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The Honolulu Advertiser
Posted on: Sunday, May 30, 2010

Hawaii's interisland airfares settling down

By Alan Yonan Jr.
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

Hawaiian Airlines passenger Raka Washburn, arriving from Kona after a business trip, says she is traveling less for personal reasons because the "prices are outrageous."

DEBORAH BOOKER | The Honolulu Advertiser

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The wild swings in airfares that characterized the interisland travel market over the past five years appear to have subsided, with the base fare stabilizing at a level that is only modestly higher than when Aloha Airlines folded in the spring of 2008.

A number of factors, including more direct flights to the Neighbor Islands from the Mainland, have helped keep interisland carriers from jacking up rates aggressively, analysts said. The current lowest one-way interisland fare of $58 compares with a $49 fare that was the lowest available at the time Aloha went under.

Fares rose in the months after Aloha's demise, then fell when Mokulele teamed with Indianapolis-based Republic Airways to bring new jet service to the interisland market in the fall of 2008. Fares began climbing again when go! and Mokulele merged in October 2009. The $58 base fare charged by Hawaiian and go! Mokulele has been in effect since late last year.

go! airlines set the stage for dramatically lower interisland fares when it entered the market in June 2006 offering limited one-way fares of $19 and $29. Its base fare of $39 was well below the $80 and $90 lowest fares available before go!'s arrival.

Hawaiian and Aloha were forced to match go!'s pricing, which forced all three to offer the discounted tickets at below cost a major factor in Aloha's collapse.

While go! called the shots in ticket pricing back then, Hawaiian is in the driver's seat today, said Peter Forman, a local aviation historian and author.

go! Mokulele tried to raise the minimum fare to $63 in January. But when Hawaiian didn't match the fare after one week, go! Mokulele was forced to roll back to $58.

"Hawaiian has been showing the constraint not to raise ticket prices. One reason is that Hawaiian is flying fuller planes so they don't need to raise their fares," Forman said.

go! Mokulele, on the other hand, has been struggling to fill its planes, he said. Hawaiian's load factor has averaged 84 percent since the start of the year, while go! Mokulele's planes have been about 67 percent full, on average.

"They (go! Mokulele) really can't raise their prices in that situation," he said. "Any airline can lower fares. But if go! wants to raise fares it will need Hawaiian's cooperation."

And go! Mokulele can ill afford to see its market share in the Islands slip any further with its parent company, Mesa Air Group, struggling to work its way through bankruptcy .

Forman said he doubts either Hawaiian or go! Mokulele is able to make money charging $58 per ticket, which is why they sell only a limited number at that price. According to Hawaiian's website, coach fares go up incrementally depending on availability, topping out at $127.

Hawaiian is better positioned to absorb losses with lower-priced tickets because it has a robust Mainland and international business, he said.

Hawaiian's geographic diversification has helped it maintain profitability as demand for interisland flights has waned. The 7.4 million passengers who traveled on interisland flights last year were the fewest in at least 20 years, according to data from the state Department of Transportation.

Interisland passengers peaked at 10.5 million in 1996 before beginning a steady decline. The numbers perked up slightly in 2007 after go! came into the market, but then resumed their slide in 2008.

"When Mainland-based carriers began flying straight to the outer islands there wasn't the need to connect through Honolulu anymore," said Steve Danishek, a Seattle-based travel consultant.

"Alaska Airlines is going to all the islands now from places like Seattle, Portland and Sacramento using their 737s," Danishek said.

Indeed, the DOT's figures show that the number of airline passengers using Hono- lulu International Airport as a transit point has dropped sharply, falling from more than a million in the early 1990s to just over 9,000 last year.

Forman also said better hospitals and more shopping options on the Neighbor Islands these days mean residents there have fewer reasons to fly to Honolulu.

Even though fares for interisland flights have stabilized, many local travelers still long for the days of the airfare wars.

"I fly way less now," said Daniel Takashima, 31, who grew up on O'ahu but moved to Maui after high school.

"All my family is here," said Takashima, a graduate of Waipahu High School. "Before when it was 40 bucks I would fly once or twice a month. I would come to O'ahu for birthday parties, I would come to almost every one. Now I come back maybe twice a year, mostly on holidays and special occasions."

Raka Washburn, who traveled to the Big Island on business last week, said her roundtrip fare was more than $200.

"These prices are outrageous. If I had to pay for it out of my pocket I sure as heck wouldn't be traveling as often," said Washburn, a Kāne'ohe resident and former Aloha Airlines employee who works for an environmental engineering firm.

Roy Goo, a Kaua'i resident who is moving to Honolulu to work at the University of Hawai'i, said he has cut his interisland travel in half since the days of bargain-basement fares.

"I would try to go back and forth maybe two times a month on leisure trips. Now I'll go at most once a month."

Singer-songwriter Keola Beamer and his wife Moana flew to Honolulu from their home on Maui last week to rehearse for an upcoming Memorial Day concert.

"We may not consider the extra, kind of fun trip any more. But we have to travel for work," Moana Beamer said.

Added Keola Beamer, "We feel like there is a lack of competition. And we particularly miss the Superferry where we could just load all our stuff on board."

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