Surf's up!
Changes are afoot at Hawaiian Airlines, but will they ride the crest or ding the board?
Think of Hawaii and you might imagine bright sunshine, cool waves, majestic volcanoes and beautiful waterfalls. For these reasons and many more the Aloha state is a prime tourist destination, attracting more than 8 million visitors a year pre-COVID. Aviation enthusiasts like me might also think of Hawaiian Airlines, the local carrier.
With years of profit behind them they seem solid and dependable. I have not yet had the pleasure to fly them but I hear the food is great and the service is friendly. But recently two things caught my attention that suggest changes are afoot.
The first was that they announced their new business class for Boeing 787, the medium sized wide-body. You can see pictures of the current A330 seat here on The Points Guy and the new one here on Skift. The current product is designed for low weight – check out the gaps between the foot rest and the seat in front, the narrow arm rests and the way the headrest is much narrower than the cushion!
The new seat appears to offer aisle access for all, which may or may not lead to a reduction in density – we would need to see the LOPA (seat map) for sure. It also offers sideboard stowage, a significantly larger shell and might even have a door. All of these will come with a significant weight penalty leading to extra fuel burn and I would wager that the manufacturer will be charging Hawaiian much more than they might pay for a basic seat.
It must have been a tough internal sell for whoever is behind this fabulous new piece of branding to convince budget holders that upping their game and investing in snazzy seating would be worth the cost. Airline finance departments have notoriously high standards to meet before they release a budget for something like this, especially when it is new.
My best guess is that two things are happening:
1. Hawaiian may be concerned that their current premium cabin is uncompetitive compared to other Pacific operators like Qantas (Australia), JAL and ANA (both Japanese), who are all known for high standards up front. Philippine Airlines, who also fly to Hawaii are also known to be investing in customer experience.
2. Hawaiian may be developing a new commercial strategy and expect improved business class to contribute to yield growth – it looks that this is coming along too.
Travel Weekly and others recently reported that Hawaiian will soon be introducing a GDS surcharge within the US and remove flights within the state from Global Distribution Systems (GDS) – click here for the TW article. This is also a brave move, as although the number of airlines who have taken similar actions is growing the club is still small.
Airlines traditionally offer their seats for sale through the GDS because it gives them easy access to travel agents. If they start charging extra for the privilege and even removing some flights altogether then they will lose sales. In return they get people booking through their own sales channel, which not only comes with lower costs, it also makes it easier for the airline to push special deals and upsells for ancillary services and cabin upgrades.
Bringing new business class and less focus on GDS together suggest to me that Hawaiian is looking to transform their business for the better to get more control over their bookings and support higher revenues and profitability.
So how should Hawaiian make the most of their new model? I think they will almost certainly invest in branded fares (see article) and lounges (see article) but should also consider three further projects:
1. Incorporate special deals for loyalty members who have not flown business class before so that they get a chance to experience the new business class at an affordable price for either cash or points – while I would expect their average fares to increase in the front cabins, when seats would otherwise go unsold they should not be afraid to discount as today’s first-timer is tomorrow’s regular
2. Launch premium economy (see this article and this article) – flights to and from Hawaii are long and there will be a significant premium leisure segment willing to pay more than economy but less than business, so Hawaiian may be a perfect use case for this cabin
3. Build a super-app to make Hawaiian Airlines the natural place to come to arrange every aspect of a Hawaii trip.
It is easy to understand why they are not doing all these things at once. Change takes time in the airline business and it is better to do a few things well than many things not so well.
As always, it will be for the market to decide whether or not the new Hawaiian will be successful. But it must have been hard to take the two steps that they have already made – investing in business class and breaking away from the GDS model. It looks to me like they have put strong foundations in place. They deserve good results and I hope that we will see great things from Hawaiian in the next few years.
oliver AT ransonpricing DOT com