South­west plan­ning low-cost in­ter­is­land ser­vice

Honolulu Star-Advertiser - - FRONT PAGE - By Dave Se­gal dse­gal@starad­ver­tiser.com

South­west Air­lines, which cre­ated rip­ples through the state last year when it an­nounced it would be­gin ser­vice be­tween the main­land and Hawaii, said Wed­nes­day it in­tends to of­fer in­ter­is­land ser­vice as well and will set prices lower than cur­rently avail­able.

Hawai­ian Air­lines dom­i­nates the in­ter­is­land mar­ket with more than a 90 per­cent share, and many in­ter­is­land trav­el­ers would wel­come added com­pe­ti­tion.

Dal­las-based South­west said when it en­ters a mar­ket, prices his­tor­i­cally come down in part be­cause of the air­line’s policy of no bag fees and no change fees.

South­west Pres­i­dent Tom Nealon, who is in Hawaii to meet with com­mu­nity and busi­ness lead­ers, said he re­cently pur­chased an in­ter­is­land ticket and that it was “very ex­pen­sive.”

“We will come in with lower fares, and not in­tro­duc­tory fares. We have the struc­ture to of­fer low fares,” he said ahead of to­day’s of­fi­cial in­ter­is­land an­nounce­ment.

“We will price low be­cause we have a cost struc­ture that al­lows us to com­pete very ag­gres­sively

and still have good unit growth and a strong op­er­at­ing mar­gin,” Nealon said. “It’s got to be a price that’s com­pet­i­tive and the low­est price in the mar­ket.”

In opt­ing to of­fer in­ter­is­land flights, South­west will be ven­tur­ing into an air­line grave­yard of sorts that most re­cently has seen Aloha Air­lines, go! and Is­land Air all go out of busi­ness while try­ing to com­pete against Hawai­ian Air­lines.

Nealon said Is­land Air’s shut­down in Novem­ber had noth­ing to do with South­west’s de­ci­sion to ven­ture into in­ter­is­land ser­vice.

“We make our de­ci­sions based on what we can do in the mar­ket,” he said. “This is the mar­ket we want to be in and we think it’s un­der­served and lacks com­pe­ti­tion even with Is­land Air (pre­vi­ously) in play. We think we can pro­vide a great ser­vice. We’ve been meet­ing with dif­fer­ent com­mu­nity groups and we’re hear­ing loud and clear there’s not a lot of com­pe­ti­tion in the mar­ket.”

“Our in­tent is to be­gin ser­vice to in­ter­is­land once we get the net­work built up and have enough air­planes on the ground here to have enough fre­quen­cies to make the ser­vice mean­ing­ful,” Nealon said.

Nealon said South­west plans to ramp up Hawaii ser­vice pretty quickly af­ter it re­ceives air­craft cer­ti­fi­ca­tion to be­gin fly­ing from the Fed­eral Avi­a­tion Ad­min­is­tra­tion.

“The first step is re­ceiv­ing ETOPS (ex­tended op­er­a­tions) cer­ti­fi­ca­tion,” he said. “The sec­ond step is launch­ing ser­vice from Cal­i­for­nia to four Hawaii lo­ca­tions. And once we get enough air­craft here, the third step is to ex­e­cute in­ter­is­land ser­vice.”

Nealon re­it­er­ated that South­west in­tends to be­gin sell­ing tick­ets be­tween the main­land and Hawaii be­fore the end of 2018, adding that a tar­get of of­fer­ing in­ter­is­land ser­vice “within a year would be fan­tas­tic.” He said main­land-Hawaii flights ini­tially will come from Cal­i­for­nia, where South­west has a strong cus­tomer base and trans­ports 63 per­cent of the cus­tomers who fly routes within Cal­i­for­nia.

“The best-case sce­nario would be that it would be ab­so­lutely in­cred­i­ble if we’re fly­ing (to Hawaii) by the end of this year,” Nealon said. “Work­ing to­ward that stated ob­jec­tive, if we pub­lish a sched­ule to­ward the end of the year, it re­ally im­plies that we’re op­er­at­ing early next year. Whether it takes a month or two longer, in the grand scheme of things it re­ally doesn’t mat­ter. Once we en­ter the mar­ket, we’re mak­ing a com­mit­ment to our­selves emo­tion­ally and our op­er­a­tions. It’s a com­mit­ment that we’re not a pass­ing fancy and we in­tend to win and do very well.”

South­west plans to serve Hawaii with 175-seat air­craft, ini­tially start­ing with the Boe­ing 737-800 and then switch­ing to the more ef­fi­cient Boe­ing 737 MAX 8.

“On Day One you won’t see us launch­ing a blitzkrieg of air­craft,” he said. “We’ll start slow and build up. In the first two to three months, you’ll see a pretty sig­nif­i­cant num­ber of flights that will in­crease over the bal­ance of the year and you’ll be pretty pleased with the num­ber of flights we bring into Hawaii.”

He said flights from Cal­i­for­nia to Oahu, Maui, Kauai and Kona on Hawaii is­land “will be spaced out.”

“We ex­pect to roll into in­ter­is­land fly­ing once we’re com­fort­able with the scale we’re bring­ing in from the main­land,” Nealon said. “There won’t be an overly ex­tended gap be­tween Cal­i­for­nia fly­ing and in­ter­is­land fly­ing.”

South­west also plans to con­duct lo­cal hir­ing but has no specifics yet, ac­cord­ing to Steve Goldberg, se­nior vice pres­i­dent of op­er­a­tions & hos­pi­tal­ity.

“We ex­pect to hire lo­cally at all four air­ports and blend in some of our em­ploy­ees trans­fer­ring over from the main­land,” he said.

COUR­TESY PHOTO

STAR-ADVERTISER / 2017

Tom Nealon

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