The Predatory Skies

To call an airline “predatory” is a bold accusation. Nonetheless, it’s difficult to reach any other conclusion regarding Hawaii’s newest interisland airline, go!. The actions of this newcomer don’t tell the whole story. One must also consider the timing of those actions.

First, let’s look at go!’s announcement to enter the interisland market. It came while Aloha Airlines was involved in delicate negotiations with potential investors aiming to bring the airline out of Chapter 11. This timing was, of course, more than coincidence. Go! took on the job of spoiler, the villain intent on scaring away investors and then profiting from Aloha’s demise. The tactic didn’t work, and Aloha’s financial backing came through anyway. Go! chose to make good on its threat and it entered the market quickly thereafter.

Next, consider the $45 fares ($39 plus fees and taxes) which go! has brought to the interisland market. Airline analysts agree that neither go! nor its competitors can break even with such low fares. It is reasonable for a new entrant to come into a market with a low fare to capture the media’s attention and build a customer base. At some point, however, the airline needs to move on and make a profit. Go!’s insistence that these low fares remain is an indication that a prolonged period of losses will plague Hawaii’s interisland carriers.

Go!’s announced plans to acquire 8-12 large (90 seats or more) jets for the Hawaii market is noteworthy for a couple reasons. First, the startup airline has only been in business for a month and a half during the busiest tourist season, giving it no real opportunity to properly assess the potential for profitability. Second, go!’s announcement came just a few days after Israel’s invasion of Lebanon. Why in the world would an airline announce a major investment in aircraft immediately after news that unsettles financial markets and drives oil to new highs? The answer can only be that the purpose of the announcement was to undermine one or more of its competitors.

Keep in mind that Hawaii’s interisland market has been shrinking for years now. The reasons are obvious. Airlines have increased direct flights to neighbor islands and thereby eliminated many connection flights. Medical and shopping facilities on neighbor islands now eliminate many needed trips to Honolulu. As for Oahu residents taking vacations on other islands, island hotel room rates exceeding $200 a night put the kibosh on many such plans, even if air fares are reasonable. With low airfares to the mainland, a week in Las Vegas is noticeably less expensive than a week on Maui. Why then is go! planning to add an enormous number of seats to the interisland market? Such a plan only makes sense if at least one of its competitors is eliminated, and go! appears hell-bent on making this happen. Stay tuned.