Hawaiian CEO: No fee for first bags interisland

Following its competitors’ lead, Hawaiian Airlines on Thursday announced two new passenger fees and adjusted its frequent flier program in an attempt to hedge rising fuel costs.

Travelers checking a bag on transpacific flights will be charged $15, and reservations over the phone will incur an extra $10 beginning Oct. 1 and Sept. 1, respectively.

Like many other carriers, Hawaiian earlier this year instituted fees for a second checked bag: $17 on interisland flights and $25 on transpacific.

Hawaiian President and Chief Executive Mark Dunkerley told The Garden Island Friday that the new fees are expected to bring in an additional $20 million per year.

The carrier cited “unprecedented economic challenges” in matching its competitors’ baggage fees, but said it would not go as far as to charge for the first checked bag on interisland flights — even though it would make business sense for the company. Interisland competitor go! instituted a $10 fee for the first checked bag on flights within Hawai‘i last month.

“Economically, we ought to do that,” Dunkerley said. “But we recognize our role in the Hawai‘i community is different.”

Add-on charges are an increasingly popular method of combating soaring expenses, with most carriers in the Hawai‘i market jumping on the bandwagon.

Asked why airlines are opting for add-on fees instead of a good old fashioned fare hike, Dunkerley said online shoppers pick their tickets based on the lowest price.

“If we add $15 to our fares, bookings would slowdown dramatically,” Dunkerley said. It’s not enough to cut costs; airlines have to find a way to bring in more revenue, he added.

The carrier saved about $20 million last year by controlling costs; however, expenses ballooned by ten times that figure. The price of jet fuel alone has increased 80 percent in the last year, compared to a 30 percent jump at the pump for motorists.

Traditionally, summer is the peak travel season, but lower-than-expected numbers are a “harbinger of tough times,” according to Dunkerley.

A $52.5 million litigation settlement with Mesa Air Group notwithstanding, Hawaiian broke even in the second quarter, posting net income of $1.8 million, or $0.04 per diluted share. Including the settlement, the company reported a consolidated net income for the three months ended June 30 of $54.3 million, or $1.09 per diluted share.

For the year to date, the company reported a consolidated net income of $34.4 million, or $0.71 per diluted share. Subtract the settlement, and that figure becomes to a net loss of $18.1 million, or $0.37 per diluted share, for the first half of 2008.

Dunkerley said the costs of jet fuel and the additional flying to meet demand following the sudden collapse of both Aloha and ATA airlines in early in April were the quarter’s biggest expenses. So big, in fact, that a 21 percent increase in customers and raising air fares left the company at roughly break even.

“This is a testament to the severity of the fuel price crisis facing our industry,” Dunkerley said.

Looking ahead, the third quarter is traditionally Hawaiian’s best-performing, and the fourth the worst.

Dunkerley feels the interisland market has stabilized at a point where the capacity of seats is sufficient to meet demand. The transpacific picture, however, is less settled, he said. And with airplanes emptier this year than last, there are no plans to increase capacity in that market.

• Blake Jones, business writer/assistant editor, can be reached at 245-3681 (ext. 251) or bjones@kauaipubco.com

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