Tuesday, January 9, 2001
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Posted on: Tuesday, January 9, 2001

Isles may see mixed results of airline megamerger

Airline monopolies feared
Graphic of airlines' major hubs, revenue passenger miles

By Andrew Gomes and John Duchemin
Advertiser Staff Writers

i travelers, fasten your seat belts.

The proposed megamerger of American Airlines and Trans World Airlines will thrust two of the state’s primary Mainland carriers into the second-largest market share position, and the effect could be bumpy.

Market shares

If American and TWA merge, they would create an airline that, based on 2000 figures, would have the second-largest market share of seats on Mainland-Hawaii routes.

Market share:

Flights between U.S. Mainland and Hawaii in 2000

1. United 30.9%

2. Hawaiian 15.6%

3. Delta 13.5%

4. American 12.4%

8. TWA 3.5%

Source: Hawaii Visitors and Conventions Bureau

With Hawai
i’s dependence on airlines for its millions of visitors and residents, the possibility of a dwindling number of carriers leaves the state in a potentially precarious situation that some say could leave fliers with fewer choices and higher fares.

American operates 10 flights a day to Honolulu and Maui; TWA operates three flights a day to Honolulu, Maui and Kona. Together, they control 900,000 available seats, or about 16 percent of the market between the U.S. Mainland and Hawaii. Only United would be larger, with a market share of about 30 percent.

Details of the proposed merger could be announced as soon as tomorrow, but American Airlines reportedly is ready to rescue money-losing TWA, and purchase from United some of the assets of US Airways. The airlines have declined comment. Their announcement comes eight months after United announced its intent to buy US Airways in the biggest-ever airline merger.

Some say a consolidation of American and TWA, as well as the previously announced effort by United to buy US Airways, will only propel further contraction in the industry as Delta, Continental and Northwest seek to keep up by looking for partners. With such mergers come the spectre of higher fares and more noncompetitive markets.

Local transportation and hospitality industry leaders said yesterday that the state’s leading tourism industry could benefit from a buyout of financially troubled TWA by American, although they said it could be at the expense of fliers and some local travel agencies that do business with TWA.

But Fredrick Collison, professor of transportation and marketing in the University of Hawaii School of Travel Industry Management, said an American-TWA merger would probably not reduce flights or raise prices between Hawaii and the Mainland — chiefly because the airlines serve different markets.

TWA flies to Hawaii mainly from St. Louis, while American flies from Chicago, Dallas-Fort Worth, the San Francisco Bay area and Los Angeles.

"Yes, this will mean one less carrier in the market, but American and TWA really don’t compete in this market, so I don’t see how things will change very much as far as pricing and seats," he said.

But some local travel agents said they suspect that reducing competition among airlines will leave travelers with fewer choices, reduced service and higher fares.

"TWA provided a lot of competitive fares to Hawaii inbound and outbound," said Earl Loo, president of Business & Leisure Holidays. Loo said TWA, because it is a smaller airline, tended to be more price competitive — something that he expects would change with American taking over.

One local travel agency that could take a hit is King’s Travel Inc., the main Hawaii reseller of TWA tickets. TWA makes up about 50 percent of King’s business, providing more than 1,000 ticket sales in most months, owner Peter Wang said. Wang said he hasn’t heard from TWA, and isn’t sure what will happen to his relationship with the airline if American takes over. He said, however, that King’s would survive by expanding its business with other airlines.

Rachael Shimamoto, past Hawaii chapter president of the American Society of Travel Agents, said the merger has positive and negative effects. On one hand, travel agencies will have fewer sources of business, said Shimamoto, manager of Travel Ways. On the other hand, travelers will find it easier to connect to different Mainland cities served by the two carriers.

American’s purchase of TWA also could preserve the weaker airline’s routes to the state, she added.

"We’re hoping this buyout provides more stabilization for Hawaii," said Jerry Matsuda, airports administrator with the state Transportation Department. "From the broad perspective, it looks like it might strengthen the TWA side."

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