December 16, 2013
In a U.S. airline industry where capacity constraint is pursued with almost religious fervor, Hawaiian Airlines' double-digit growth rate makes it something of a heretic. But the carrier is not pursuing expansion for its own sake—rather, it is following a deliberate plan to transform its business model and set itself up for long-term success.
During the past five years Hawaiian has morphed from a carrier that was primarily reliant on domestic routes to the U.S. West Coast to one that has a major presence in international markets around the Pacific Rim. In the nine months through July, the carrier added five new overseas destinations. And underlining its shift in focus is the fact that it has more points on its international network—12—than it has on the U.S. mainland.
Now, the airline is taking a breather from its rapid expansion. It plans to launch flights to Beijing in April, which will be its first new addition in nine months. This hiatus is allowing Hawaiian to consolidate the changes it has already made and plan for its next phase of growth.
CEO Mark Dunkerley tells Aviation Week that Hawaiian's era of transformation really began in 2005, when it exited bankruptcy protection. That is when “we set about plotting what we thought made sense for our company for the next 10-15 years.”
At that point, Hawaiian had two basic elements to its operation. Flying between the islands of Hawaii accounted for about 30% of its business, and almost all the remainder was service from Hawaii to the U.S. West Coast.
The inter-island market is quite different from any other in the U.S. airline industry, Dunkerley notes. In addition to the usual leisure and business traffic, residents take flights for routine trips that would use ground transportation elsewhere. Healthcare providers fly patients for treatment, and high school athletics associations must also transport teams to neighbor islands for some sports meets.
But this market is not growing, as the population of Hawaii is fairly stable. Hawaiian's share of the inter-island market when it emerged from bankruptcy was 64%, and the only thing that could have changed that dramatically would be the exit of main rival Aloha Airlines—which did eventually happen, although that was “hardly a sensible strategic expectation at the time,” says Dunkerley.