The interisland market in Hawai’i is one that has seen years of shifting alliances, remarkable drama, and rarely… calm. But one thing that has stood the test of time is that it nearly always settles into a duopoly. With Hawaiian and Mokulele now signing an interline agreement, it appears to be getting back into that comfortable space once again as Hawaiian focuses it competitive spirit almost entirely on Southwest.

The news of the new interline agreement is really just the culmination of a long history, so that’s where I’ll spend the bulk of this post.

The closest thing to a steady state in the interisland market was when Hawaiian and Aloha jointly ruled the skies. Hawaiian started flying way back in 1929 while Aloha came along just after World War II. They developed a comfortable domination of the interisland market for many years.

At various times, random startups would come in, trying to make a name for themselves. There was Mid Pacific in the 1980s, Discovery and Mahalo in the 1990s, and then the 2000s got really nutty. But none of them ever lasted.

I went into Cirium T100 data going back to 1990 to show you what the lay of the land has been like for the last 30 years, so you can get a sense of the madness.

Seats by Airline by Year – Hawai’i Interisland Market

In 1990, you can see that both Aloha and Hawaiian dominated, but there was also a healthy amount of flying from mainland carriers. These were just extensions of mainland flights — for example, LA – Honolulu – Kahului. It wasn’t meant for the local market, but it added a lot of seats anyway thanks to the big widebodies flying the routes at the time. That flying was nearly gone by the turn of the century once airlines realized they could start flying lower capacity narrowbodies nonstop to the neighbor islands from the mainland instead of routing via Honolulu.

While Hawaiian had a small but rapidly growing longer-haul network, Aloha did not have anything meaningful until the last few years of its life. The big business for both of them was serving everything in the interisland markets. That plan narrowed as the airlines focused on bigger airplanes. Hawaiian ditched its old Dash-7 props in 1994 and Aloha divested what was then called Aloha Island Air flying Dash-6 and later Q400 props in 2003. That meant neither airline could serve the smallest markets in the islands.

This planted the seeds for the commuter market to grow, primarily with 9-seaters that could serve these places with high frequency. First it was Pacific Wings and then Mokulele and Makani Kai that came to fill the need. Pacific Wings failed in 2013, but Mokulele was is in for the long haul, cementing its position when it acquired Makani Kai in 2020 to become the only notable commuter. (The airline is now owned by Southern Airways Express.)

But I’m getting ahead of myself here. It was in the mid-2000s when all hell broke loose. Hawaiian and Aloha both filed for bankruptcy protection. Mesa Air Group saw that as an opportunity, so it pretended it wanted to buy Aloha out of bankruptcy, used all of its proprietary data, and then started its own airline called go! in 2005. This pushed Aloha over the edge in 2008 when it shut down for good. Go! even had the gall to try to take the Aloha name for its own operation, but it was blocked from doing so just out of general disgust from the court.

Having go! was never a good idea, but it sure tanked fares despite not having that many seats. In fact, the low fares go! had to file to fill its small planes shows just how much over capacity the state was when Aloha was alive.

In the wake of Aloha’s failure, interisland capacity plunged from more than 8 million seats in 2000 to under 5 million just a few years later. What we’ve learned since that time is that 8 million was and still is way too much. There really wasn’t room for two major players in the interisland market, but at the same time, travelers always wanted to have someone providing a check against Hawaiian having a monopoly.

While go! was circling the drain, Mokulele was getting big ideas. First, it began flying as go!Express to try to get some feed advantages in 2007. Then airline then contracted with Republic to fly Embraer 170s interisland under the Mokulele name to compete with go!. After, Republic took a stake in Mokulele and the whole thing blew up spectacularly, Mokulele then linked up with go! to form the awfully-named go! Mokulele as a joint venture in 2009. That ended in 2011. The point of all this is that over the years, Mokulele has had big ideas and has certainly made some moves that would make Hawaiian consider the airline competition.

In 2014, go! finally failed and everyone celebrated. That same year, Hawaiian decided to move into Mokulele’s prime market by creating ‘Ohana by Hawaiian to serve the smaller markets in the state. The airline eventually went into Molokai, Lānaʻi, and Kapalua in West Maui to compete with the commuters. Again, Hawaiian and Mokulele were going head-to-head.

Meanwhile, the lack of stability in the interisland world continued. Island Air had been focusing on Lānaʻi after a stint being owned by Larry Ellison — owner of the island as well — but it then tried to move into some of the bigger markets with its turboprops to make up for the loss of go!. That didn’t work, and the airline died in 2017.

At that point, Hawaiian was at the height of its market power. It had a monopoly in the big interisland markets, and it only had to deal with the commuters in the small markets where ‘Ohana could provide much more capacity in a single flight. But then Hawaiian’s fortunes turned.

Southwest made the move into Hawai’i in 2019 and as part of the plan, the airline announced widespread flying in interisland markets, creating another competitor to Hawaiian once again and one with deep pockets that wouldn’t go away quickly.

Meanwhile in the smaller markets, Hawaiian made the decision at the dawn of the pandemic to walk away from ‘Ohana completely. That meant it would abandon smaller markets where its jets couldn’t fly. It worked closely with Mokulele, even giving some of its materials and tools to Mokulele at the airports to help the airline serve those with special needs.

And that created an opportunity for the airlines to finally become friendly. If we look at the overlap between Hawaiian and Mokulele, it has most certainly changed.

All of the competition in Honolulu is gone. There is just some overlap between Maui and the Big Island now, and it’s not really all that competitive of a market anyway. So, after years of seeing each other as competitors, the reality is fundamentally different.

That’s how we got to where we are today. Hawaiian and Mokulele have now agreed to an interline agreement. It’s a very basic level of connectivity at this point, but it at least allows someone to purchase a ticket from, say, Los Angeles to Molokai.

Now that Hawaiian is solely focused on Southwest as a big, threatening competitor, it makes sense to partner with Mokulele to help serve the piece of the market that Southwest does not.