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The Honolulu Advertiser
Updated at 9:53 a.m., Wednesday, October 23, 2002

Flights to be cut Dec. 1

 •  Hawai'i holiday bookings more sluggish than usual
 •  Fewer flights limit good holiday deals

By Frank Cho
Advertiser Staff Writer

Hawaiian and Aloha airlines plan to begin reducing service between Honolulu and some Neighbor Island airports Dec. 1 under a recently granted federal antitrust exemption.

John Adams, Hawaiian's chairman and chief executive officer, said he plans to unveil what flights and how many airline seats will be affected in about three weeks.

Adams also said yesterday that Hawaiian employees should expect job cuts and demands for increased productivity.

Hawaiian officials began meeting with executives at rival Aloha Airlines about 10 days ago under the antitrust exemption to determine how many airline seats the Hawai'i market can support and then develop a formula to evenly split those seats between them, Adams said.

"Unfortunately, you are not going to be able to walk up five minutes before a flight and say I would like to fly," Adams said. "On the other hand, I think you are going to have two airlines that are sufficiently secure in their interisland operations ... but you are going to have two very competitive airlines competing for your ticket."

Aloha Airlines spokesman Stu Glauberman declined to disclose details but said Aloha is planning to have its changes also in place for a Dec. 1 start.

The cost-cutting moves come as the nation's largest airlines racked up roughly $2.2 billion in third-quarter losses, putting the industry on a pace to lose some $8 billion for the second year in a row.

Hawaiian and Aloha have said they have been losing millions of dollars in the interisland market and said coordinating capacity is the best way reduce their costs and survive a slumping interisland market.

Critics have argued that the two carriers, which already control more than 90 percent of the interisland market, want only to reduce competition to increase their control of the market.

The federal antitrust exemption — the only one of its kind to be granted by airline regulators since Sept. 11 — took effect Oct. 1 and will allow the carriers to coordinate capacity on routes between Honolulu and Lihue, Kahului, Kona and Hilo through Oct. 1, 2003.

Before the reductions can be implemented, Adams said both carriers will have to submit their plan to federal aviation and state transportation officials for review.

Under the federal antitrust exemption, federal officials or Gov. Ben Cayetano can withdraw their support at any time, which could lead regulators to revoke the exemption.

The move to reduce airline seat capacity between the islands is expected to save both companies millions of dollars largely through reduced landing fees, fuel costs and other expenses.

Adams said yesterday it will also likely result in some job cuts.

Labor represents between 20 percent and 25 percent of operating costs at Hawaiian and it's growing.

"So it's a large percentage of our costs," Adams said. To get those costs under control, Adams said he would rather reduce staffing levels than ask employees to take cuts in their pay and benefits.

"We are very dedicated to maintaining the raises our employees worked so hard to get. I am loathe to go to the labor unions and ask for concessions," Adams said. "But if we can get our productivity to a level we feel comfortable with we are not going to go through (large layoffs)."

Aloha is asking all of its roughly 3,000 employees to take pay cuts to save $37 million during the next three years in an effort to get a federal loan guarantee it applied for earlier this year.

Adams said he believed reduced demand for interisland travel is a permanent trend and airlines that expect to survive will have to find ways to be more efficient.

He said he will share his plans with labor groups representing thousands of Hawaiian pilots, flight attendants and mechanics in the next couple of weeks.

The number of available flights in September shorter than 250 miles, which includes the majority of interisland travel, declined by 18 percent in the past two years, according to the Transportation Department.

By comparison, flights 250 to 499 miles long declined by 10 percent and flights longer than 1,000 miles fell by 3 percent.

Though a major goal of Hawaiian has been to reduce interisland capacity and cut costs, Adams said Hawaiian has launched 10 new routes in the past year in an attempt to open new markets and grow revenues.

He said the company is also looking at adding more destinations, but he declined to say which cities are being considered or when new routes may be added.

Reach Frank Cho at 525-8088, or at fcho@honoluluadvertiser.com.

Correction: An earlier version of this story erroneously reported that Aloha Airlines had announced plans for staffing cuts. The airlines has said it plans to cut pay, not positions.