Southwest Airlines has confirmed that it plans to fly to Hawaii, probably beginning next year – a decision that could bring sharply lower fares for all travel to the islands. Or maybe not…
Since the airline started to take delivery of new Boeing 737MAX 8 aircraft, there has been widespread speculation that it would use the planes – which can fly 500 nautical miles farther than its 737-800s – to begin service.
And now the company has announced its intention to do just that. Southwest said it will seek FAA approval to gain ETOPS certification for its new 737s – a regulatory requirement for flying them to Hawaii. ETOPS stands for Extended-range Twin-engine Operational Performance Standards.
Assuming it gains that approval, Southwest said it “plans to begin selling tickets in 2018 for service to Hawaii.” It’s not clear yet if flights will also begin in 2018.
However, the company hasn’t yet said which airports will get the new flights – only that “service details are to be announced at a later date.”
Will Southwest bring lower fares to the islands? Maybe. But don’t get too excited yet. Atlanta expected the so-called Southwest Effect to reduce fares when Southwest took over AirTran’s hub there. Instead, fares went up and the number of flights went down. “Airfares have gone up so much that Atlanta had the largest year-over-year increase in average domestic fares in the country,” reported the Atlanta Journal-Constitution in 2014.
However, the move should provide a boost to Southwest’s Rapid Rewards program, which has always suffered from not having the reach of other airline programs that can fly members to Hawaii or around the world.
My best guess is that we’ll enjoy a temporary decrease in fares as airlines compete with Southwest on introductory fares, but in the long run the lowest fares will remain about the same, currently, stubbornly, rarely sinking below the $400 average roundtrip. Why? Because it’s not cheap to fly to Hawaii— it’s about 2,500 miles from the US west coast, a route that requires more fuel and more expensive planes. And increasingly, Southwest’s recent moves have shown that it’s not always a low fare leader.
Southwest officials made the announcement to a gathering of its employees in southern California. Joining the conference via satellite from Honolulu were Hawaii Governor David Ige and Southwest president Tom Nealon, who predicted that the carrier’s entry “will be a game-changer in the US. to Hawaii market.”
That statement is probably a reference to something called the Southwest Effect – a concept introduced in the 1990s in a Transportation Department analysis of domestic airline competition. Back then DOT found that whenever Southwest enters a new market, it tends to result in an increase in traffic and a reduction in fares for all competitors in that market.
In a recent detailed analysis of the likelihood that Southwest would start flying to Hawaii, the financial website Seeking Alpha predicted this would likely lead to a fare war. “In our opinion, the most important impact of the Southwest Effect in Hawaii is that it tends to lead to a dramatic reduction in fares, given that we believe travel demand to Hawaii is relatively inelastic (so passengers are unlikely to increase much),” the website said.
Seeking Alpha predicted that Southwest “could easily add at least 10 daily flights to Hawaii, to start with.” Based on the amount of market share that Southwest controls, it suggested that likely airports to host Hawaii flights would include Los Angeles, San Francisco, Oakland, San Jose, Phoenix, San Diego, Seattle and Portland.
What do YOU think will happen to Hawaii fares when Southwest enters that market? Leave your comments below.