How Hawaiian Airlines Soars Above a Cratered Economy

What the islands' carrier can teach us about the airline industry, tourism and the state of the two-speed recovery

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If you've ever sipped passion-orange-guava juice while flying perilously close to Haleakalā volcano, then you know firsthand the Hawaiian Airlines experience. The carrier, which mostly operates thousands of miles from the American mainland, has enjoyed similar distance from the U.S. recession. Why hasn't the airline felt the pinch of the downturn? To find out, I spoke with the airline's president and CEO, Mark B. Dunkerley earlier this month.

The Sun's Still Shining in Hawaii

On the U.S. economic recovery, Dunkerley was actually quite optimistic. He told me that 2011 has so far been a year of pretty robust demand. The biggest obstacle his airline has faced has been rising fuel prices, which should not shock anyone who has been to a gas station this year. And unfortunately, fuel is one cost that an airline can't avoid.

But what about the summer slowdown -- is he becoming pessimistic about the rest of 2011? "What I think is interesting is that we haven't seen any fundamental change in (demand) going through the summer and looking out into the fall. In fact, if anything what we've seen is a small, but meaningful, moderation in the price of oil," said Dunkerley. In other words, profits have actually been improving over the past few months, since sales have remained strong while fuel prices have relaxed a bit, coming off the highs they hit earlier in the year.

This view certainly contrasts with some of the economic reports we've been seeing lately. In April through June, real consumer spending had been declining. Only in July did we finally see an uptick, possibly in part because Americans got a little relief from rising prices in June. And what makes Hawaiian airlines' resilience even more surprising is that its business is tourism: an industry that generally suffers early in a recession and recovers late in a recovery. Vacations are one of the easiest expenses for consumers to cut back on.

Hawaiian Airlines' Resilience

In fact, Hawaiian Airlines has performed relatively well over the past few years. Even throughout the recession, it continued to record positive annual net income. That's not a claim that all U.S. airlines can make. Here's a chart showing a few performance metrics of Hawaiian and a couple of other airlines that I thought might be interesting to compare it to:

hawaiian air versus others 2010.png

Its revenue has been relatively strong, an impressive feat during the worst recession in more than a generation. Its net income has been on verge of the remarkable in an industry that's known for constant bankruptcies and restructurings. And when it comes to the ever-important passenger load metric -- the ratio of passenger miles flown to seat miles available -- Hawaiian soundly beats these three other airlines.

Hawaiian's Secret: It Serves Hawaii!

So why has Hawaiian managed to perform so well? The first thing that came to my mind was that it may cater to more of a luxury market than other airlines that serve a wider variety of destinations. And even during a recession, the rich remain, well, rich. So if Hawaii is a relatively expensive and extravagant place to visit, then perhaps its customer base hasn't been as affected.

But Dunkerley disputed this view, explaining that my conception of Hawaiian tourism probably stems from my east coast zip code. On the west coast -- the only part of the continental U.S. that the carrier serves -- a Hawaiian getaway can be even an affordable weekend trip. "Hawaii is a good value for money destination," he adds.

Instead, he attributes much of the airline's success to the simple fact that it specializes in Hawaii. Its strategy is very different from most other airlines, since it is a destination carrier. "Hawaii is, I think unquestionably, the number one destination in the world, in terms of how highly sought after it is not only within the United States, but also overseas," said Dunkerley. Having spent some time there, I have to agree: it is a truly unique destination. "The fact that no other airline brings you Hawaii like Hawaiian can is unquestionably the source of our strength."

Presented by

Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.

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