Name:
Location: Kailua, Hawaii, United States

Peter Forman is the author of Wings of Paradise, Hawaii's Incomparable Airlines, a 400 page hardcover available online at www.airlinesofhawaii.com .

Sunday, February 18, 2007





Selling The Myth

Here we go! again with another $29 fare war on Hawaii interisland routes. This time it’s different, because we better understand the story.

When go! entered the interisland market in June of 2006, this division of Mesa Air Group offered introductory $39 fares, claiming that Aloha and Hawaiian Airlines had been overcharging the good people of Hawaii. To prove its point, go! dropped the fare even lower and vowed that it would always offer a $39 price tag on at least some of its tickets. The airline sought to convince consumers that long-term savings awaited them if they embraced the new airline, and this enormous discrepancy in before and after fares would drive home their point. Nonetheless, a series of revelations soured customers to go!’s claims.

First came the veracity issues. The airline operates many routes on the mainland, but it has never been known as a low-fare airline. Further, during court actions, emails between a top Mesa official and their advisor spoke of not being able to turn a profit unless Aloha Airlines was eliminated and that Mesa should enter the market and give Aloha the final push. After that, fares would be elevated. Mesa no longer looked like the benevolent airline they made themselves out to be.

Economics became an issue as well. Most consumers realized early on that the $19, $29, and $39 fares were below cost. What really raised eyebrows was a report by Sabre Airline Solutions (commissioned by Aloha Airlines) reporting that with 62% of seats full, the cost of providing a typical interisland ticket were $50 for Aloha, $55 for Hawaiian, and $67 for go!. Here was go! not only selling tickets below cost, but trying to eliminate Aloha, the lowest-cost provider in the market.

Other issues also began to dog go!. For years, Hawaiian Airlines held the spot of honor as this country’s most on-time airline. In the past two months, Aloha not only displaced Hawaiian from the top spot, but also won accolades for having the lowest rate of consumer complaints. So, if go! eliminated Aloha, it would be taking out not only the lowest-cost carrier in Hawaii but also the airline offering the most reliable service in the United States. It didn’t make sense. Other airlines such as Island Air began laying off workers and the extent of the damage to Hawaii’s air carriers began to sink in.

There is another reason for Aloha’s resilience, and it is something which Mesa Air Group officials likely never anticipated. When Aloha began service in 1946 as Trans Pacific Airlines, it was a big player in a social revolution. Most businesses in the early 1940s treated Hawaii’s Japanese, Chinese, and Filipino residents as second-class citizens. Aloha was founded by a local businessman of Chinese descent who offered an airline where every customer was treated as an equal. Aloha’s success played a crucial role in reshaping Hawaii’s social fabric, and many older residents of this state have never forgotten Aloha’s place in history. Consequently, when Aloha and Hawaiian match fares with go!, each of the two established carriers can outsell this newcomer by a factor of about four to one. Go! could lower its costs by introducing larger jets, but right now that move makes no sense because go! cannot even fill its smaller jets.

When it came on the scene in 2006, go! boasted enormous staying power. Much has changed there as well. At the time, Mesa expected an annual profit of some $100 million dollars. Profits are now a pale fraction of that amount, owing to losses in Hawaii and, more importantly, to reduced profits on the mainland operation. Mesa makes the vast majority of its money by contracting with large airlines to provide regional aircraft and crews to operate them. The turmoil in the airline industry following 9/11 worked in Mesa’s favor, because aircraft and crews could be obtained at less expense than during good times. The airline industry in the U.S. has finally pulled itself together at a time when many Mesa crews are jumping ship to fly for higher-paying airlines or abandoning the airline business altogether. The net result is that Mesa’s core business has serious issues to deal with in the coming years, Mesa will see upward pressure on its costs, and the company no longer has the luxury of funding its losses in Hawaii indefinitely.

Go! has once again lowered ticket prices to $29. Since it has offered this price before, the company already knows that demand will not increase sufficiently to offset the price cut. At this point, the cut is mostly a means of sliding bamboo under its competitors’ fingernails. Will Aloha pack up and give go! the opening it’s looking for? Not likely. Go! will continue to sell the myth of long-term, ridiculously-low fares to a small number of Hawaii residents, but the majority aren’t biting. Hawaii residents are a more akamai group of consumers than Mesa Air Group anticipated. Ultimately, the facts outweigh the hype.

4 Comments:

Blogger Travelguy said...

Bro, I'm sorry, but as an educated writer/journalist covering the Hawaii travel scene I had to speak up. Your comments are so slanted and phoney, it's unbelievable. I couldn't even read the first blog entry without laughing aloud.
Let me again state that I have no allegance to go!: I don't have any allegance to any airline within the state of Hawaii. Carriers serve one purpose: To get us from A to B without incident, in a timely fashion, and at affordable prices.
To start, Hawaiian and ESPECIALLY Aloha Airlines fail to meet the second two of those qualifications. Again, speaking as a neutral journalist who just wants to get from A to B; the last two times I flew Aloha, the planes departed 25 minutes late (For a 20 minute flight, mind you) and upon arrival after one of those flights, I had to wait 45 minutes for my checked backpack--which simply held my liquids that didn't fit in the FAA regulated bags. So rediculous. Know what I did? I sent an email to Aloha's head of marketing and asked them if they were folding soon. I had heard rumors that they had cut back on staff due to fiscal crunch--and you know what he said? Nothing. No answer. What marketing director doesn't answer a question from a journalist as to whether the airline is in fiscal trouble? One who is hiding that the company is in fact on the brink of closing.
So tired of all you pseudo-old schoolers crying wolf over the entry of an airline that does nothing but rectify the pricing structure, and allow us to visit our friends and loved ones for prices that we haven't seen since th mid-80's.
Quit your whining and fly interisland! go! is not the devil, you're incessant whining is!

