australia flights. The airline did not immediately respond to a request to provide revenue specific to Japan.
Dunkerley notes that Korean Air, which flies daily between Honolulu and Tokyo-Narita, has put notable pricing pressure on the route.
"They have very substantially reduced fares to induce people to travel out of Narita," Dunkerley says.
He adds that "a further unhelpful development has been the weakening of the yen." A decline in the value of the yen has cost Hawaiian $5.5 million since the first quarter of 2012, Dunkerley says.
The dollar has lately been worth nearly 100 yen, compared to roughly 80 yen one year ago, according to data from Bloomberg.
Despite those challenges, Dunkerley expressed confidence of Hawaiian's ability to compete in the Japanese market.
"The good news is that we believe we have the lowest unit cost of any of the operators in the Japan market, and consumer research suggests that we are getting good awareness of our brand and that our service is held in high regard by the Japanese traveller," Dunkerley says.