BEACH BLISS

Hawaii just got cheaper

It’s lucky that new Hawaiian Airlines boss Peter Ingram doesn’t mind a scrap. His airline, which this week celebrated five years flying to New Zealand, is about to go another round with Air NZ on the increasingly popular Auckland-Honolulu route. Hawaiian will step up its three regular weekly services to five times a week from March 21, in the head-tohead battle with the Kiwi carrier which will intensify this winter.

When Hawaiian announced its plans last year, it drew a swift and aggressive response from the New Zealand airline, which immediately announced a big increase in capacity over the coming high season for New Zealanders wanting to chase the sun.

Hawaiian’s entry has dramatically shifted the market, which had slowed as more aircraft flew over the islands since the 1980s.

Since it began flying here, Kiwi arrivals to Hawaii have trebled from just over 20,000 to 68,000 in 2017. Fares, which used to nudge $2000 return at school holiday times, are now as low as $599, as tens of thousands of extra seats have been added to the route.

Ingram has been in the job since the beginning of this month — succeeding Mark Dunkerley — and in his previous commercial job had been central in pointing the expanding airline’s planes towards New Zealand.

He doesn’t mince words about services before his airline entered the market.

“We were able to add capacity to a market that, candidly, had been underserved and overpriced by the incumbent carrier in the local market,” he told the Weekend Herald.

Air New Zealand’s response was no surprise to the destination airline that flies into the home patches of other airlines around the world.

“It’s the nature of our business,” says Ingram.

“We sort of relish the role of being the scrappy little competitor that needs to come into someone else’s home market and carve out a spot.”

Ingram, 51, grew up just outside Toronto before finishing his studies in the United States and is a 23-year airline veteran. He started his career in the airline industry’s hardscrabble zone, the United States domestic market, for American Airlines’ regional arm, American Eagle. He moved to Hawaiian as chief commercial officer 12 years ago.

Fares, which used to nudge $2000 return at school holiday times, are now as low as $599

The airline industry was suited to his naturally competitive nature.

“I’ve always loved that it’s an incredibly dynamic and competitive business and I’ve always been someone who has enjoyed competition. I would have loved to have been a professional athlete, and — aside from the complete lack of natural ability — I think the competitiveness of the airline industry gives me the outlet to channel that desire.”

But Air New Zealand is not about to give an inch. While some of its competitors have behaved “more rationally” — reducing capacity — on other routes, the percentage of available seat kilometres where it faces direct competition has increased from 56 per cent to 71 per cent, according to Macquarie.

Chief revenue officer Cam Wallace says the route is very important to Air New Zealand.

“Hawaii is a bit of a battleground and has emerged as one of the most intensely competitive markets that we’ve got in terms of outbound leisure, and we’ve been determined to make sure that we’re getting our fair share,” he says.

During the winter it will operate an additional 94 return services, moving to daily flights and up to nine services per week during the busy July school holiday period. Mostly, Air NZ will use a Dreamliner, with a change to the Boeing 777-200 during the July and September holidays.

That will add almost 60,000 more Air New Zealand seats between Auckland and Honolulu from April to October next year, an increase of 75 per cent compared with last year.

“Obviously, both carriers and Hawaii Tourism have helped stimulate that market which has really gained in appeal,” says Wallace. “Some of which is because it has a lot to offer and some of which is because the airlines have a lot of capacity and there’s been some attractive prices.”

Air New Zealand’s response to the new airline was expected, says Flight Centre general manager, product, Sean Berenson.

“If you look anywhere around the world in aviation, airlines will respond on routes that they’re passionate about — and you could say that Air New Zealand is very passionate about Hawaii.”

Hawaiian’s Ingram expects discounting to continue.

“There is ample capacity in the place and we’ve got a couple of competitors in the market that are keeping checks and balances on one another. So I think it’s a really great time and fares are going to be reasonably accessible for the foreseeable future.”

Ingram was central in making the call to fly to New Zealand.

In 2010 the airline was well on the way in its recovery from bankruptcy, and took delivery of the first of its 24 Airbus A330s as it looked to expand its reach and diversify its network.

“We had a number of route startups during that period, we had already been serving Australia with a service to Sydney. That went back a little further, but we expanded that,” says Ingram.

Auckland was a “natural opportunity” for the 89-year-old airline at the time that it was expanding in Asia with services to Japan, Korea and China.

“The New Zealand route in particular had a couple of things that were important to us. On the one hand, the overall size of the market is somewhat limited given the population bases in New Zealand and Hawaii. But it was a rather unique opportunity for bidirectional traffic. New Zealand and Hawaii are very popular places for tourism.”

Most of the passengers carried are Kiwis heading to the most populous island of Oahu, and increasingly on to other islands in the Hawaiian group. Some connect to ports on the US West Coast and New York.

The decision to move to services five times a week was a risk, but part of the airline’s policy of “calculated aggression”.

“There’s always a risk when you grow. One of the things that we’ve been really fortunate about over the last several years is, our business overall has become more profitable and stronger, and we’ve been able to use our financial success to reinforce our balance sheet,” says Ingram.

“Frankly, one of the philosophies that Mark Dunkerley had, that I share, is that this is a business where we should take risks.”

The operations side of the business is risk averse, because safety is paramount, “but on the commercial side, if we’re not taking risks, I don’t think we’re trying hard enough. And if everything we do works, that probably means we’re being too cautious.” Ingram says that approach is a change from his former finance role, where he was prone to keep his foot on the brake rather than the accelerator.

The airline has also looked at expanding in New Zealand, by flying to Christchurch.

“It is something we have looked at from time to time. It hasn’t bubbled to the top of our list yet.”

The airline is looking at about 10 to 20 different opportunities that have prospects of enough demand to support a non-stop service to Hawaii. Asked whether the New Zealand route is profitable, Ingram says the airline does not disclose the financial performance of specific routes. In the last full financial year, Hawaiian carried a record 11.5 million passengers, up 4.1 per cent on the previous year, and its financial footing had allowed its largest ever profit share payment — splitting US$23.8 million ($32.8m) among its 6700 staff. That success is a mixed blessing. “According to some of the people who track the industry globally, I think we’re in the top two or three most profitable carriers over 2017. So that does attract greater competition.” South West Airlines — the biggest US domestic airline by passengers carried — is planning to start services to Hawaii this year, and United Airlines is expanding in the islands.

“We’ve seen waves of competition in the past. Frankly our attitude is bring it on. BIO.”