Like no other

Sure, Hawaiian is a US flag carrier – the Stars and Stripes on the fuselage is proof enough of that. However, just don’t call it a US “legacy carrier”. Given Hawaii is so steeped in Asian culture, due to the islands’ historic links, the airline has evolved into one that exudes a different feeling compared to those based in Atlanta, Dallas/Fort Worth or Chicago.

Hawaiian is hoping that gives it an advantage as the airline looks west to markets in North Asia such as China, Japan, South Korea while building out its network to Australia/New Zealand.

While Hawaiian is not without competition in the markets it serves – a quick walk through Honolulu Airport on any given morning shows aircraft from any number of countries parked at the gate, not to mention those based in the US mainland – that Hawaiian authenticity and sincerity built up over 86 years of operations is difficult, and some within the airline argue, impossible to replicate.

The on-board product too reflects the nature of the Hawaii market, which is heavily dependent on leisure travellers. For example, international passengers get two checked bags included in every fare, whether at the pointy end or down the back.

And all flights between Hawaii and the US mainland, as well as international services, offer a complimentary meal in economy,

The US carrier has been keen to forge closer ties with Virgin.

making Hawaii the only US airline to serve meals on domestic flights to all passengers.

“One of the things that we focus on as a leisure carrier is [that] the design of our product. . . doesn’t start at the front of airplane and work back but it starts at the back of the airplane and works forward,” Hawaiian chief commercial officer Peter Ingram says.

“This is a leisure airline. Leisure is our business and we can’t rely on a disproportionate amount of revenue from business customers at the front of the airplane so we’ve got to make sure we give an attention to service in the main cabin.

“That is why you see things like a free meal in economy and a welcome drink upon arrival that are really unique to our carrier at a time when other carriers really treat the main cabin as an afterthought in their services. ”

Australia to grow

While currency changes and the softening of the Australian economy in recent times has held the market back a little – with visitors from this part of the world to Hawaii either staying fewer days and/or spending less, Dunkerley says he is optimistic about the local market here and hoping to be able to expand Hawaiian’s presence Down Under in the period ahead.

“There is a little bit of pause in terms of outbound growth at the moment associated with the domestic economic situation but long term we are bullish about Australia so I think for us the question is more when rather than if,” Dunkerley tells reporters during the airline’s global media day in Honolulu on October 19.

“At the moment we are not announcing any sort of firm plans, but neither are we talking down the prospect that over time we will increase services there. ” Figures from Hawaiian Tourism Authority (HTA) showed there were 252,125 Australians who visited Hawaii during the first nine months of calendar 2015, a 10. 3 per cent increase compared with the prior corresponding period. Each visitor spent an average of US$255 per day, which was down from US$269 a year ago.

“These visitors spent less on shopping and food and beverage, but more on lodging, entertainment and recreation, and transportation,” the HTA report said.

Securing more Australian visitors to the islands of Hawaii – the state is far more than just sun, sand and surf given the stunning natural beauty from rainforests to volcanoes and almost everything in between – may depend on how Hawaiian’s relationship with Virgin Australia evolves.

The US carrier has been keen to forge closer ties with Virgin in a bid to have better access to passengers beyond its two Australian gateways. Currently, Hawaiian has interline agreements on Virgin-operated flights from Sydney and Brisbane, which does allow for some connecting traffic.

Dunkerley says Hawaiian clearly would like to do more and was currently working with Virgin on that, but declined to offer too many details.

“It’s a relationship we would like to see deepen. We would like to see more traffic exchanging between us,” Dunklerley says.

“In a business where each marginal customer counts, it is always very useful to have behind the gateway feed and we would certainly like to have more of it in Australia. ” Virgin places its VA airline code on Hawaiian’s flights to Honolulu and also sells Hawaiian flights to the neighbouring islands.

Hawaiian Airlines senior vice-president for global sales and alliances Theo Panagiotoulias,who is originally from Melbourne, says Virgin is a good partner and describes the relationship as one where there is “a lot more potential we can capitalise on”.

“We both realise that we can explore it more,” Panagiotoulias tells Australian Aviation.

“We have agreed we are going to have ongoing discussions exploring on how much further we can deepen that. ” Hawaiian is also hoping to capture Australians and New Zealanders looking to have a stopover in Hawaii en route to the US mainland by taking advantage of Honolulu’s geographic location.

Although Hawaiian has Hawaii in its name and started operations as a public transport service covering Hawaii’s major islands 86 years ago – still a major focus – the airline now also serves 11 points on the US mainland, including thecountry’s longest domestic flight, a nonstop service from New York (JFK) to Honolulu.

Current schedules have flights from Brisbane and Sydney arriving in Honolulu mid-morning, allowing for excellent connecting opportunities onwards to not just Hawaiian islands such as Maui, The Big Island and Kauai, but also to the likes of Sacramento, San Jose, San Diego and Seattle on the US West Coast.

