Southwest Airlines growing to Hawaii even as it shrinks elsewhere because of the MAX
When Southwest Airlines began selling tickets for its first-ever flights to Hawaii in March, they sold out “in minutes,” said chief financial officer Tammy Romo.
Demand for Hawaii remains “ahead" of the Dallas-based carrier's expectations and has prompted further growth to the islands even as Southwest continues to deal with the ramifications of the Boeing 737 MAX grounding, Romo said while speaking at a Cowen investor conference on Wednesday.
“Hawaii has just been tremendously successful right out of the gate,” she added.
In March, Southwest landed in Hawaii with flights to Honolulu (HNL), Kahului (OGG) on Maui, and Kona (KOA) from both Oakland (OAK) and San Jose (SJC) in California. Plans called for a rapid ramp up of service to those initial cities, plus Hilo (ITO) and Lihue (LIH) in Hawaii, and from Sacramento (SMF) and San Diego (SAN) on the US mainland.
But then Southwest’s best laid plans for Hawaii went awry.
The 737 MAX was grounded in March, throwing a wrench into Southwest’s growth plans. The carrier is the largest US operator of the aircraft, with 34 737 MAX 8s at the time of the suspension and a previous expectation to have 68 MAXes by the end of the year.
Southwest was forced to put its Hawaii plans on hold as it dealt with the operational issues stemming from the MAX grounding. Newark (EWR) has been dropped from its network, at least 13 routes suspended, and numerous flights cancelled as a result.
As a result, the airline will operate roughly 8% less capacity at the end of 2019 than it planned to at the beginning of the year, said Romo. Based on Southwest's initial plans to grow by nearly 5% this year, this means it will actually shrink by roughly three percentage points because of the MAX.
But Hawaii continues to beat expectations. This was a driver of Southwest’s decision in August to continue with its expansion to the islands, even as it continued to work to mitigate the impact of the MAX grounding.
On Jan. 19, Southwest will begin six new Hawaii routes: Honolulu-Hilo, Honolulu-Lihue, Honolulu-Sacramento, Kahului-Kona, Oakland-Kona, and San Jose-Lihue. Two days later it will add service between Oakland and Lihue, and San Jose and Kona.
Notably, even as the carrier moves forward with its Hawaii expansion, all of the new routes begin only after it expects the 737 MAX to resume flying on Jan. 6.
Southwest sees a lot of opportunity to continue to grow in Hawaii, and elsewhere, said Romo. That growth just will not occur until 2020 at the earliest.