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The Honolulu Advertiser
Posted on: Saturday, March 6, 2004

New airline to enter market

By Debbie Sokei
Advertiser Staff Writer

Jack Bates, former chairman and CEO of advertising agency Starr Seigle Communications Inc., said he and a group of investors have formed a California-based company, Fly Blue Hawaii Airlines, which they hope will someday provide an alternative for customers flying between Hawai'i and the West Coast.

Initially, the group will lease three or four wide-bodied planes from Boeing Capital Corp. or Airbus and add more planes when the company grows, said Bates, who is a minority investor. Fly Blue Hawaii will not compete in the interisland market, Bates said.

"It's probably a chancy operation," said Ron Kuhlmann, vice president of Unisys R2A, a California-based aviation consulting firm. "It seems like the only way they will be able to survive is to offer better service and lower fares."

Bates said the concept is still in its preliminary stage and is evolving. The group is exploring several business models to serve the trans-Pacific market and has been talking to potential Hawai'i and Mainland investors.

"The group believes there is considerable growth in the market and there's an opportunity to add more service than what exists currently," said Bates, who declined to identify the other investors in the airline. The routes and price structure for the new carrier have not been determined yet, but one of the business models they are looking at is JetBlue, a low-cost airline, Bates said.

Bates said the new carrier will be formally announced in mid-April.

When Bates began working on Blue Hawaii, he resigned as a member of the creditors committee that is working with the bankrupt Hawaiian Airlines. Starr Seigle is waiting to collect $570,000 from Hawaiian.

Bill Oliver, an airline consultant with the Boyd Group, a Colorado-based aviation consulting and research firm, said he is pessimistic about a new carrier entering a tight Hawaiian market.

"It's a very difficult market for existing carriers to make money in and there's a host of other airlines flying those routes today," Oliver said. "It would be very interesting to see their market plan and see what insights these folks have."

Reach Debbie Sokei at 525-8064 or dsokei@honoluluadvertiser.com.