It has been anticipated for years, and as of yesterday, Southwest has finally started selling tickets for its first Hawai’i flights. Even though this is only the beginning of the airline’s service rollout, there is a lot we can glean from this.
Flying Soon > Flying Profitably
It took Southwest a long time to get all the government approvals, but it was only about a week ago that the final sign-off came through. Some airlines might have looked at that and said, “Ok, summer is high season, so let’s just start flying in June and give ourselves plenty of time to sell those seats at a good fare.” But Southwest went with a different strategy.
It is less than two weeks between the day that Southwest started selling and the day it will have its first flight. Oakland to Honolulu begins on March 17 with Oakland to Kahului (Maui) coming April 7. Honolulu to Kahului begins April 28, then San Jose gets Honolulu on May 5. Honolulu to Kona starts May 12 and finally San Jose goes to Kahului (Maui) May 26. That’s it for the first round of service, but more is coming.
With such a short ramp-up, Southwest had no choice but to try to fill the planes with low fares and generate some buzz to put butts in seats. It went REALLY low with fares starting at $49 one way, and the seats sold out very quickly.
Why go with this strategy to fly money-losing flights? Well, there are two reasons. First, it’s great press. It helps drive home the idea that Southwest is the low-fare leader even when that doesn’t always match reality anymore. This was a great marketing opportunity, and Southwest swung for the fences. Second, fixed costs are already there. Southwest has had its terminal space built and employees hired for some time. If you have to pay them, you might as well start giving them a job to do.
No Redeyes to Help the East, But More Options for the West
Redeyes would be the obvious way to serve the Eastern half of the US, but Southwest still can’t handle that. So if you live east of the Rockies, this won’t be for you. Instead, Southwest has gone with two basic time banks that will serve both the local California markets as well as connections in the West.
Southwest has the traditional West Coast-Hawai’i schedule: morning flights out and afternoon returns. With flights leaving between 8 and 9, they will be almost entirely filled with people who aren’t connecting. There are only a couple markets that can connect, like Los Angeles or Vegas, so there will be some. But for most, it’s not an option. On the return, it’s the same. With flights arriving just before 9pm back in California, there are very few markets that will have connecting options.
The second flight is on a much stranger schedule. It’s an evening westbound flight which will allow connections from just about anywhere in the US. That’s not a surprise. But the return is timed oddly. Instead of an early morning return which might open up more connections, the flights will leave mid-morning and get back around 6pm. That means there will be plenty of people who can fly westbound but not east on Southwest if they want to go to Hawai’i.
This appears to be the standard pattern that Southwest will use for flights. One day it will get its act together and fly redeyes, but until that day happens, much of the network is going to be off limits.
Last Minute Fares
When I spoke with Andrew Watterson at Southwest last year, he compared San Diego-Honolulu with San Diego-Baltimore, noting that the fares in the former were higher than the latter. And the latter performed well for Southwest, so that was a good sign.
Of course, the markets are different. There is less last minute traffic in a market like Honolulu than in Baltimore. That’s why Hawaiian markets tend to have higher advance purchase fares and lower last minute fares. They concentrate closer to the middle since there aren’t as many high last minute fares to offset low promo deals.
I figured Southwest would also have lower last minute fares in the Hawaiian market, but that appears to be wrong, at least from a fare structure standpoint. The Anytime fare for Southwest is $604 in Oakland-Baltimore and $599 in Oakland-Honolulu. So it appears to be about the same. This is lower than the highest last minute fares on other airlines, but it’s not any different than other Southwest markets.
The filed fares below that top level do seem to be higher in Honolulu than Baltimore, once you get beyond all the promo noise. Of course, none of that really matters since it all depends upon the inventory Southwest makes available at each fare level. Southwest could have low Wanna Get Away fares available at the last minute for a fraction of the Anytime price. It’s too early to know that yet.
Neighbor Island Flights Have an Uphill Battle
Southwest has also rolled out its first neighbor island flights, and so far we see four daily in both Honolulu to Kahului (Maui) and Honolulu to Kona. As expected, Southwest will rotate airplanes from the mainland into the neighbor island network for a brief period and then send them back to the mainland. I’m sure as Southwest rolls out more flights, that patterns will change, but the basic idea of rotating airplanes through is likely to hold.
Interestingly, Southwest seems to have a 45 minute turn time on these flights which seems fairly long for a neighbor island turn. But that’s probably just how the schedule came together.
What I find strange about all this is that Southwest appears to have scheduled neighbor island flying around aircraft utilization and not around when demand exists. The bulk of tourists flying between the islands prefer the mid-day time period. Yet Southwest only has half of its flights between mid-morning and mid-afternoon. The rest are early morning or evening. That might appeal to locals, but locals also like having the ability to just get on a plane when their work is done. Hawaiian flies a mind-numbing number of times in those markets and will have a huge advantage in that sense.
Presumably Hawaiian is going to watch this closely, and it wouldn’t surprise me if flights at times in the morning and evening that are similar to Southwest’s end up getting matching fares. Southwest is going to have to fill up 175 seats with infrequent service. While I expect a bottomless pit of demand on the mid-day runs, I’ll be very curious to see if it can get much traction outside those times.
In markets like Honolulu-Kahului, if Southwest wants to seriously compete for locals, four flights a day isn’t enough. I imagine as the airline ramps up flights from California, we’ll see more neighbor island flying in these markets. But how many flights Southwest can add with so many seats on those airplanes remains to be seen.
A Bad Day for Alaska
Surely this isn’t a great day for Hawaiian Airlines. More capacity and lower fares are now flooding some of its main neighbor island markets. Even though Hawaiian still holds a huge schedule and loyalty advantage, it’s concerning. But at least to California, the cities where Southwest flies are more secondary markets for Hawaiian Airlines. The same can’t be said for Alaska Airlines.
Alaska has built up Hawai’i over the last several years, but its bread and butter has been in markets where Southwest will now overlap. That’s going to be a big increase in capacity, so fares have to come down. Southwest has already declared war against Alaska (without using the airline’s name) within California. This just opens up a new front in that war. If Southwest wants to win, it can. This is a bigger chunk of Alaska’s network than it is Southwest’s. Of course, Alaska has known this was coming for a long time, but it still has to hurt. For those in these secondary California airports, get ready for sustained fare wars for a long time, especially outside of summer.
