Mar
31
Complex impact from Aloha shutdown
Filed Under Sunrise on KGMB9 | 1 Comment
The twilight of Aloha Airlines, if it cannot be halted or undone rapidly, will affect the whole state.
For example, there are 500 Aloha employees on Maui, where it is the 11th largest employer. Almost 2,000 employees statewide face layoff even though the cargo operations are continuing.
Gov. Lingle injected an interesting note Sunday evening when she announced she will ask the bankruptcy judge to order Aloha NOT to shut down until it can show it has exhausted all options.
She alluded indirectly to a state law requiring more notice of major layoffs than Aloha has given. But since federal law supercedes state law it would be wise not to assume will automatically save the day.
Sources close to the situation say what was different this time, as opposed to the last bankruptcy, is that the capital markets are tighter as a result of the mortgage default crisis, so potential white knights can’t access cash as easily as before.
In other words, what was different this time was not anything different about Aloha but something different about the rest of the world.
Aloha wasn’t much changed. Sure, its aging fleet is even more senior than before, and soaring jet fuel prices made that an even bigger deal than formerly, but in many respects the airline operates more economically and efficiently than before. And let’s not forget the very real possibility of a substantial monetary judgment if it won its pending lawsuit against go! parent Mesa Air.
Mar
30
If Aloha is unable to find sufficient funds to relaunch its service, who benefits?
A little-known fact about the interisland fare war is that go! took a lot of its market share from Aloha Airlines, while Hawaiian Airlines held onto substantially all of its own market share. With higher labor costs but more fuel-efficient jets than Aloha, Hawaiian can afford to add interisland capacity.
On Sunday afternoon, CEO Mark Dunkerley announced he was adding 6,000 extra interisland seats effective Tuesday — a combination of more flights by the existing interisland fleet and putting one wide-body jetliner into interisland service — to accommodate stranded Aloha passengers.
But that still leaves open the question of what Hawaiian will do in the longer term. It’s not economical to leave a wide-body jet in interisland service forever.
Hawaiian might be content to fill up its remaining seats and leave the rest of Aloha’s interisland traffic to go! and smaller carriers. If it works that way, there could be a little more traffic for go!, Island Air, Pacific Wings and go!Express, while all of them plus Hawaiian could afford to charge more. It wouldn’t necessarily the partially-free ride we’ve had in the fare war, but you might see incremental increases to cover more of the soaring fuel bill.
Jet fuel is an even bigger chunk of interisland flying than long distance flying because most fuel is used taking off, regardless of the length of a flight.
For trans-Pacific service, Hawaiian has an opportunity to pick up some Aloha capacity, but not everywhere.
Take Los Angeles. Hawaiian flies to LAX in competition with virtually every major mainland carrier, while Aloha has flown to John Wayne International Airport in Orange County. I always enjoyed flying that route because John Wayne is never too busy and can walk across the street to your rental car. But Hawaiian’s jets are too big for the runway.
San Diego might be a better opportunity. Hawaiian flies there already but could add capacity to make up for the loss of Aloha, in a healthy market where tourism officials could probably develop more visitor traffic.
Aloha has also served Reno by extending its flights to other cities. I don’t know much about the Reno airport or market but it seemed like Aloha never prospered enough there to maintain direct service.
In his Sunday news conference, asked directly if he was considering expanding to corridors served only by Aloha, Dunkerley replied that he’s not focused on that at the moment but he made a point of mentioning that Hawaiian flies to other cities not far from Aloha markets.
That’s true. Hawaiian doesn’t fly to Orange County but it flies to LAX. It doesn’t fly to Oakland but it flies to SFO and San Jose. It doesn’t fly to Reno but it flies to Sacramento.
Dunkerley has always struck me as a complex thinker. I think he has thought this out, several moves ahead. And I think he has no firm view on what to do, and won’t, until he has a key piece of information: what it would cost him to lease an extra jet or two. And not from Aloha, since those planes are thirsty ones.
Mar
28
Auwe! Aloha to cease operations
Filed Under Sunrise on KGMB9 | Leave a Comment
- Jet fuel has risen by two thirds in the past year.
- Aloha has an older fleet — gas guzzlers, in other words.
- Mesa Air, parent of go!, continues to wage the fare war that, according to an email by its former chief financial officer, may have been designed to produce precisely this result.
Aloha had these things going for it:
- Its mainland routes are mostly successful and could be profitable even at current fuel prices with more fuel-efficient jets.
- It has enormous brand loyalty in Hawaii and among Hawaii ex-pats on the mainland. Aloha was founded by ethnic Asians at a time when Hawaiian bumped some people for others, and this led to some family loyalty that exists to this day.
- While others have spoken of the contracting interisland market, the fact remains that there is enough interisland business to support two carriers if, again, the jets are fuel-efficient. Some people just won’t fly smaller aircraft between islands and are not lured by go!, Island Air or other players at any price.
- Later in the year it has a suit against Mesa, which already lost an $80 million judgment against Hawaiian. Aloha could use the same evidence Hawaiian found, including the smoking gun email, which, while described at one point as a joke, was backed up by charts and graphs showing how to use Mesa’s deeper pockets to muscle Aloha to the sidelines. (The eventual judgement could even be larger than $80 million since the judge refused to award damages for current or future operations, only for demonstrable predatory pricing going back in time.)
- Aloha is second only to Hawaiian as the most on-time airline in the republic, and has the lowest complaint ratio of any airline.
Other media have recommended against what they called a state bailout for Aloha, but two points should be made. First, the state bailed out Hawaiian Airlines with loan guarantees not so long ago, so it would have been unfair not to extend similar assistance to Aloha, not for its sake but in the enlightened self-interest of saving 3,500 jobs.
Second, a key bit of assistance that the legislature was moving to offer — and it needs to be said, the legislature was really moving quite rapidly, even if it proved not fast enough — was merely to level the playing field in one key respect. Current law taxes interisland jet fuel but not jet fuel expended to fly out-of-state; exempting interisland fuel from taxation makes economic sense for an archipelago state.
Even now I wouldn’t rule out a relaunch of Aloha by a new owner using more fuel-efficient jets. I haven’t looked into their economic ability to manage such a deal this year but from an operational point of view it would be interesting to see such a deal with Southwest, Alaska or JetBlue. I would add JAL, ANA or even Qantas, KAL or PAL, but there is a U.S. law barring majority ownership of a U.S. airline by foreign interests.
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