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The Honolulu Advertiser
Posted on: Friday, November 30, 2007

Aloha Air hikes Hawaii interisland fares by $10

By Rick Daysog
Advertiser Staff Writer

Aloha Airlines raised its interisland fares by $10 this week to cope with soaring fuel prices, and rival Hawaiian Airlines is studying its next step.

The fare hike, if it sticks, could mark a turning point in the interisland price war that began in June 2006 when go! airline entered the market with $39 one-way fares.

Aloha "is trying to bring up fares to see if the competition will follow, which is a reasonable thing to do," said local airline industry historian Peter Forman. "They're trying to say let's quit this nonsense of money-losing fares, let's try to at least break even with fares."

Aloha increased ticket prices on most of its interisland flights by $10 Monday, citing the high cost of jet fuel. Hawaiian did not immediately match, but company spokesman Keoni Wagner said the airline is looking at the option.

Upstart go! airline, which kicked off the fare war last year when it cut ticket prices by more than half, declined to comment when asked if it would follow suit.

Aloha said the fare increase is strictly about fuel costs.

Thom Nulty, Aloha's senior vice president of marketing and sales, said jet fuel prices have more than doubled during the past several years from about $1.25 a gallon to about $2.89 today.

As a result, Aloha's annual fuel expenses have soared from $71.1 million in 2004 to $95.9 million in 2005 and $100.5 million in 2006.

Nulty noted that at $1.25 a gallon, the per-passenger fuel cost is about $8 on an interisland flight that's 70 percent full. At $2.89 a gallon, the per-passenger fuel cost is $18.25, he said.

"It's not about trying to squeeze out an extra profit," he said. "It's about trying to recover the added costs."

This is not the first time that Aloha has looked to raise fares. Earlier this month, Aloha announced that it was raising fares by $5 due to high fuel costs.

But the carrier pulled the fare increase after Hawaiian and go! declined to match.

Nulty, who likened the fare increase to surcharges implemented by shipping companies like Matson Navigation Co., said he hopes competitors will follow this time.

"Everyone is losing substantial amounts of money ... and at some point somebody has to step up and it is us," Nulty said.

"We hope sanity will prevail."

Since go!'s launch in June 2006, fares have dropped by as much as half to about $39. At times, go! has dropped ticket prices to $29, $19 and $9.

In most instances, the fares were matched by Aloha and Hawaiian, which lost about $40 million each in 2006.

A recent study commissioned by Aloha and conducted by Dallas-based Sabre Airline Solutions concluded that Aloha, Hawaiian and go! lose money when they sell interisland tickets below $50.

Honolulu resident Bill Lyster doesn't think that the $10 fare increase will make a difference in whether he travels to the Neighbor Islands. The construction industry consultant said airfares are just one of several expenses that he and his wife look at when they travel. Hotel prices, car rentals and other costs are factors that he looks at when planning trips, he said.

But Lyster said he would rethink future travel plans should interisland fares return to the $70 to $90 levels of two years ago.

"I think it's part of the normal ebb and flow of business," Lyster said of Aloha's $10 fare increase.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.