Hawai'i service to be kept after United bankruptcy
| • | United Airlines files for bankruptcy |
| • | Analysts see fewer United seats, higher prices |
By Kelly Yamanouchi
Advertiser Staff Writer
Hawai'i is unlikely to see any significant immediate changes from United Airlines' bankruptcy filing, but long-term effects are more difficult to predict and could include cuts in local operations and flights to the Islands.
The nation's second-largest carrier said that it will continue to fly as it seeks protection from creditors, and yesterday it was too early to tell what reductions it might make as its reorganization efforts continue.
But the question of what is in store for the carrier is crucial for Hawai'i, which depends on the airline for the majority of flights that link residents to the rest of the world and bring in visitors to fuel the state's biggest industry.
As the Islands' largest U.S. carrier, with about 20 percent of the market and more than 1,000 employees in the state, any cuts could shake the state's sluggish economy and $10 billion tourism market.
"It is a concern," said state economist Pearl Imada Iboshi. "It really depends on how they restructure."
While that's still unclear and likely will take months to work out, some said United's 1,200 Hawai'i employees, including staff at a Honolulu reservations center, could face cost cutting in the form of pay or job cuts when the airline renegotiates all of its labor contracts.
Earlier this year, United announced plans to close several of its reservation centers across the country, but its Honolulu operations were spared.
However, Patrick Palazzolo, United Air Line Pilots Association union spokesman said, "The potential for layoffs is certainly there."
The potential also is there for cuts in the airline's flights to Hawai'i, although many in Hawai'i said they believe the airline's Island routes are too valuable to be significantly reduced.
"United Airlines and other airlines have cut flights in other areas but they in general have maintained flights to Hawai'i," Imada Iboshi said. "We have become a more lucrative market for the airlines (compared to business-travel routes) so I think that will help us in the transition."
Palazzolo said he does not think United will cut service to Hawai'i.
"We've been there since 1947, and it's been one of the few profitable areas during this downturn," Palazzolo said. "In good times and bad, we've always served Hawai'i."
Those in the tourism industry are hoping that holds true as they seek to regain visitors who have only recently begun to slowly return after the Sept. 11 attacks.
"If this happened four years ago when the other routes were dramatically outperforming Hawai'i, it would be different, but relatively speaking, Hawai'i has been better," said David Carey, president of Outrigger Enterprises Inc.
Still, others worry that because consumers often use frequent-flier miles for their flights to Hawai'i, the Island routes have the reputation of generating less direct revenues. And that also makes Hawai'i's place in United particularly dependent on the future of the airline's frequent-flier program during its restructuring.
Analysts have said that the carrier's frequent-flier policies could get tighter during its reorganization.
It is also unclear whether United will go forward with any planned expansions of flights, including a scheduled increase in its nonstop flights from Denver to Honolulu to daily flights instead of only weekend flights early next year.
While analysts have said some flights could be pared, Palazzolo said Denver flights have high load factors.
"I have every expectation they will continue" with the plans, Palazzolo said.
Many in the travel industry in Hawai'i said that, ultimately, there is little they can do to prepare for any changes at United.
"United's a big employer here," Hawai'i Tourism Authority executive director said Rex Johnson. "From a state standpoint, we can write letters and those types of things, but at the end of the day bankruptcy usually means get to work on cutting costs and figuring out how to run an airline."
And tourism industry officials say that if visitor demand continues for Hawai'i, other carriers might step in take over any routes United would drop.
"When one of the largest carriers to a destination has a problem, it can't help but make you nervous," Carey said. "I'm optimistic that the Hawai'i's routes would be OK, but I'm speculating here, with a little bit of hope woven into that.
"From a Hawai'i standpoint, we've just got to keep marketing our destination so we get first call for airline equipment and routes. We hope that the demand for the destination continues for Hawai'i. Even if United isn't able to carry it, some other carrier will."
