Wanted: Cheaper flights

Kauai County Council asks state lawmakers to explore incentivizing interisland airline competition
Garden Island News - November 1, 2015
Tom Hasslinger

LIHUE — The Kauai County Council wants the state to take up what it feels is a serious, islandwide issue: expensive costs for residents to fly from one island to another.
“I think it’s an important issue,” said Councilman Ross Kagawa, who introduced a resolution calling on the state Legislature to spur cheaper tickets for interisland travel by incentivizing airline competition for Hawaiian Airlines. “We need to speak up already. Right now this is a serious problem.”

The resolution passed unanimously last month. Kagawa said it’s always been an important issue to him and that he’s heard from other counties that could send along similar resolutions.
He said it was important for him to get the conversation started.

“I’m pretty optimistic, I talked to other councilmembers on other islands,” he said. “I think it will pass on the other islands as well.”

The resolution, which is a nonbinding request from one entity to another, says that residents in the state benefited from 1946 through 2008 by having two major commercial airlines, Aloha and Hawaiian. The competition resulted in “fare wars” that offered tickets that were affordable. But Aloha ceased operations on March 31, 2008, leaving Hawaiian with “the ability to monopolize interisland air travel” with fares so high they are cost prohibitive for a majority of the people here.

A recent online price search showed a weekend roundtrip ticket to Honolulu from Lihue would cost about $225 to $250.

Ann Botticelli, SVP Corporate Communications and public affairs officer, speaking for Hawaiian, said the company keeps its fares low. Some of the fees charged are mandated by federal taxes and fees can add to the price, but the company has kept its fares flat in recent years.

A one-way ticket price from Lihue to Honolulu for 12 months ending March 30 was $68, according to the U.S. Department of Transportation that tracks average fares across the country.
That chart also shows that this is the same average fare as recorded during the 12 months ending March 30, 2012.

“So there has been no average fare inflation over the last three years,” Botticelli wrote in an email. “We offer several flights every day that run on time with exceptional service, and we are very proud of that. We also very much value our Neighbor Island commuters.”

But those one-way prices do not include federal taxes and fees, which would add another $14.70 to the $68 fare, she pointed out. Here’s how that breaks down: The base fare carries a U.S. tax of 7.5 percent. Then the company has to add a $4 U.S. segment tax levied on each ticket and another $5.60 per head TSA segment fee.
So on that $68 ticket, the consumer sees a fare of $82.70.

Still, Botticelli said, keeping fares flat is an accomplishment considering taxes and fees on tickets have increased 53 percent since 2004, and that booking flights two weeks out still leaves one-way tickets under $100.

“In 2014, more than half of our Neighbor Island passengers paid an average fare of $74,” she wrote. “On the high end, just over 10 percent of the passengers paid an average fare of $106.”
Hawaiian Holdings, Inc., parent company of Hawaiian Airlines, Inc. reported its financial results for the third quarter of 2015 earlier this month. They showed an adjusted net income of $78.4 million.
Kagawa said the unanimous support the resolution received — Councilman Mason Chock didn’t vote for it as he was absent from the meeting — shows there is energy behind it. What incentivization includes exactly would have to be worked out with all the parties involved.

“I think it’s a statewide no-brainer that people are upset with airfares on the islands,” he said.

A trio of state lawmakers said perhaps the resolution could jumpstart taking action.

“I think it’s definitely worth having the conversation,” said Sen. Mike Gabbard, vice chair of the state’s Transportation and Energy Committee.

The former Honolulu City Councilman who represents the 20th District on Oahu said he couldn’t speculate on what incentivizing could look like, but would have to include the whole industry, including at the federal level. He hasn’t heard discussion about bringing the issue up when the sessions starts in January.

“As a former councilman, I appreciate getting that feedback from other councils,” he said.

Rep. Derek Kawakami, District 14 on Kauai, said while interisland travel is integral to residents’ quality of life, Hawaii’s market might not be big enough to support competition.

He said he hasn’t heard of any airlines interested in entering the Hawaiian market, and pointed to a study that came out a couple of years ago stating the market couldn’t handle two carriers.
An Associated Press article on Aloha’s 2008 Chapter 11 bankruptcy said it was the “casualty of fierce competition and rising fuel prices.”

“That is one of the reasons why Aloha Airlines went out of business and that is why companies like the Superferry wanted to enter the market,” Kawakami wrote in an email. “Another challenge is that we can incentivize industries to promote growth but we can’t incentivize any one particular company.”

Which is to say Hawaiian could take advantage, too, of incentives given the industry.

Alice Parker of Lihue said she has a daughter on the Big Island she would like to see more often, but cost is prohibitive.

“We definitely need it,” she said. “And going for medical expenses? Horrendous. We definitely need cheaper air travel.”

Hawaiian Airlines didn’t address the resolution specifically.

Rep. Dee Morikawa, District 16 on Kauai, said lawmakers tried to address the issue around five years ago after experiencing difficulty themselves flying to and from Oahu for state business. But it didn’t get off the ground.

“Everyone knows it’s a problem,” Morikawa said, but added that addressing it isn’t as simple as inviting other carriers here. “How can you make money because Hawaiian is so big already?”

As far as a resolution going to state lawmakers, she’s all for it.

“Maybe the resolution will spur the discussion, who knows?” she said. “That’s something worthwhile, I think.”