Southwest Makes a Big Play for Hawaii
Southwest Airlines is making a move to become one of the largest airlines flying between the continental U.S. and Hawaii after little more than two years in the market to the 50th state.
The Dallas-based carrier will add 15 new routes and three new mainland gateways in Las Vegas, Los Angeles and Phoenix from June 6 through September 7. The additions will bring an influx of new capacity to the islands — nearly tripling the number of seats Southwest flies in the market — just as the leisure travel recovery is forecast to take off this summer.
But the move also pits Southwest more directly against the long-standing leaders to Hawaii. In terms of daily seats to the islands, the airline will jump from sixth place out of seven carriers at the beginning of June to a close third behind United Airlines and Hawaiian Airlines — leapfrogging the likes of Alaska Airlines, American Airlines and Delta Air Lines — by September, according to Cirium schedules and an Airline Weekly analysis of the new flights. And all but two of its new routes — Las Vegas to Kona and Lihue — will compete directly with another carrier.
The Hawaii additions come as airlines report strong demand for domestic leisure travel. Last week, Alaska executives told J.P. Morgan analysts that its Hawaii flights boasted the “highest load factors in [its] system” amid the broad leisure travel recovery. Demand to the islands is driven by the lack of many long-haul international beach destinations open to Americans, the analysts wrote in a report.
Since the worst days of the pandemic passed last spring, Southwest has used the crisis to grow in ways previously unimaginable for the airline. It has added or unveiled 17 new destinations — ranging from outdoor-oriented Bozeman, Mont., to high-cost hub Miami — in a momentous move for an airline that once made headlines for adding one or two new cities in a year. Executives have repeatedly said that, with demand down for its typically high-frequency hop schedules, it makes sense to use otherwise idled aircraft to expand the breadth of its map and tap new revenue streams.
“We’re a growth company,” Southwest CEO Gary Kelly said during the airline’s first-quarter earnings call in April. “We know how to manage growth, and we would be foolish to pass on what I think is the opportunity of a lifetime to grow this airline in this environment.”
Asked about further growth on top of the 17 new destinations, Kelly said: “We got a lot more we’d like to add.”
Southwest’s Hawaii play is likely to test other airlines willingness to challenge their new competitor. Hawaiian executives have repeatedly played down the new competition, expressing confidence in the airline being the “carrier of choice” in the state. And United, the market leader, has resumed its full network to Hawaii and is adding new routes, including Orange County-Honolulu and Newark-Kahului.
When Southwest unveiled plans to add Palm Springs to its map last year, Alaska responded in kind with new service between the California desert town and Boise, Reno and San Jose, Calif. And while Palm Springs is an important — albeit small — leisure destination for the Seattle-based carrier, Hawaii accounted for 14 percent of its pre-crisis capacity and a significant chunk of revenue. It is very likely that Alaska will not go gently into the night.
Southwest’s new routes include nonstops each between Las Vegas, Los Angeles and Phoenix and Honolulu, Kahului, Kona and Lihue — 12 routes in total. In addition, it will connect San Diego with Kahului, Kona and Lihue. All of the new routes will be flown with either Boeing 737-800 or 737-8 aircraft that seat 175 passengers.
American Plans a Smaller, More Profitable International Network
American is making no small plans for its network recovery from the coronavirus pandemic. But those plans are not necessarily what one might think: It will continue to grow domestically around its largest hubs but internationally it will come back smaller — maybe much smaller — than it was just two years ago.
“The international that will be there [after Covid-19] is going to be way different than the international that went away in 2019,” said Vasu Raja, chief revenue officer of the Fort Worth, Texas-based carrier, at a Goldman Sachs conference last week. The key recovery metric will be financial — specifically pre-tax margins — and to a lesser extent traveler demand, for American as it eyes which long-haul markets to return to and which to leave.
On the surface, these plans are of little surprise to those following American through the crisis. The airline retired 41 widebody jets, including all of its Airbus A330s and Boeing 767s, as well as its 34 Boeing 757s that flew long and thin international routes. Eliminating these aircraft automatically cut some destinations from its map, for example Brasilia, Dubrovnik and its first-ever planned Africa service to Casablanca.
