Smaller Airlines Strike Back

The Hawaii interisland fare war has recently expanded to include smaller islands Molokai and Lanai, served by mid-sized airline Island Air and smaller carriers such as Pacific Wings. Pacific Wings has just announced plans to create a low-fare division and offer $29 fares on all nine seats of its Cessna Caravan aircraft. And away we go with another fare war!

What would motivate Pacific Wings to cut its prices on these routes? The most likely answer is that it sees someone else preparing to offer lower fares on those routes, and it wants to be first out of the blocks with the discounted air travel. Let’s face it, the first airline to announce lower fares gets all the press coverage. Those who match fares only get a few words of newsprint. Perhaps Go! Express is the most likely airline to press for lower fares when they introduce their own nine-passenger Caravans. Your comments on this competition are welcomed since I hope to gain a better grasp of the dynamics.

Meanwhile, Island Air not only has been jostled by the go! fare war, it now must deal with a fare war on its bread-and-butter routes, as well. Island Air responded with a slightly lower fare (after taxes and fees are figured in) for nine seats of each aircraft serving those destinations. This is probably a reasonable response given that many travelers will still prefer the larger, twin-engined, two-man crew Dash-8s, even at a somewhat higher price. Island Air can use this model to gauge the market and make adjustments later, if necessary.

As for Pacific Wings, it has been a rather lively player in this invasion of Hawaiian airspace by go! and the pending arrival of go! express. Pacific Wings has announced plans to fly certain Hawaii routes to smaller communities such as Hana without a federal essential air service subsidy. This strategy removes the ability for other airlines to request subsidies for the same service. Now Pacific Wings has announced plans to provide air service to various New Mexico communities in the heart Mesa Air Group country. If Mesa is going to unleash devastating below-cost fare wars in Hawaii, then Pacific Wings sees that a little turnabout is fair play. Its nine-passenger Caravans can serve cities without the subsidies that larger aircraft require, such as Mesa’s Beech 1900s. So, Pacific Wings plans to remove a few potentially-profitable destinations from Mesa’s backyard. Stay tuned.