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New carrier shaking up travel in Hawaii

The airfare war is already under way but the dog fight officially begins Friday when "Go" airlines launches service, becoming the third interisland jet carrier in Hawaii.
/ Source: The Associated Press

The airfare war is already under way but the dogfight officially begins June 9 when Go Airlines launches service, becoming the third interisland jet carrier in Hawaii.

The low-cost carrier is a venture of Mesa Air Group Inc., the largest company to enter the exclusive interisland market dominated for decades by Hawaiian and Aloha airlines.

"There's the word 'monopoly.' There's the word 'duopoly.' But there's no word 'triopoly,'" said Jonathan Ornstein, Mesa's president and chief executive. "With a third carrier in the market now, it's sort of forcing this level of competition, which is clearly good for the consumer."

Phoenix-based Mesa is one of the nation's largest regional carriers, with 182 jets, 5,000 employees and annual revenues exceeding $1 billion. It flies to more than 170 cities under the America West Express, Delta Connection, United Express, and other brand names.

Ornstein called his company, "the real deal," and promises a long-term commitment to Hawaii. That's not good news for Hawaiian and Aloha, both recently emerging from Chapter 11 bankruptcy protection and under pressure to perform for new investors.

Both carriers have publicly brushed off their new competitor, noting that several interisland startups -- Mid-Pacific, Discovery and Mahalo airlines -- all eventually failed, and other startups never got off the ground. FlyHawaii Airlines had planned to launch a turboprop operation this year offering low fares but pulled out with Mesa entering the market.

It's no secret, however, that Aloha and Hawaiian have paid close attention to Mesa, quickly matching the low-cost carrier's every promotion and discount, despite soaring fuel costs.

Mesa introduced $39 promotional one-way rates in March. Aloha and Hawaiian quickly followed suit. That's nearly half of usual airfares in Hawaii. Mesa also recently announced a special $59 round-trip weekday rate, and that was also matched.

Industry analyst Bob Mann of New York-based R.W. Mann & Co. said Aloha and Hawaiian are sending a clear message: "You're not going to underprice us and we will be competitive."

Thom Nulty, Aloha's senior vice president, said some of the promotional prices are irrational. "With fuel prices the way they are, some of these lower fares frankly just don't make sense. But we want to be competitive," he said.

Nulty said he's confident many travelers will choose to stay with Aloha after weighing everything from fares and flight schedules to frequent flier programs and size of the jets.

Also, Aloha has a 60-year history in Hawaii. "We're part of the community and always have been. Frankly, they are not," Nulty said. "There are just so many reasons to fly Aloha versus flying an airline that people have never heard of."

'We can afford to fly again'
Mark Dunkerley, president and chief executive of Hawaiian Airlines, said in a statement that, "We intend to maintain our leadership in the Hawaii market, regardless of who the competition turns out to be."

But Ornstein said bookings so far exceed expectations as Go has received a warm welcome from Hawaii travelers. "What we found has been almost a relief that we're coming," he said. "They tell us, 'Thank God, you guys are here. We can afford to fly again.'"

Go must also compete with two small interisland carriers -- Island Air and Pacific Wings -- that operate turboprop planes and serve Hawaii's smaller airports. With Hawaii Superferry Inc. planning to connect the islands starting next year using two high-speed catamarans, there are more ways to island hop than ever before.

But experts say Mesa is taking a gamble by creating and operating its own airline, instead of sticking to its traditional, low-risk business model of providing connecting service for other carriers.

"They essentially cannot lose money" with their standard operation, Mann said. "The Go operation, on the other hand, is completely at risk."

Interisland travel has also declined, despite record tourism in Hawaii. Some of that decline can be attributed to more carriers flying directly from the U.S. mainland to Maui, the Big Island and Kauai. But many island residents have been turned off by the rising interisland prices.

Ornstein said airfares nearly doubled in the past five years and have stifled travel among the islands. "If we can bring the average fare back down to a reasonable level, we get to grow again," he said.

Many travelers, such as Sualin Aikichy of Hilo, said lower fares would encourage them to fly more often. She currently flies to Honolulu nearly every month, paying anywhere from $160 to $200 for a round-trip ticket.

Samson Mahuiki, of Kauai, pays about the same every time he takes the 25-minute flight to visit his daughter in Honolulu. For a few hundred dollars more, he could buy an entire tour package to Las Vegas, he said.

"It's kind of outrageous," he said. "Within the last few years, it's getting so high, I can't afford to take the whole family."

The trucker said he is eager to give Go a shot. "I hope they survive," he said.

Whether Go succeeds will depend largely on how much it is willing to invest and risk losing, Mann said.

Go plans to operate 32 flights per day, using three 50-passenger Canadair regional jets. Flights will double when additional aircraft are added June 30.

Mann said with the newcomers Go and Superferry in the market, it will be difficult for everyone to win -- besides consumers. "It's a consumer bonanza," Mann said. "Exactly who will be the survivors and who is willing to continue throwing money at the problem? I'll guess we'll wait for history to tell us."