Years of irrational pricing by Philippine Airlines led to Hawaiian Airlines' decision to pull out of the Honolulu-Manila market, says Hawaiian's president and chief executive officer Mark Dunkerley.
In an earnings call 23 April, Dunkerley speculated that Philippine Airlines, the only other carrier to offer direct commercial service on the route, priced seats on its Honolulu-Manila flights below cost.
Hawaiian announced in April it will end the Manila route on 1 August.
"In the Manila situation, we have a competitor who has persisted in pricing their product at a rate which cannot possibly be compensatory to them and, for sure, isn't to us," Dunkerley says.
He adds Hawaiian had hoped Philippine Airlines would adopt a "more rational approach" to pricing after a management shakeup in April 2012, when six board directors, including the president and treasurer, left the company.
Executives affiliated with holding company San Miguel Corporation, which acquired a 49% stake in Philippine Airlines' parent company PAL Holdings the same month, replaced them.
But pricing didn't improve with new management.
"We didn't see light at the end of that tunnel, and so made the straightforward decision to stop flying there," Dunkerley says. "We decided to perhaps stop beating our head against the wall and withdraw."
Philippine Airlines could not immediately be reached for comment.
Hawaiian Airlines launched flights between Manila and Honolulu, its first Asia destination, in April 2008 using 264-seat Boeing 767-300ER aircraft. The service, which operates four times weekly, competes with Philippine Airlines' thrice weekly service.
Philippine Airlines, based near Manila, flies the route using 264-seat Airbus A340-300 aircraft, according to Innovata.
Dunkerley says excess capacity in the number of markets, notably North American destination, was largely the cause of the airline's poor financial results for the first quarter of 2013, released Tuesday.
Hawaiian reported an operating loss of $11.9 million and a net loss of $17.1 million.
That's in contrast to the first quarter of 2012, when Hawaiian reported an operating income of $12.9 million and a net income of $7.3 million.
Cost per available seat mile (CASM) in the first quarter of 2013 decreased 5.7% year-over-year to 12.7 cents, and the airline has $438 million in unrestricted cash and cash equivalents on hand.
In response to excess capacity, Dunkerley says Hawaiian is cutting capacity on under-performing routes and deploying aircraft to new international markets.
Hawaiian launched flights to Auckland, New Zealand in March and intends to begin flights to Sendai, Japan in June, Taipei, Taiwan in July and Beijing in April 2014.
Hawaiian is also adding extra seasonal flights to international destinations.
"As we continue to grow into the still relatively new part of the world for us, we expect that not every assumption will prove to be correct, and that we will, on a market-by-market basis, have to learn the curiosities of competing effectively," Dunkerley adds.