But Raja’s comments appear to cut deeper than just exiting destinations served by 757s and 767s. Flights to key partner hubs, including London Heathrow, and booming emerging markets, like India, will return in time, he said. Destinations that are “strategic” will not. Raja did not say what American considers strategic, but Atmosphere Research Co-Founder and Travel Industry Analyst Henry Harteveldt thinks it means secondary European destinations like Prague, Reykjavik, and Venice.
“Covid showed an unflattering light on airline route profitability,” said Harteveldt. “And airlines — all airlines — are making route network decisions about what will help them get back to profitability the fastest and best way.”
But even if American does not return to Berlin and Prague, it could still have a sizable transatlantic presence. The airline could serve major European cities — for example London, Madrid and Paris — with at least six daily flights each if it only connected them to all of its East Coast and large connecting hubs in Charlotte, Chicago, Dallas-Fort Worth, Miami, New York and Philadelphia. American already plans to grow long-haul flying from JFK, including new nonstops to Athens, New Delhi and Tel Aviv, under its new alliance with JetBlue Airways.
Europe is the focus of Raja’s comments for good reason. American’s pre-tax margins to Latin America are already comparable to domestic, suggesting few changes there, and it has already pared back much of its Asia-Pacific flying, particularly from its once-planned Los Angeles gateway. The carrier has indefinitely suspended flights to Beijing, Hong Kong and Tokyo Narita from LAX, while keeping service to all of the destinations from mega-hub Dallas-Fort Worth.
A pared back but more calculated long-haul international network does pose a risk for American. United plans to use structural changes in international markets to generate improved financial returns when travel recovers. Changes include the exit of some competitors, including Norwegian Air to Europe and Virgin Australia to Australia, as well as consolidation like Korean Air’s purchase of Asiana. United has kept its entire long-haul fleet in preparation for when demand rebounds so it can quickly resume flights.
Harteveldt agreed there is a risk, especially for corporate contracts that could shift to other airlines if American waits too long to return to a market.
But, at least in the American and United comparison, the former always made more money domestically and the latter internationally. The end result could be little change fundamental change as both look to leverage their relative strengths to recover financially from the pandemic.
“We’re going to be really cautious how we build back international,” said Raja. “When we [do], we’re bringing back an international that can produce margins in line with domestic.”
- Air Canada is not waiting for Canada to ease its travel restrictions to tap the pent up demand in leisure travel. Last week, the carrier unveiled three new routes to Hawaii from December: Honolulu to Calgary and Montreal, and Kahului to Toronto. Air Canada will resume select flights to Hawaii from its Vancouver hub in July, though most pre-crisis routes do not come back until December.
- Alaska is expanding further in Latin America with plans to add Belize City to its map later this year. The carrier will unveil service details for the new destination in June.
- Business travel may be down significantly for the foreseeable future, but that is not stopping Austrian Airlines from moving its Milan service to the city’s close-in Linate airport from Malpensa. The carrier will move its two daily flights from Vienna to Linate on June 1. Austrian cites Linate’s popularity with business travelers for the move.
- British Airways is making good on plans to ratchet up its dormant capacity to meet pent-up leisure demand beginning in June. The carrier will add new service between the Channel Island of Guernsey and both London City and Edinburgh from June 25 through September 27. Earlier in May, IAG executives said the group could fly as much as 70-75 percent of 2019 capacity in the third quarter.
- The latest U.S. start-up Connect Airways, owned by Massachusetts-based Waltzing Matilda Aviation, has outlined its initial route plans. Flying from a base at Toronto’s Billy Bishop Airport, the airline plans to serve Baltimore/Washington, Boston, Chicago O’Hare, New York JFK and Philadelphia, a recent filing with the U.S. DOT shows. It also plans nonstops between Boston and both Baltimore and Philadelphia. Connect still needs U.S. Part 121 certification — it already has Part 135 certification — and sign off by Transport Canada before flights can begin. Connect will fly de Havilland Dash 8-400 turboprops, much like its Billy Bishop-based competitor Porter Airlines whose flights remain suspended due to the pandemic.
- Goodbye fifth freedoms? Delta will “indefinitely suspend” flights to Manila, which it served via a stop at Seoul Incheon. The decision to drop the Philippine capital from its map means Delta will no longer operate any fifth-freedom routes in Asia, where it once had multiple such routes to Bangkok, Guam, Singapore and other cities. Delta inherited the Manila route from Northwest Airlines when the two merged with in 2009.