8:17 PM  
Blogger Peter Forman said...

Dear Travelguy,
You claim to be a journalist. If so, would you please respond and forward links to stories you have published. You obviously wish to defend go!, and if you can back your view with facts, you can surely sell stories to local publications.

What I see lacking, besides proof that you are indeed a journalist, are facts to back up your position. You write an anecdote here about traveling on a delayed flight with Aloha. Are we to surmise that Aloha didn't really win the #1 on-time US airline rating for the past two months? Also, if you're such a proponent of go!, why were you traveling on Aloha in the first place? Go!'s planes are barely half full. Surely you could have purchased a ticket on them.

If you can provide logical arguments for your position, backed with facts, we can continue an intelligent debate here. If you wish to engage in a juvenile flamefest, then I'm not interested. Your choice. By the way, I have no vested interest in either Hawaiian or Aloha Airlines.
Peter Forman- real name

9:30 PM  
Blogger Traveling Guy said...

Gentlemen,

I find this entire thing to be quite interesting. But, I will agree that some of what Peter wrote is self serving but, there is also a lot of truth.

Is Mesa/Go making money? No! They are losing money in Hawaii, on the UA contract and recently dropped the DL contract.

The recent departure from the EAS markets by Air Midwest is the preliminary step they are making to raise money by selling Air Midwest to Gulfstream International Airlines in Florida (A Continental Connection partner whom flies within Florida and to the Bahamas).

The cost of operating an aircraft is not voodoo and at the end of the day most of the costs (to operate safely and by the book) are relatively the same. The US Dept of Transportation publishes the costs to operate on their website in reports that show each carriers costs on each type.

At the end of the day Go! is not making money and cannot until they get the average fare up around $75-85

If they want to burn money that is fine but, Peter has a valid point.

The fools like "Travelguy" who buy in and legitimize are the same idiots who cry when the competitor is lost and the fares move higher then they were before.

He also seems to judge an airline based on one incident. Not very smart.

Sadly, In this country we have lost the loyality and all that counts is how much I can save now.

I personally do NOT like Aloha. The planes are old and they are indifferent. Hawaiian is better but both could use some attitude adjustments. At least with Hawaiian I get a decent 717 that is roomy, comfortable, and new.

Go flys CRJ200s they are Ok but I would prefer the 717 anyday. The CRJs are also older then the 717s so another point to Hawaiian.

If someone seriously wanted to start a cost effective airline in Hawaii then Island Air would have the lead. The Dash-8-400 is the lowest cost per seat of any of the equipment being flown by any of the carriers.

Sadly, they are also the least capitalized and they would need some $$$ to stick it out.

Pacific Wings is a decent operation but again how long can they continue without $$$.

Mokulele actually has some $$$ behind them and I would be a little worried if I were Greg and crowd at Pacific Wings. They are again a mainland enterprise gone Hawaii. The guy behind them was a ramper at Alaska airlines till he invented the Digi Player and cashed out. Unlike most airlines they own their planes for $$$ paid at delivery and they have no debt to service or lease payments to make. Certainly gives a bonus in operating costs to them. The depreciation will make a nice tax write off and the association with Go! eliminates the need for reservations, clearinghouse and other expenses that they would normally need.

Go! also recently won the federal contract for interisland travel in Hawaii meaning all federal employees will be flying Go! and its affiliates.

Mesa is one of the least desireable airlines in my opinion and Go! is Mesa. They have issues with employees, maintenance and other items according to my own independent searchs of google. I for one will stick with Hawaiian and on occasion Pacific Wings. If they would give me a later flight out of Honolulu to the islands to connect to my Continental flight I would be even happier. But, I have no problem paying for the service I recieve and that means even if it costs $75-100 bucks. At least I get a plane that is maintained, comfortable, and hopefully (if anyone pays attention) a staff that cares.

8:51 AM  
Blogger Freedom of Competition said...

Sorry Pete. I'm with the travelguy on this one. Your Q&A are basically set up by you looking at the mirror. You are very bias. If you have no interest at all on this airline war, please accept my apologies. In my opinion, it seems very clear.

By the way, what is the opinion of the hawaiian people? Their opinion should count, right? This seems to be so similar kind of treatment of Wal-Mart's entry. The high cost of living in Hawaii is legendary. Wal-Mart should be punished for cutting down the cost. The same for Costco.

Anything from the mainland is tainted with greedy black suited bad man. Unless you are a tourist with whom Hawaiian businesses can charge high and (over) use the "valid" excuse of the cost of freight.

As for the other gentleman, claiming no maintenance by Go! How long Mesa had been in business? Early 90s? Oh yeah early 80s. Man they must had crashes at least once a year.

Competition is what we have to learn in this global economy. Go! will start charging high fares once it eliminates the competition?
I do not think so. Freedom. There that's another word since another competition will jump in to put Go! out of business. By then Go! will be the hero for you.

5:06 PM  

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