Why Larry Ellison Doesn't Need Island Air Anymore

Let's travel back in time. All the way back to January 2013. Larry Elison, CEO of Oracle, had recently spent a bunch of money buying the island of Lanai and wanted to make sure visitors would still be able to get to the two Four Seasons hotels on the island. Island Air was in bad shape, with not a lot of money and Dash 8-100s that were running out of cycles and working on replacing them with worn out ex-American Eagle ATR 72s. While technically possible, jet service to the island had never been a fiscally sound thing to do (I remember Aloha advertising it at one point and Hawaiian ran a triangle route with load restricted DC-9s between Honolulu, Molokai, and Lanai) so Hawaiian 717s were unlikely to show up anytime soon. Mokulele's tiny 9-seat Cessna Caravans were likely the type of experience he wanted for the guests of his high end resorts.

So buying Island Air made some sense. The ATRs, while not a large jet, would at least provide the familiar experience of flying a regional airliner on the short interisland hop. Trying to position itself as the #2 airline probably didn't seem like a bad idea either after the failure of the much-loved Aloha and much-despised Go, a position in which Island Air pretty much was in whether they wanted it or not. A lower cost/lower fare turboprop alternative to the mainline jets had been tried before, but there was the potential to be more successful with just one big competitor (Hawaiian) rather than two (Aloha and Hawaiian). But Island Air was never seemingly able to shake the poor reputation they developed when they didn't have enough Dash 8s left to fly the schedule and once the ATRs arrived couldn't keep them flying either, resulting in delays and cancelled flights.

So Hawaiian smelled an opportunity. Go was gone, Island Air had a poor reputation, and Mokulele was too small to be relevant. They bought some ATR 42s from Europe, contracted Empire to fly them, and reentered the Molokai and Lanai markets they hadn't been able to viably serve since retiring the Dash 7. Almost immediately, freed from the obligation of providing the only regional airliner sized service to the island, Island Air dropped service to Molokai to focus on Ellison's Lanai. But with Island Air continuing to lose money and Hawaiian's ATRs not seemingly going anywhere and able to bring guests to the resorts, it makes sense for him to stop pouring money into the airline and let someone else figure out what to do with it.

Spirit Airlines Hates Its Customers

Spirit Airlines likes to charge low fares. Really low fares. Absurdly low fares. So low, that they don't cover the cost of hauling the passenger from the gate to the end of the runway. How low? Try $9. But that's apparently not low enough. Yesterday, they announced new, even lower fares. But where do you go from $9?

Of course, if you think you're really going to get to fly somewhere on an airplane for one measly penny, you'd be quite mistaken. For if there's one thing Sprit likes more than really low fares, this is it:

Fees.

Here are a few of them:

• Want to check a bag? $19 if you pay online, $25 at the airport.
• How about another bag? $25. After August 1st, it will be $45.
• Get thirsty on board the plane? $2-3
• Want to pick your seat before you check in? $7. For the middle seat.
• Rather pre-reserve a window or aisle seat? $12. $20 for the emergency exit row.
• Oh, and you actually want that $9 fare? You'll have to join their $9 Fare Club, which costs $39.95 per year.

But all of that isn't new. And much of it is being copied by other airlines, some not exactly known for having low fares in the first place. That one-penny fare also doesn't include fuel. You pay for the seat, but there's an extra fee to actually move it anywhere.

But, buried in that press release about the one-penny fare (which I'm sure Spirit was hoping would get most of the attention), was yet another new fee.

• Want to carry-on your own luggage? Free. If it fits under the seat in front of you.
• $20. If you're a member of the $9 Fare Club and you pay in advance.
• Otherwise, it's $30.
• Or $45 if you wait to pay at the gate.

That's right. For the privilege of hauling your bag through the security checkpoint by yourself (ensuring that all liquids are in 100mL containers or less in a 1-quart zip top plastic bag outside your luggage), dragging it all through the airport terminals and down the jet bridge, and hoisting it in to the overhead bin all by yourself (ok, so you might get another passenger or a flight attendant to help you with that last bit), you have to pay Spirit Airlines a fee.

I want people to pay me to do things themselves. Imagine having to tip the bellman at a hotel for not bringing your luggage to your room, or tipping the valet to park your car yourself. That's what this is.

At the same time, they're lowering the fee for the first checked bag. $15 on domestic flights and $20 on international flights; $10 more if you're not a $9 Fare Club member. So it's actually cheaper to check a bag then not. The airline is charging you more if you do something yourself than if they do it for you.

