Southwest’s Hawaiian Entry Tanks Competitor’s Stock

Home » Money Management » Economic News » Southwest’s Hawaiian Entry Tanks Competitor’s Stock

Southwest’s Hawaiian Entry Tanks Competitor’s Stock

After years of waiting, Southwest Airlines is officially headed to Hawaii. Thanks to the longer range of the Boeing 737 MAX 8s that the budget airline has added to its fleet, travelers will soon be able to catch flights from Oakland and San Jose to Honolulu and Kahului. What’s more these flights saw prices start at just $49 each way. Of course, while this may be good news for Southwest loyalists, other travelers, and the airline itself, it could be bad news for competitors.

Given Southwest’s low fares, observers have cited the aptly named “Southwest effect” as driving down the price of flights along certain routes. While Southwest’s $49 fares aren’t likely to last forever, there is mass speculation that rival airlines will be forced to compete on price. Considering the location in question, it should be no surprise that stock in Hawaiian Holdings, Inc. — parent company of Hawaiian Airlines — fell 10% on Monday as the first Southwest tickets went on sale. Further hurting Hawaiian Airlines was the fact that, in Southwest’s announcement, they revealed that they will not only begin offering flights from California to Hawaii this month but will also begin inter-island service between Honolulu and Kahului in April with more to come. Fares for these inter-island routes will start at just $29 each way. For the record other airlines such as United and Alaska also saw dips in their stocks Monday.

In a statement about the new routes, Southwest Airlines’ President  Tom Nealon said, “Beyond these introductory fares that celebrate our significant initial investment in serving the Islands, our Hawaii Customers will experience our everyday value in low fares that offer everybody the same brand standards: no fees to change your ticket and two checked bags fly free.” He continued, “We’re focused on bringing Hawaii an authentically Southwest experience with comfort across all seating—for every customer—along with in-cabin snack enhancements for our flights between the State of Hawaii and the U.S. mainland.” Meanwhile, in an interview with the Associated Press, Hawaiian Airlines CEO Peter Ingram seemed to welcome the competition, saying, “We think Southwest is a great airline and we are envious of a 40-plus-year track record of profitability, but it’s really not something new for us to have competitors coming into the market.”

As expected fares to Hawaii did drop as Southwest sales started. SF Gate reports that Alaska Airlines had roundtrip flights between California to Hawaii for a little as $198 for a time on Monday while prices on Tuesday were in the range of $278 to$298 aboard Alaska, Hawaiian, and United. Ultimately it will take some time before we’ll know the full impact of the “Southwest effect” on our 50th state but, so far, it seems like a win for travelers and a headache for investors in other airlines.

Comments

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Author

Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

Other Articles by Jonathan Dyer

Ameritrade Survey Finds Many Investors Lack Knowledge of Retirement Accounts

How much do you know about your retirement accounts? Even if you contribute to an employer-sponsored 401(k) or even a traditional IRA, chances are you still might not be familiar with all of the rules, requirements, or fees that come with them. To prove this point, recently Ameritrade interviewed 1,006...

Become a Successful Solopreneur With These Essential Tools

Has there ever been a better time to be an entrepreneur? Between the strong economy, a growing number of sales outlets, and “side hustle” culture abounding, it’s really no wonder that small business optimism reached record levels last year. Speaking of side hustles, a recent development is the the rise...

Federal Reserve Seems Unlikely to Raise Rate This Year

Over the past year, one recurring economic story has revolved around the Federal Reserve. That’s because the central banking system spent 2018 slowly raising interest rates from their historically low levels — much to the dismay of the President. Although that trend was expected to extend into this year, it...