Recently, little Island Air of Hawai’i decided that it was time to rebrand. The new logo and marketing effort was meant to support the airline in a new direction, mostly visibly in the form of new ATR aircraft. In general, I think airlines are way too quick to just rebrand as a way to show they’re doing something, so I wanted to talk to Island Air to better understand why this was happening. A couple weeks ago, I spoke with Island Air CEO Lesley Kaneshiro about the airline’s plans.
Cranky: Let’s just start with the rebranding in general. What was the reason for it?
Lesley: For the past several years, if you’ve been following the Hawai’i interisland market, Island Air has stayed under the radar with the fare wars that resulted in Aloha going out of business. We retracted into what we call our niche market: smaller communities in the State of Hawai’i that we service, those being Lanai, Molokai and West Maui. We really didn’t do a whole lot of marketing. We were out there a lot in the media and in front of the communities, but with the transition to the [new] ATR [turboprop aircraft], we see this as an opportunity for a new beginning for the company, something to give the employees something be excited about and proud about. What we put out in the new livery is just the beginning.
Cranky: So it’s a shift in strategy for the airline beyond the small routes to broader Hawai’i?
Lesley: Yes. Eventually we see ourselves connecting more of the islands together. It may be destinations that are not served today as a nonstop route. As enplanements into Hawai’i continue to grow, that will help us determine which markets to enter.
Cranky: You placed this order for the ATRs. Are they coming this month?
Lesley: We have one coming probably early September and it’s coming out of C check right now. It will go into paint next week.
Cranky: How many are you taking?
Lesley: We have 2 ATR 72s coming this year and then the ATR 42s we’re looking at 5 or 6 next year.
Cranky: And how many Dash 8s do you have right now?
Lesley: We have 3 Dash-8s right now and 1 wet lease with a Saab.
Cranky: This is certainly growth. I know you briefly flirted with the Q400, was that a couple years ago?
Lesley: In 2006.
Cranky: It was that long ago now?
Lesley: Yeah, time flies.
Cranky: So what is it now with the ATR 72 that it looks better than when the Q400 was introduced?
Lesley: Good question. What we’ve seen over the years, we see a lot more of the larger carriers coming inbound into Hawai’i. So for example, Allegiant, which is a new entrant into Hawai’i, just announced Spokane and Boise. These are secondary markets that did not have service to Hawai’i previously. We know that Southwest is working on certification to come into Hawai’i. And in the Asian market, there are a lot of Asian airlines like Korean Air, China Air that are adding flights into Hawai’i and with the restrictions on visas being lifted for Koreans and Chinese, we expect that we’ll see more visitors from those countries traveling to Hawai’i and through Hawai’i for vacation.
We’ve been also actively working on obtaining additional codeshare agreements with other carriers. We’ve been in discussions with half a dozen right now. We’re a small carrier and somebody in China or the East Coast, they’ve never traveled to Hawai’i. They may not know who Island Air is. They want to go to Hawai’i but they don’t know how to get there. And if they go to United’s website, they can see how to get their with our codeshare. Those codeshares are important.
Cranky: What percentage of your traffic comes from people connecting versus just local demand?
Lesley: It’s about 60 percent local and 40 percent visitor. But the local, I can’t really tell if they’re traveling for business or vacation.
Cranky: So with the ATRs coming, what’s the first route?
Lesley: The ATR is going to cover an existing aircraft that’s going out for heavy maintenance so we’re not really adding new flights. It’s going to pick up some of Maui to Lihue nonstop. We’ll try to use it in existing flights but looking out where there’s more opportunity to pick up additional passengers. Because some of the markets, if it’s small, the market doesn’t have the demand for the ATR 72.
Cranky: Can you talk about why you decided to go with the ATR versus something else?
Lesley: We have some unusual runway restrictions in Hawai’i. Kapalua airport is a short runway, 3,000 feet, and that requires the aircraft to be able to land and takeoff with that short runway restriction. The Dash 8 gets in an out pretty easily. The Saab cannot because it’s too heavy. Based upon the restrictions, that’s what we look for – the aircraft that best meets those requirements. The ATR 72 will not be able to land in Kapalua but the ATR 42 will be able to. We will probably take a weight penalty depending upon several factors.
Cranky: The ATR is the only real option? I guess, are the Dash 8s getting too old?
Lesley: Because the Dash 8s aren’t in production anymore, the smaller aircraft when you get to the 37, and the ATR 42 will have 46 seats, [size category], there’s limited inventory. The Dash, we’ve been looking for aircraft for the last two years when we saw we could start to take on more. They just weren’t available at a reasonable price that we thought was realistic to make money. Because we weren’t able to solidify more aircraft, we decided to look outside to find what aircraft meet the needs.
Cranky: You said these are coming out of C check so these are used aircraft?
Lesley: Yes, the 72 is a -212.
Cranky: Where are they coming from?
Lesley: These two were operated by American Eagle
Cranky: And the ATR 42s?
Lesley: I don’t know yet.
Cranky: Your partner Hawaiian has recently said it would get smaller aircraft of its own and presumably start to compete with you. How do you plan to be able to compete with them?
Lesley: We’ve been in active discussion about the codeshare agreement and looking to see how we can work together to expand the agreement as recent as last week. Their media release really was very vague – they said turboprops but they gave no indication as to the timeline. We would and have always been a rational partner with Hawaiian. We want to work with them versus work against them and we have communicated that to them more than several times…. If they choose to treat us as a competitor, you know Aloha and Hawaiian coexisted in the market for many years and still maintained a rational competition there.
Cranky: Does a lot of your trafifc come from Hawaiian today?
Lesley: We have two codeshare partners, and they are not our largest. They give us a significant amount of revenue but they aren’t our largest partner.
Cranky: But it is a threat if they decide to start competing with you so you have to be ready for that.
Cranky: In 5 years, do you have a vision of how Island Air will look?
Lesley: Our business plan is not to be the biggest. It’s to operate within the state of Hawai’i, provide alternatives for travel for the communities here in Hawai’i and for visitors. We’d like to get more codeshare partners, to put Island Air out there more. That’s going to be important for us. We plan to grow, take a little bit more market share than we have today with 4 aircraft. We want to be profitable but offer a safe alternative with good frequency to the destinations people want to travel to.
Cranky: Do you have any interest in smaller aircraft or leave that to the Mokuleles and Pacific Wings of the world?
Lesley: We’ve looked at those options. For right now we’d like to focus on the ATR, the 72 and the 42 will give us two different sized aircraft…. On a 9-seat Caravan, if you look at most of the other operations, they’re non-union. If I put my union costs into a template, I’m not certain fiscally that would be a good decision. But we’ve looked at it and we haven’t discounted it. For now we’d like to concentrate on the ATRs and transition out of the Dashes. It’s a big project to do all at the same time.