Southwest Airlines' decision to finally enter the Hawaii market with service from California is set to introduce substantial low-cost competition in a space that has long been dominated by full-service airlines.
The Dallas-based carrier's foray into Hawaii will make it the third low-cost airline in recent years to launch services to the popular leisure destination, although it will be the only low-cost carrier flying to Hawaii once flights begin.
Virgin America, which began serving Hawaii in late 2015, will see its flights folded into Alaska Airlines' inventory in April 2018. Las Vegas-based Allegiant will finish its Hawaii run by end-2017, after struggling with insufficient demand on several routes it launched beginning in 2012. The ultra low-cost carrier will wind down its remaining Las Vegas-Honolulu nonstop flights in the coming months.
A Southwest spokesman declined to comment further on the airline's plans to serve Hawaii, referring FlightGlobal to the airline's statement issued late on 11 October. The carrier intends to begin Hawaii sales in 2018, and will embark on the process to secure extended twin-engine operations (ETOPS) approval from the US Federal Aviation Administration (FAA).
While the airline has not specified markets, Southwest chief executive Gary Kelly says in a note to employees that ETOPS will allow the airline to "establish required operational processes to offer our customers nonstop service they expect from California to one of the world’s top leisure destinations".
The carrier plans to "build into a multi-market offering among our west coast cities and the Hawaiian Islands", adds Kelly.
CALIFORNIA DREAMIN'
Southwest will be the sixth US airline operating between the contiguous USA and Hawaii, after Allegiant leaves the market and Virgin America's flights are subsumed into Alaska's system.
Southwest's choice of California makes sense, given that the Golden State is Hawaii's top passenger market, statistics from the US Department of Transportation show. In 2016, US airlines transported more than 8.2 million passengers between Hawaii and California.
FlightGlobal schedules data
The Hawaii Tourism Authority forecasts that visitor arrivals from the US west coast, which it defines as the 11 Pacific states west of the Rocky Mountains, will exceed 3.74 million this year and hit more than 3.86 million in 2020.
Currently, carriers operate nonstop from six airports in California (Los Angeles, Oakland, Sacramento, San Diego, San Francisco and San Jose) to five airports in Hawaii (Hilo, Honolulu, Kahului, Kona and Lihue), FlightGlobal schedules data show. Hawaiian Airlines and United Airlines are the biggest airlines operating flights between California and Hawaii.
Service between California and Hawaii
FlightGlobal schedules data (created with Great Circle Mapper)
In California, Los Angeles is by far the top market for Hawaii services, according to statistics compiled by the Hawaii Tourism Authority using FlightGlobal schedules data. In 2016, airlines offered more than 2.52 million nonstop seats from Los Angeles. Elsewhere in the USA, San Francisco was in second place with almost 1.22 million seats on nonstop flights.
Among Hawaii-California routes, Honolulu from Los Angeles and San Francisco rank as the top city pairs, DOT data shows.
Department of Transportation
Five airlines operate nonstop between Los Angeles and Honolulu: American Airlines, Delta Air Lines, Hawaiian, United and Virgin America. Hawaiian, United and Virgin America fly between San Francisco and Honolulu.
While it is still not yet clear which markets Southwest will offer service in, the airline's strong presence in California will likely give it leverage on new Hawaii services. The carrier has about a 28% share of the flights in California, estimates Bank of America Merrill Lynch analyst Andrew Didora.
Los Angeles is Southwest's eighth largest airport, with the airline set to operate almost 3,800 flights this month. Southwest is the fourth largest airline at the airport, with a 14% share of flights, FlightGlobal schedules data shows.
Other California airports feature among Southwest's top airports: Oakland (10th place), San Diego (12th), San Jose (15th), Sacramento (16th) and San Francisco (24th). The carrier is the biggest airline at Oakland, San Diego, San Jose and Sacramento.
"With about 90% of seats from the West Coast into Hawaii as economy, we believe LUV's product could be an attractive alternative for customers," says Didora.
In August, Southwest also announced plans to launch dozens of new routes in 2018, of which 19 will serve California.
Chief revenue officer Andrew Watterson said then that the new routes will capitalise upon the airline's strong customer base in California.
MAX EFFICIENCIES
Southwest's Hawaii announcement comes weeks after the airline launched into service the Boeing 737 Max, although the airline will begin its Hawaii flights with the 737-800.
"The Max will be our Hawaii aircraft but, we’ll start with our ETOPS-equipped -800 fleet to accelerate our service launch date," says Kelly in the note to employees.
US regulators typically prefer for an airline to operate a new aircraft type for about a year before granting ETOPS approval. The range of the 737 Max will limit Southwest, an all-737 operator, to offering only nonstop service to Hawaii from California, Oregon and Washington states.
Combined with the fuel efficiency of the 737 Max, the entry of Southwest into the Hawaii market is likely to reduce fares, notes Didora, pointing out that the airline usually lowers fares by 10% to 30% in a new market.
While keeping mum on where the airline plans to fly, Kelly himself has promised as much: "Those Southwest shockwaves of our terrific value and bar-setting customer service will be a game-changing addition in the US transpacific market."
It is not immediately clear if or how Southwest will tailor its product for the flights to Hawaii. Depending on where Southwest chooses to serve in Hawaii, the new flights could end up being the airline's longest. Currently, that honour belongs to its nonstop route from Baltimore/Washington to San Jose in California, the distance of which is shorter than service to Hawaii from southern California.
Southwest does not offer food for purchase on board, but typically provides additional snacks on longer flights. The airline has long maintained it has no plans to alter its single-class configuration on board its aircraft.
Source: Cirium Dashboard