Does that make any sense? It's like if, at the gas station, the prices at the full service pumps cost less than at the self service pumps.

Actually, yes it does make sense. Spirit's COO lays it out in the press release:

“In addition to lowering fares even further, this will reduce the number of carry-on bags, which will improve inflight safety and efficiency by speeding up the boarding and deplaning process, all of which ultimately improve the overall customer experience,” says Spirit’s Chief Operating Officer Ken McKenzie. “Bring less; pay less. It’s simple.”

So, they want to reduce the number of carry-on bags. So if you charge people to do it, they won't. Simple enough.

Or is it? We have to ask the question: Why are people bringing on so many carry-on bags?

I've already answered that question. Scroll back up. I'll wait.

Ok, I'll tell you again:

• Want to check a bag? $19 if you pay online, $25 at the airport.
• How about another bag? $25. After August 1st, it will be $45.

As I predicted when American Airlines started charging for that first checked bag almost two years ago, when asked to pay a fee to check their bags, many customers will choose instead to carry them on. How do we know this is happening? Ask the flight attendants, who will tell you that passengers have been carrying on more since the airlines started charging to check bags.

So, doesn't that mean that the problem of too-many carry-ons is really the airlines' fault in the first place?

Yes.

And does it also mean that they could solve the problem by simply not charging that fee?

Yes.

But instead of reversing the move that caused the problem in the first place, Sprit has decided to solve the problem by charging yet another fee. It may work too, but not in the way Spirit is hoping.

Fewer passengers on board mean fewer carry ons, regardless of whether or not they check the bags.

So why would the company choose the customer-unfriendly option in the first place, that has the possibility of hurting its business even more?

I can draw only one conclusion:

Spirit Airlines hates its customers.

More Bad Ideas from the Airline Industry

Here's why this is a bad idea:

First, for at least the short term, checking in will take longer as people argue with the agents about the fee. Plus, there will be confusion about who pays the fee and who doesn't. Sure, they lay it out pretty clearly on their web site, but do we really expect all their front line agents to know all the details? And we know customers don't read.

Second, it will make security lines longer as more people who might have otherwise checked a bag now try to bring it through as a carry on to avoid paying the fee. People like me who would check through their liquid stuff will now have to have it as one more thing to pull out of the back and place in a separate bin along with my shoes, laptop, and sweater/coat.

Third, boarding will take longer while people try to find room for all that stuff they didn't check. People trying to stuff it in the overhead bin, figure out how to get it under their seat, and finally having to check it through anyway.

The ultra-low-cost carriers like Ryanair, Allegiant, and the late, unmissed Skybus can get away with this because their fares are so low that I actually buy the argument that they're simply operating on an a la carte model where you pay for the services you want. I have a harder time buying that argument from American, where we won't be seeing the fares going down (and most people won't notice if they keep the fares lower by doing this in lieu of simply raising fares) and their fares aren't and won't be substantially different from their competitors.

We'll Miss You

1946-2008

Inter-Island Airfares

One cannot deny that the arrival of go! in Hawaii's inter-island market has lowered airfares. What there seems to be a lot of misconceptions about is just how high fares were before Go arrived.

Our tale starts in the good old days. The standard method of purchasing inter-island travel was the coupon. These were pre-paid vouchers that were sold primarily through travel agents. You bought the coupon, and then booked your reservation. Or not. If there was an open seat, you could just show up at the airport, hand the agent a coupon, and get on the plane. You could also book your reservation by calling the airline, then buy the coupon. It didn't matter. Hawaiian had them. Aloha had them. Island Air had them (but they were more expensive). Mahalo had them. Air Molokai had them. Coupon prices fluctuated; when there was more competition (such as Mahalo being in business), prices were down. Then they'd slowly go up. Different agencies sold them at different prices (Bankoh ATMs were usually a bit more expensive, but you couldn't beat the convenience of buying one at the Bankoh ATM in the Honolulu airport on your way from your flight from the mainland to your inter-island flight. I did that once.)

As you can imagine, yield-management, the practice of controlling price and inventory so as flights get fuller, prices go up, was basically impossible.

So what happened?

The same thing that wrecked everything else in the airline industry. 9/11.

Coupons went away. In its place came yield-managed e-tickets. Actually, they had yield-managed fares for inter-island flights before, the difference was that people who knew about them went the coupon route.

