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.

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.

Honolulu Still Doesn't Get It

From the Honolulu Star-Bulletin:

He learned from City Council members that widening the entire roadway means a speed-limit reduction from 45 mph to 35 mph.

Let's see: Traffic congestion on Fort Weaver Road is a problem, so we'll add another lane. Good. But we'll also lower the speed limit.

Um, yeah. That makes sense.

In my opinion as a driver who learned to drive in Southern California, Hawaii's speed limits are already lower than they should be, and the cynic in me assumes that it is to generate additional revenue from speeding tickets. Whenever there is any sort of traffic accident in Hawaii, the media will nearly always say something along the lines of "speed may have been a factor."

Get over it already. Hawaii drivers aren't bad drivers because they drive too fast, they are bad drivers because the driver's education system in Hawaii is bad. Speed doesn't cause accidents, speed differences do.

Ba-Le in the Star-Bulletin

The Honolulu Star-Bulletin has an article today about the sandwiches at Ba-Le. Now I know they're called Bahn mi. And they are very yummy, however I wish more locations carried the teri beef sandwich, in my experience the one on Nimitz Highway near the airport is the only one that has them consistently.

Too bad it's 2,600 miles away...

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.

Airlines of Hawaii

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