Separately, Delta is not sitting idly by as American and JetBlue ramp up their Boston and New York hubs. Delta will add new nonstops between Boston and Charlotte and Dallas/Fort Worth — American’s two largest hubs — as well as Toronto Pearson in October. Also in the offing is new New York LaGuardia-Toronto Pearson service in August, likely the result of the failure of Delta’s proposed joint venture with WestJet.
- But not all fifth freedoms are on the chopping block. Singapore Airlines will resume its the Tokyo-Los Angeles leg of its Singapore-Tokyo-Los Angeles service on June 16. The return complements SIA’s nonstop Singapore-Los Angeles flights that have operated through the crisis.
- Avelo Airlines‘ launch in April has not gone unnoticed by the competition. Alaska quickly moved to fortify its leading position in Santa Rosa, and now Frontier Airlines has its sights set on Avelo’s new Burbank base. The Denver-based discounter will add daily service between Burbank and Denver, Las Vegas and Phoenix on July 15. While Avelo only serves Phoenix, the size of the Denver and Las Vegas markets almost guarantee that they are on the start-ups short-list for future expansion.
In addition, Frontier will join Delta connecting Southern California’s Ontario airport and Atlanta. Flights begin on July 16.
- Ryanair is not done pushing to replace retrenching Norwegian Air, even in the latter’s home territory. The Irish discounter will add Stockholm’s Arlanda airport to its map with a new base from October. The airline plans 21 routes initially, including a mix of traditional European hubs like Brussels Charleroi, Milan Bergamo and London Stansted, as well as leisure hotspots like Malaga, Spain, and Thessaloniki, Greece, according to Cirium schedules. At least seven routes will compete directly with Norwegian.
- Another delay for Qantas and Virgin Australia. Both carriers have pushed back the resumption of international flights to the end of the year from October, except for select ones across the Tasman Sea to New Zealand. Australia’s government is expected to reopen the country’s borders by mid-2022, after completing the country’s vaccine program by year end, Qantas said. For the Flying Kangaroo, this means restarting long-haul international services from the December timeframe. In addition, Qantas plans to take advantage of new travel bubbles if they open (Singapore and Hong Kong have been floated).
With its long-haul international network gone as part of its voluntary administration rejig last year, Virgin only has to postpone the relaunch of flights to select New Zealand destinations as well as Bali, Samoa, the Solomon Islands and Vanuatu. It anticipates resuming these flights in December.
- New-ish Taiwanese carrier Starlux is launching thrice-weekly flights between Taipei and Ho Chi Minh City in Vietnam. The new route follows Starlux’s pandemic strategy of flying primarily to what it sees as business destinations. Since the pandemic began, it started flying to Bangkok, Tokyo Narita, Osaka, and Kuala Lumpur. Starlux says it is still on track to begin flying to North America next year.
- More airlines are expanding at Belfast City airport and filling the gap left by Flybe‘s demise in 2020. Stobart Air will add new service between Belfast and Cardiff on June 28, following by Dublin-Cardiff flights on August 30. Both routes will be operated in partnership with Aer Lingus.
- Turkish Airlines will add a second New York gateway to its map this month. Flights between Istanbul and Newark begin May 21, connecting Turkish directly to the hub of its Star Alliance partner United. Despite the continuing pandemic, Turkish has resumed service to all nine of its U.S. gateways with Newark becoming its 10th destination in the country. The new route complements existing service to New York JFK.
- Indian carrier Vistara will add Tokyo to its map in June. The carrier will connect Delhi and Haneda airport weekly from June 17. The addition comes as India continues to face a devastating wave of Covid-19 infections, and Japan remains largely closed to visitors amid its own pandemic struggles.
- Wizz Air is making a big push for the Eternal city. The discounter will open its 43rd base at Rome’s Fiumicino airport initially with four Airbus A321 Neo aircraft in July. Wizz will add 32 new routes to destinations ranging from Casablanca to London Luton and Tel Aviv. The airline will serve 57 destinations nonstop from Rome, including both Ciampino and Fiumicino airports, by year-end.