For the most part, the fares were a bit higher than what coupons left off at. But not always. But what really matters here is how it forced a changed in the way island residents had to travel. Instead of being able to get on the flight for a relatively fixed price, last minute travelers would generally end up paying more, because the more popular flights would have long sold out their lower fares. To get the lower fares, it became necessary to plan ahead and/or settle for a less desirable flight time. Which is how it works everywhere else in the country. Even on Southwest. People paying $200 or more to fly on a round trip inter-island ticket didn't plan ahead or insisted on taking a more popular flight time.

All the arrival of Go did was cause the bottom end of the fare range to fall back into places it hasn't been... well, since Mahalo was around. Go still has a range of fares, though to be fair their fares top out lower than Hawaiian's or Aloha's. If you pick the more popular flight or don't plan ahead, you'll have to pay more.

If you want the $39 flight, you'll have to plan ahead and be flexible. It doesn't matter whether you're doing Las Vegas to Phoenix with Southwest or US Airways, or Honolulu to Kahului with Hawaiian or Go.

Wings of Paradise: Hawaii's Incomparable Airlines

Recently received my copy of this new book, and read it over the holiday weekend. I enjoyed it immensely, and recommend it to anyone interested in Hawaii's aviation history. Unlike some of the previous books, it covers the entire industry, rather than focusing on either Hawaiian Airlines (as in Kennedy's Hawaiian Air) or Aloha Airlines (50 Years of Aloha, published by Aloha Airlines itself). Both of these books are slanted towards the history of the airline's story they're trying to tell, such as often referring to Aloha as "Brand X" in Kennedy's Hawaiian Air. You get some of this feeling from Wings of Paradise, as well, but because it alternates between telling the story of Hawaiian, Aloha, Mid Pacific, Royal Hawaiian, Discovery, Mahalo, and others, you get a pretty balanced picture in the end.

My biggest complaint with the book is that it's a bit short on recent details. Coverage of Island Air, for example, is pretty much limited to the start as Princeville Airways, the acquisition by Aloha and name change to Aloha IslandAir, the crash on Molokai, and the final name change to Island Air, and the sale to Gavarnie Holding, though the acquiring company isn't mentioned by name in the book. Omitted from Island Air's history is the airline's brief flirtation with the Dornier Do 228 and eventual replacement of the Twin Otters with the Dash 8. It also missed the point that a contributing factor to Mahalo Air's downfall was the replacement of new ATR-42s with older examples that ended up costing the airline a lot in maintenance expenses. I can forgive omission of some of the recent events due to the lead time in book publishing, such as Island Air's planned acquisition of Q400 aircraft and details on Mesa and FlyHawaii's plans (though FlyHawaii is also not mentioned by name). But completely omitting Pacific Wings is a definite oversight.

However, one must keep in mind that it's easer to find out about more recent events, and perhaps omitting them now is reasonable course of action in favor of waiting to see how they effect the industry in the long term.

This Can't Be Good

This quote from today's Honolulu Star-Bulletin caught my attention:

Faris said he was surprised the cash-strapped airline has been able to survive this long, and agreed with Aloha that it needs to hasten its emergence from bankruptcy.

It can't be a good sign when your bankruptcy judge is surprised that you're still in business.

Another Way the Airlines Screw Passengers

A conversion my father had with a Continental Airlines gate agent yesterday lead to my realization of another way the airlines are screwing passengers. You see, the airlines have put Regional Jets on a lot of routes, not only those formerly operated by turboprop aircraft, but also those formerly operated with larger jets like 737s and DC-9s.

So why is this a problem? It's simple. There's not a lot of space for carry-on luggage in the cabin of RJs, so like on turboprops, most "carry-on" bags need to be checked. The airline will let you drop off your bag on a cart next to the aircraft, and you pick it up on another cart after the plane lands. Different airlines have different names for this. For example, Horizon Air calls it a la cart.

So how does this screw the passenger? As my father learned, the airline will not be responsible for damage to bags checked plane side. Most passengers know that fragile items should be carried on, to avoid the possibility of their items being damaged when passing through the baggage systems or as a result of rough handling by airline employees. Checking a bag plane side helps as it avoids some of the machinery, but it is still subject to rough handling when being loaded into the aircraft's cargo compartment. By using RJs instead of larger jets, the airlines force passengers who had hoped to avoid damage to fragile items by carrying them on to check them anyway, with the bonus that the airline will not pay for any damage that results.

Airlines of Hawaii

New book coming out next year, will have to keep my eyes open for this one.

Repetitively repetitive

An e-ticket confirmation e-mail I got tonight from American Airlines contained the following:

Nonrefundable tickets cannot be refunded.