However, the flights to Brisbane and Sydney have fewer connecting opportunities given lunchtime/mid-afternoon departures from Honolulu.

While connecting passengers are typically lower yielding, the seasonality of passenger flows to Hawaii from the US mainland does allow for Hawaiian to build transfer traffic during off-peak times.

Hawaiian vice-president for revenue management and network planning Brent Overbeek says Los Angeles, San Francisco and New York are the most popular destination for Australian travellers, while secondary markets also do well.

Overbeek says there is better two-way connectivity on the Brisbane route, given the lack of an airport curfew in the Queensland capital meant the flight from Honolulu left later in the afternoon compared with Sydney.

“We are never going to be a big connector out of North Asia but certainly out of Australia, New Zealand and Tahiti, those are areas where we are the natural connecting point into the mainland and so we schedule around a time where we believe customers can conveniently connect,” Overbeek tells Australian Aviation.

Mid-morning at Honolulu Airport is the peak time for international arrivals, with the customs andimmigration hall filled to capacity during Australian Aviation’s visit to attend Hawaiian’s media day. It is estimated between 5,000 and 7,000 arriving passengers are processed every morning, with some having to wait more than an hour to get through passport control and baggage claim.

Such bottlenecks are the visible signs of growing pains at an airport catching up to build extra infrastructure in an effort to handle the increasing number of passengers.

Dunkerley says Hawaiian’s dip in on-time performance in the three months to September was due to gate shortages from airport construction works, as well some air traffic control changes.

And the British-born executive, who holds a current commercial pilot’s licence and sometimes takes employees on joy flights on board the airline’s first ever aircraft – a Bellanca CH-300 Pacemaker – goes further, believing it is going to be at least a couple of years before things get better.

“The state of the state’s airports are such that it is restricting our growth, it is limiting our ambitions,” Dunkerley says.

“Therefore we are tremendously interested in seeing improvements to the airport. We are working very closely with our colleagues in the state to bring that about. ”

Currency moves and tourist numbers

Hawaiian’s financial results for the nine months to September 30 2015 showed the airline was weathering the effects of a stronger US dollar against both the Japanese yen and Australian dollar.

The company reported net profit of US$144. 7 million for the period, up from US$57. 8 million in the prior corresponding period.

Ingram says the performance of the local Hawaiian and North American markets are strengthening.

We are a primarily leisure-based carrier catering to couples and families. MARK DUNKERLEY

However, foreign exchange and the impact of fuel surcharges and changes in markets such as Japan and South Korea had put some pressure on its international revenues, with passenger revenue per available seat mile (PRASM) on international routes suffering a “mid-teens percentage decline”.

On a positive note, demand from Hawaiian’s international markets “remains steady and growing”, which Ingram says demonstrates the resilience of Hawaii as a destination.

“Internationally, we continue to benefit from the maturing of our routes and the development of our distribution capabilities,” Ingram tells investors and media during Hawaiian’s third quarter results presentation on October 19.

Japan and Australia are Hawaiian’s two biggest overseas markets, representing about 40 per cent and 26 per cent, respectively, of the airline’s international seat capacity, according to figures from CAPA – Centre for Aviation.

“The added drag from currency and fuel surcharges is a particularly disappointing burden for Hawaiian, which was seeing positive results from its efforts to diversify its network and build strength in the trans-Pacific,” CAPA said in a research note dated November 9.

“The logic behind that network diversification strategy remains strong, and Hawaiian is rightfully taking a long-term view that building up and maintaining its trans-Pacific presence is key, once global macroeconomic conditions stabilise. ” Hawaiian’s international operations generate about a quarter of its total revenues, compared with about eight per cent in 2009.

Fleet changes

Currently, Hawaiian serves Australia with a daily flight to Sydney and four times a week to Brisbane with Airbus A330-200s that feature 18 business class recliners, 40 “extra comfort” economy class seats that included additional features such as increased legroom, amenity kits and enhanced meal service, and 236 regular economy seats for a total of 294.

Those recliners, which are starting to look and feel a bit aged given the recent advances in seat design, are being replaced with a new fully-flat business class seat due to debut in mid-2016 that Dunkerley says will “usher in a new era of premium service in Hawaii”.

“It has been designed to recognise that we are a primarily leisure-based carrier catering to couples and families travelling to the vacation of a lifetime.

“We believe this new cabin experience will cement our reputation as being the best value for money proposition to be had. ” The emphasis on having the design of the seat focus on leisure travellers highlights the airline’s target demographic of tourists heading to Hawaii, not men and women on business.

So instead of individual private pods, the mockups of the new seats, designed by Optimares andPaulWylde, showed a more open cabin laid out with three rows in a 2-2-2 configuration. Also, the airline is revamping its inflight entertainment offering in business class which will use tablet devices held in an adjustable arm.

