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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 .

Tuesday, May 29, 2007







$9 Fares Anyone?


Have you ever seen a fare war where the winner is the company that sells THE LEAST number of tickets? Hawaii's inter-island travelers are witnessing just such a sale over the Memorial Day weekend.


Go! Airlines, a division of Mesa Air Group (Nasdaq:MESA), has once again shaken up Hawaii's inter-island airfares with a $9 ticket, but this time it is during peak summer months. The airline cannot possibly make money with these fares, and the big question for this sale is Why?


The only way that the sale could have proven financially advantageous on its own merits is if the number of tickets sold was severely restricted and the sale drove consumers to go!'s website, where they might buy higher-priced tickets. Such looked like the case on Monday, when I took a look and could not find a single $9 ticket available. But wait, on Tuesday a new batch of $9 fares resurfaced on the website.


In theory, an airline can make money with a $9 fare if it sells these tickets only to customers traveling on flights which would have had empty seats anyway. The airline also steals customers from its rivals and inflicts financial pain. Unfortunately, the airline selling $9 tickets is stealing customers from itself, as well. Those who normally travel on go! will opt for a $9 fare instead of the $39 fare they planned to purchase in the near future. The net result? A loss in revenue even though more tickets are sold.


This fare war was a test of sorts for Hawaiian and Aloha Airlines, to see if they'd be sucked into the lunacy of selling $9 fares during the busy summer months. From what I can see, Hawaiian and Aloha only offered a limited number of tickets.


Why then is go! offering this sale? The sales team at go! has recently seen changes, and no doubt the new team wants to prove that they have something new to offer. Another incentive is that Mesa's attempt to break into the Hawaii inter-island market has not been going well. The airline has only been able to sell less than two-thirds of their seats at prices which would require more than a full load just to break even. By selling these $9 tickets, go! will likely experience an upward bump in traffic. Mesa's CEO can then go to his board of directors and say, “See, the numbers are picking up, Hawaii loves us!”. Never mind that the fare makes no financial sense whatsoever, these are non-standard business tactics we're witnessing. And of course there's the most obvious reason: Mesa is playing the spoiler, trying to weaken Aloha and Hawaiian Airlines by poisoning the fare structure of the year's most profitable months.

5 Comments:

Blogger no more lies said...

Ornstein is the "dog in the manger"

If his airline is going to be a failure, so is everybody elses.

12:11 PM  
Blogger RONALD said...

Aloha,
Good stuff.
In the interests of all,Hawaii must not let irrational airfares-reduce
seat capacity,number of planes in service,industry employment etc.
As all the airlines are financial
basketcases dispite bankrupty,change in ownership,"stiffing" employee salaries-not to mention savaging pension, Big Government has to, unfortunately ,step in-perhaps appoint a powerful ombudsman.
The Public Good must take precedent
over the interest of temporary owner"stewards".
Ron Gilligan
R.f.Gilligan Realty

2:12 PM  
Blogger puppy breath said...

It makes no sense at all why airlines would give away their seats at the busyest time of the year. Is Mesa trying to put themselves out of business too?

2:36 PM  
Blogger David said...

Maybe Mesa's on their way out and is trying to take everyone with them...or at least cause as much damage as possible before they "gracefully" bow out due to the China deal? Oh yeah, and the lawsuit...and the fact that they still can't fill their planes while practically giving away free flights.

10:47 AM  
Blogger Traveling Guy said...

Mesa has no where else to go at this point. They are selling Air Midwest (A mesa subsidary) to Gulfstream International Airlines (Continental Connection in Florida/Bahamas) to raise $$$.

The dropped the Dash8 flying in JFK with Delta as they were losing money.

They lost money on the United Flying as they priced below cost

Where can they go. He is between a rock and hard spot and losing $15-20 M USD a quarter in Hawaii.

The Go! attitude is at least we are not losing as much as Hawaiian and Aloha and thinks he can outlast them.

Sadly, There may be a hint of truth to that part.

Aloha and Hawaiian have much higher operating costs overall so while it is ok to talk about seat costs. We must look at the total picture.

As long as fares are this low the damage Go! inflicts on itself is negligable compared to the damage they do to Hawaiian and Aloha.

8:58 AM  

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