Interisland airline go! surprised customers yesterday with an unprecedented $1 one-way fare. While the Internet promotion stalled out early in the day with server problems, the message that Hawai‘i’s air fare wars are alive and well was clearly executed. Yesterday’s
Interisland airline go! surprised customers yesterday with an unprecedented $1 one-way fare. While the Internet promotion stalled out early in the day with server problems, the message that Hawai‘i’s air fare wars are alive and well was clearly executed.
Yesterday’s promotion follows closely on the heels of go!’s $9 fare, initiated more than a week ago. Aloha and Hawaiian airlines matched that price, but will not do the same for this fare, the companies’ respective spokespersons confirmed.
The decision breaks with previous statements from both competitors that they would not be out-priced by go!.
“The $9 fare was a desperate move by go!, and the $1 fare is even more desperate,” Stu Glauberman, Aloha’s director of corporate communications, said via e-mail.
Keoni Wagner, vice president of public affairs for Hawaiian, declined to comment on the decision.
The deal, offered in honor of go!’s first anniversary in Hawai‘i and King Kamehameha Day, marks a year of turbulence for the interisland market.
Immediately following go!’s arrival last June, competitor prices dropped to meet a one-way fare of $39, about half of what they had been.
According to Jonathan Ornstein, CEO of Mesa Air Group, go!’s parent company, there was a need for competition among Hawai‘i’s “entrenched duopoly,” which was charging up to $200 for round-trip tickets.
“When I wear my go! T-shirt (in Hawai‘i), people come up on the street and thank me for bringing low fares back to the islands,” Ornstein said.
But Aloha and Hawaiian have not been grateful for the added competition. Both sued Mesa last year, alleging it misused confidential information to gain an advantage.
According to an October 2006 press release announcing Aloha’s lawsuit, Mesa knowingly and “unethically” offered air fares that failed to cover its own costs in order to “drive out competition from the Hawai‘i market.”
An independent study commissioned by Aloha last year looked at the bottom line for all three interisland carriers and found that the average cost to transport one passenger on flights two-thirds’ full was about $50 for Aloha, Glauberman said. He added that estimates for Hawaiian and go! were higher, at $55 and $67, respectively.
“The smaller the aircraft, the higher the cost per seat,” Glauberman stated.
Despite regular $19 and $29 promotions, Ornstein said go!’s base fares run from $39 to $79 — enough to turn a profit.
He dismissed the notion that Aloha is a victim of cut-throat pricing and said $79 is still lower than the lowest fare available before go! entered the market.
“We’re looking to develop our brand, and with airlines you do that through price,” he said.
Glauberman noted that go! is not the first newcomer to shake up the interisland scene, and history has shown that the market won’t support three airlines.
But Ornstein pointed to Hawaiian’s recent increase in capacity as sign that the market can, in fact, sustain a third company — and a small one at that. According to Ornstein, go! accounts for 8 percent of the total interisland capacity.
“It’s not like we’re Wal-Mart building a store to compete with the local businesses,” he said. “We’re the small guy.”
Aloha remains steady at 700 flights per week, Glauberman said, and has for some time.
On the issue of shared partnerships with United — go! has provided United’s shuttle service for years, while Aloha expanded its existing cooperation agreement with the company in May — neither competitor expressed concern about conflicting interests.
One thing all three carriers have in common is losses in the millions attributed in part to rising fuel costs and fare wars.
However, Ornstein is unnerved, saying go! is a long-term investment and he is not looking for profits in the first few years.
“Like any brand, it takes time to develop,” Ornstein said.
In its first year, go! carried 650,000 passengers, according to Ornstein. In addition, 30,000 people enrolled in its frequent flyer program and 15,000 signed up to receive e-mail promotions.
Just a few hours into the $1 promotion, go!’s server responsible for booking flights crashed due to the high volume of interest.
In response, go! extended the deal until midnight last night and offered up an additional 1,000 seats at the price.
The Garden Island received reports from customers who had successfully purchased tickets by late afternoon yesterday.
• Blake Jones, business writer, can be reached at 245-3681 (ext. 251) or bjones@kauaipubco.com.