Hawaiian is also maintaining the cabin at 18 seats, albeit the percentage of premium seating is increasing slightly given the number of extra comfort seats will rise from 40 to 68, reducing the overall seat count by 16 to 278.

The newly reconfigured aircraft will debut on a yet-to-be-revealed long-haul international route, with all 23 A330‑200s then in the fleet to have the new seats by 2017. In addition to Australia and New Zealand, Hawaiian uses the A330 to Asian destinations such as Beijing, Tokyo (Haneda) and Seoul. Further, he expects yields, or average airfares per passenger, “will likely go up” as a result of installing the new seats.

“If it is as successful as we hope it will be there may come a point where we have to think about adding extra seats, but for the time being we think 18 is the right number,” Dunkerley says.

Once completed, Hawaiian and Qantas will be the only two airlines offering fully flat business class seats on nonstop Australia-Hawaii routes, given Jetstar’s 787-8s feature recliner style seats in its “business class” cabin.

Air NZ, which currently operates Boeing 767-300ERs four times a week between Auckland and Honolulu in competition with Hawaiian’s three-times-weekly schedule on the route, has 24 recliner-style seats in a 2-2-2 configuration. There is some suggestion the Kiwi flag carrier will soon deploy 787-9 Dreamliners to Honolulu, if only during peak periods.

A330 reconfiguration begins as 717 refit almost complete

Hawaiian has also been updating its Boeing 717 fleet that operate high frequency services between the neighbouring islands, with new slimline seats that has allowed the airline to add an extra row in the main cabin, as well as new first class seats that feature an attractive leather finish.

Fourteen of the 18 717s have been completed, with the remaining four to be done by the end of the year.

The 717, a descendent of the McDonnell Douglas DC-9, remains very popular with its operators, despite being out of production since 2006. In addition to Hawaiian, major operators of the type includeDelta Air Lines, QantasLink and Spanish carrier Volotea.

The airline’s historian Captain Richard Rogers says Hawaiian received its first DC-9 in March 1966, meaning that in 2016 the airline will celebrate 50 years flying the same basic aircraft type.

Dunkerley says the 717 is ideally suited to the task of operating up to 16 cycles a day on these short inter-island flights, with no other aircraft in production today being able to do what the 717 does.

Not that there is any rush to replace Hawaiian’s 717s, given their “relatively young” age. Rather, Dunkerley, who was appointed Hawaiian chief executive in 2005, is on the lookout for more 717s.

“The airplane is based on the McDonnell Douglas DC-9, which is I think to this day the toughest commercial airplane probably ever built,” Dunkerley explains.

“Those airplanes operated for 40 years in service in North America.

“These airplanes are currently about 15 years old so they’ve got from this point onwards seemingly an almost endless life. ” The non-aligned carrier will induct a new fleet type in 2017 when the first of 16 Airbus A321neos on order arrive.

Dunkerley says the A321neo will fly to the US West Coast and serve three purposes – partly as asubstitution for Hawaiian’s fleet of eight Boeing 767-300ERs which are gradually being retired, partly to replace some A330 services and allow the Airbus widebody twin to be deployed on other North America and Pacific rim routes, and partly for growth.

For example, an A330 flight from Honolulu to the US west coast could be replaced by two A321neo services, one from Honolulu and one from Maui.

In addition to a firm order for 16 A321neos, Hawaiian also has options for a further nine of the type, which are expected to be configured with about 190 seats.

The airline also has six firm orders and six options for A330-800neos, which Dunkerley says are due to arrive from 2019 onwards.

Low-cost wave about to reach Hawaiian shores

While Hawaiian has battled Qantas’s low-cost unit Jetstar, and to a lesser extent Air NZ given the Kiwi flag carrier uses its Seats to Suit fare structure for its Honolulu services where passengers pay extra for checked luggage, meals and other amenities, a fresh onslaught of budget airlines is predicted to be arriving soon.

Malaysia-based AirAsia X has made noises about serving Honolulu from its Kuala Lumpur hub with a one-stop offering via Osaka (Kansai). From the Philippines, Cebu Pacific could be touching down in early 2016. And NokScoot, a partnership between Thai-based Nok Air and Singapore’s Scoot, could be in a position to have service to Honolulu in two years.

Dunkerley says Hawaiian’s combination of product – such as included checked baggage allowance and meals in economy, as well as other amenities such as a blanket and pillow – and cost base worked very well in the Hawaii market, and going up against Jetstar has “forced us to really think about what our product is and what our price point is”.

“We already compete with long-haul LCCs in the form of Jetstar and Australia has been a very successful market for us,” Dunkerley says.

“What we’ve discovered is that people coming to Hawaii on vacation aren’t looking necessarily for just the cheapest ticket they can find. They have a very keen appreciation of value for money.

“There are some things that they value on a long-haul leisure destination and they are things that in general Hawaiian provides.

“As we project out into the future we’ve got a lot of confidence in our ability to meet our competitors whether they be full-cost, legacy airlines or LCCs. ”