Posted on: Sunday, September 28, 2003
Airlines' antitrust immunity nears end
By Dan Nakaso
Advertiser Staff Writer
The antitrust exemption handed to Hawai'i's two largest airlines a year ago will expire on Wednesday, but don't look for a quick drop in fares or a return to the "show up and go" days of interisland travel.
The one-year exemption — which led to fewer flights, higher prices and much grousing among the flying public — was designed to help Aloha and Hawaiian survive the posti9-11 drop in tourism.
With its passing, it's not likely that the two airlines will want to return to the old ways.
"Everybody's going to limit service and keep fares at a relatively high rate, or they're going to kill each other," said Barbara Beyer, president of Virginia-based airline consultant Avmark Inc. and a consultant to Hawaiian in the 1980s.
Neither airline will discuss what might happen to rates, routes or availability of seats. So passengers have no idea how their travel lives will change — if at all.
"What's going to happen?" asked Vance Tilley, a Boeing 767 first officer for Hawaiian Airlines. "That's the big question, isn't it? Personally, I don't know if it's going to stay status quo or it's gong to turn into a slugfest."
Much has changed in the year since Congress granted the exemption that allowed the airlines to collaborate on some routes.
Both airlines raised rates and eliminated the convenient and popular ticket coupon system. Security checkpoints have grown longer. And passengers are openly grieving the loss of a simpler way of life in which they could travel quickly and cheaply between islands.
In March, Hawaiian, Hawai'i's largest airline, also filed for Chapter 11 bankruptcy protection.
"We can't talk about fares and schedules for competitive reasons," Aloha spokesman Stu Glauberman said. "But we will continue to supply capacity to meet demand, and we're aware that there are some problems meeting every one's schedules and we are looking for ways to address that community need."
Life before 9-11 was relatively good for Hawaiian and Aloha, said Paul Brewbaker, chief economist for Bank of Hawaii.
"They weren't wildly profitable," Brewbaker said, "but they stayed in business."
He's one of the few who believes airfares could fall.
"It will be interesting to see who is going to be the first to lower prices," Brewbaker said. "If they go back to $60 (for one-way tickets) they are going to get all of the business."
Gov. Linda Lingle plans to carefully watch the situation unfold, especially during the busy holiday travel season.
She's particularly concerned about airfares and the effect on Hawaiian.
"We want them to survive," she said. "It would be a very bad for us to end up with one airline at this point."
Beyer, the airline consultant, says that may not be possible.
"It could take a year — year and a half, max — before one kills the other. Hawaiian's already in trouble and you just can't hemorrhage money like that forever," she said.
Hawaiian made a profit in each of the last four months — perhaps because of renegotiations while under bankruptcy protection, Beyer said. And it may be the one to ultimately survive, she said.
"They may be getting their ducks in a row," she said.
Greg Kahlstorf, president and partner of Maui-based Pacific Wings Airlines, doesn't expect any significant changes.
The antitrust exemption gave his competitors Aloha and Hawaiian no reason to change, Kahlstorf said.
"We immediately saw fare increases, (flight) frequency decreased, schedules became more inconvenient, the seats that were available were more expensive," Kahlstorf said.
"People were inconvenienced. They lost coupons. The whole nature of interisland travel literally changed over night."
And that's what Kahlstorf predicted would happen when he opposed the exemption.
"They're going to keep on doing exactly what they're doing," Kahlstorf said. "There's no need for them to compete at this point. What they've learned is that people will pay $70, $80, $90 for a ticket."
Hawaiian pilot Tilley isn't so sure.
The antitrust exemption, Tilley said, was necessary to let the market recover from 9-11. It was a necessary fix to an emergency situation, he said.
Now it's time to let the market decide. And Tilley's emotions are divided over what might happen next.
As a person who commutes from home in Hilo to fly Hawaiian Boeing 767s out of Honolulu, Tilley would like to see more interisland flights.
At the same time, he also worries about how increased costs will affect the future of his bankrupt airline.
"I don't know if both carriers can afford to go back to the losses they sustained over the last five years," Tilley said.
"Interisland is a weird market."
Advertiser staff writer David Butts contributed to this report.
Reach Dan Nakaso at dnakaso@honoluluadvertiser.com or 525-8085.
