Hawaiian grows international revenue

Hawaiian grows international revenue
By admin


International routes now account for 30% of Hawaiian Airlines revenue, up from 7% a few years ago, as the carrier continues to invest in growth markets in Asia.

The airline launched flights to Taiwan last month and will make its first foray into China next April when it touches down in Beijing.

The growth continues HA’s strategy to alter its mix of flying. Only a few years ago, international routes accounted for just 7% of total revenue while 60% was generated from its mainland US to Hawaii flights.

Now, less than 50% of revenue comes from US-Hawaii flights while revenue from its inter-island operations has fallen from around 30% to 25%.

“We have achieved our goal of diversification,” executive vice president and chief commercial officer Peter Ingram said.

HA’s international expansion has been rapid with the number of overseas ports now outnumbering the 11 it serves on the US mainland.

“We have five destinations in Japan, in mid 2010 we had zero,” Ingram said. “Our business has transformed.”

But while Japan is still the largest source market for Hawaii, other markets represent faster growth prospects for the carrier.

“That’s why you see us in places like Taiwan, Korea and from next year, Beijing,” Ingram told Travel Today. “These markets and even Australia, although Australia is a mature, developed economy, have higher growth rates.

“As we build our portfolio of international markets, we think it’s important to be in those markets that have prospects for growth over the next 10 years. We have a number of developing markets that are at different stages of maturity.”

The carrier is in the process of analysing potential destinations in 2014, he added.

But while international routes have become increasingly important, the largest part of HA’s network remains its domestic US operation. And recent heavy capacity growth has depressed yields and hit revenue, Ingram said.

But the outlook is improving.

“We’ve had a more modest period of growth in the quarter ending June and have seen revenue start to stabilise. We have a positive outlook for recovery in the back half of this year,” he said.

As ever, fuel remains one of the biggest headaches for the carrier. But Ingram said the industry has learned to cope with the perennially high cost of fuel, with the volatility of the price more problematic than the cost itself.

“As an industry we are able to adapt to fuel prices at any level. What is difficult to adapt to is the volatility because it’s hard to respond,” he explained. “You don’t know what you’re planning for when it’s up and down.

“If you had asked me a decade ago whether the airline industry could survive at US$50 or US$60 a barrel I’d have said we'd all be out of business.

“Yet we’ve been nearly double that level and we are seeing great resilience. In fact the US airline industry is enjoying a period of profitability and stability that we have not seen in 15 years.

“It’s remarkable when you are seeing that in an environment of US$100 a barrel of fuel.”

Consolidation has helped, he went on, along with prudent management which has kept an eye on long term profitability.

"We make sure the amount of capital we are investing will generate returns over the long term," Ingram said. "It's still a low margin business at the end of the day and the competitiveness will always dictate that remains the case.

"But if we can fluctuate between break even and 10% margin instead of between -10% and break even then we'll have a much healthier business and that ends up being better for consumers.

"If you've got a stable business you can invest in product and enhancements that you just can't do when you live hand to mouth and survive day by day."

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