Published on : Friday, May 4, 2018
Southwest last fall said it planned to start serving Hawaii this year. On Thursday it said it plans to fly from Oakland, San Diego, Sacramento and San Jose, California, pending regulatory approvals for it to fly long distances over the Pacific.
The Hawaiian Holdings shares lost 6.5 percent to close at $38.25 after Southwest’s announcement. Southwest shares ended little changed.
Hawaiian Airlines CEO Peter Ingram said that they are not afraid of competition.
The presence of Southwest Airlines tends to stir fears about lower airfares. In what’s been dubbed the “Southwest Effect,” in markets where the airline has nonstop service its fares are $45 lower than in cities without those routes, a University of Virginia study found.
Last week, Southwest announced it would serve four airports in Hawaii — Honolulu, Lihue Airport, Kona International Airport and Kahului Airport — and on Thursday said it could also offer flights between the islands.
The Inter-island flying is a market that has little competition. They think that it is very highly priced, Southwest President Tom Nealon said that the airline plans to offer low fares for all the passengers.
A round-trip ticket from Honolulu to Kona in mid-May on Hawaiian Airlines starts at about $185.
Southwest isn’t the only airline adding service to Hawaii. American Airlines on Wednesday said it plans to offer winter flights from Chicago to Honolulu.
The tourism to Hawaii is booming. The state took in a record 9.4 million visitors last year, up from 8.9 million in 2016.
Southwest Airlines is grappling with a decline in bookings following a midair engine failure on one of its flights last month. A passenger was partially sucked out of a blown-out window after a fan blade broke loose from one of the Boeing 737-700’s engines. The passenger died, marking Southwest’s first accident-related passenger fatality in its 47 years of flying.