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... Currently, there are four local airlines to meet the inter-island needs, of which Hawaiian Airlines (Hawaiian) is the eldest being established in 1929. ... mainland and Hawaii (Hawaiian Airlines News Release 2001). It currently has 135 flights daily between the Hawaiian Islands, the western United States, and parts of the South Pacific with 3,285 employees to service its customers.
This unique setting presents many opportunities to Hawaiian, especially because of the large tourist industry that operates in Hawaii. However, because the overall airline industry is not doing well, there are also many threats that Hawaiian must deal with daily. These ominous threats are obvious because despite being one of the top two carriers in Hawaii, Hawaiian has struggled in recent years and this year has filed for Chapter 11 bankruptcy.
This paper will examine Hawaiian Airlines and present a plan of action for its future. First, we will examine the outside industry factors that affect Hawaiian and then will go into the strengths and weaknesses that Hawaiian must contend with when dealing with these factors. After analyzing the company, we will come up with a strategic marketing plan that will address marketing mix strategies, growth strategies, diversification, and differentiation in order to seek to help Hawaiian overcome threats, make the best of its opportunities, once again become a financially sound and profitable company.
External Analysis
Customer Analysis
Hawaiian Airlines services several markets - - they have 135 flights daily between the Hawaiian Islands, the west coast, and the South Pacific. In doing so, they are the largest airline carrier in the islands, although Aloha Airlines (Aloha) has a larger share of the inter-island market segment. As the largest carrier, Hawaiian can expect over six million passengers annually, but this is not all that much considering that there are over nine million passengers that make up just the inter-island market. ... (Appendices, figure 1) Therefore, airlines cut flights by an average of 20 percent in 2002 - - most of the cuts for both Hawaiian and Aloha were its inter-island flights. ... As for Hawaiian, they handle this through reduced fares and special vacation offers in and around Hawaii in order to entice customers.
As for the Hawaiian market, the airline industry has an oligopoly since it is the only feasible way to go between the islands at this time and there are only a few dominant carriers in the market. ... Aloha with First Hawaiian) to offer credit cards that customer can earn points towards their respective frequent flyer mile plan. ... The different airlines offer basically the same sort of services and flight times. ...
Many of the airlines are trying to retain customers by creating loyalty programs such as membership clubs and by offering frequent flyer miles. These miles can be earned by flying on the airline, using a credit card that has an agreement with the airline, or by flying on other “partner” airlines. In the case of Hawaiian, it has teamed up with Northwest Airline, Alaska Airline, America West, American, Continental, and Virgin Atlantic (hawaiianair. ... Also, Hawaiian has also made it possible to earn miles when a customer purchases goods and services such as groceries, gasoline, and also by eating at various restraints. ... (Hawaiianair 2003)
Currently Hawaiian airlines has agreements with companies such as Boeing, Alaska, American, Continental, Delta, Northwest, and other such companies who provide leasing, reservations, maintenance, computers and many other functions in the airline industry. These alliances with much larger companies have helped them maintain a dominant market position in the Hawaiian region. It’s most evident alliance has been with American Airlines - - In late 1993 Hawaiian Airlines entered into a series of marketing and services agreements with American Airlines parent AMR Corporation. Consequently, Hawaiian in 1994 converted its reservations and operating computer system to Americans SABRE system, became a participating carrier in Americans AAdvantage® Travel Awards program and replaced its entire wide body fleet of Lockheed L-1011 aircraft with DC-10 aircraft provided and maintained by American Airlines (Hawaiianair 2003)
As for its local market, Aloha is another leader in inter-island travel and Hawaiians main competitor in the local market. In addition to competing within the islands, they also battle Hawaiian on mainland traffic because they too have flights to the west coast. ... In fact, competition had become so fierce that there were talks of a merger between the two airlines in 2002. (Hawaiian News Release 2002)
Market Analysis
Between 1997 and 2000 the airline industry market increased by 6. ... However, the airlines market then lost over $7 billion in value from 2000, attributable to the slowing economy in 2001 and the September 11 hijackings, which prompted an unprecedented decline in air travel. ... The first part of the $15-billion bailout, $5 billion of direct cash aid, went to the airlines based on their market share. This cash was meant to keep the airlines from going broke in the aftermath of the Sept. ... (USA Today 2003) The rest of the federal aid is $10 billion in loan guarantees, so that the airlines can again tap the capital markets for financing, with lenders and investors knowing the U. ... Theres speculation one guideline will be the boards confidence in the airlines survival if the carrier gets the loan. ... (World Information 2003)
It is also important to look at international travel since the passengers on these flights often use Hawaiian or Aloha to visit between the islands while in Hawaii. ... For example, Delta Chairman Leo Mullin testified before Congress that post-9/11 security costs imposed on airlines total at least $4 billion a year. ... As for Hawaiian, in 2003 they introduced state-of-the-art, self-service check-in terminals to enhance customer convenience and speed the check-in process for all electronically ticketed passengers. ... (Hawaiianair 2003) Also, in 1998 Hawaiian purchased the PeopleSoft Package. ... (Gomes 1998) Thirdly, Hawaiian purchased 14 Boeing 767-300ER planes, which in 2001 allowed it to be the first to have 180-minute ETOPS without previous experience. ...
It became apparent that no airline carrier could escape the snowballing effect of the industry, and Hawaiian was no exception. ... This led to the talks of the merger between Aloha and Hawaiian that began in December of 2001. Although this sounded economically sound on paper, the combined 6000 employees of Aloha and Hawaiian were worried about the lay offs and work changes. ... The antitrust exemption allowed the inter-island capacity to be divided between Aloha and Hawaiian airlines. ... mail is flown on Aloha Airlines. ... (Peltz 2001)
Hawaiian had previously filed for Chapter 11 once before, in 1993. ... Hawaiian announced that they would discontinue pursuing the merger. Reasons given for the abandoned merger were 1) Aloha Airlines’ public statements concerning the merger and 2) Hawaiian’s decision not to extend the April 18 deadline for concluding the agreement (Hawaiian Airlines News Release 2002). It is unclear why Hawaiian decided to pull out of the merger because they decided not to comment publicly about it. ... After it had been decided there would not be a merger, stocks fell about 28% (Lynch and Shapiro, 2002)
After the failure of the merger, Hawaiian and Aloha airlines implemented an antitrust exemption, in which capacity has been divided between the two companies. ... However, despite promising results because of the coordination between Aloha and Hawaiian, as of March 2003 the state airline industry has still lost about $100 million (Lynch, 2003). To make up for this loss, the legislature has asked Hawaii’s congressional delegation to push for a broader antitrust exemption allowing Hawaiian and Aloha to divide up particular routes and schedules, not just inter-island capacity. However, Hawaiian does not support this additional exemption because it does not see it as practical because the two airlines are so different - - Hawaiian wants to just continue with the current antitrust exemption. ... (Star Bulletin 2003)
In March 2003, once again Hawaiian filed for Chapter 11 bankruptcy. This means that Hawaiian Airlines is not required to pay debts incurred prior to filing Chapter 11 until after court approval, which tends to be a long process (Lynch, 2003). The court will likely allow Hawaiian Airlines to pay wages and other expenses to maintain all of its current operations. ... It has also been rumored that the reason for the filing is so that Hawaiian could be exempted from its current contract it has with Boeing. This is causing ill will between the two companies, and Boeing seeking to replace Hawaiian’s management with a trustee to oversee the reorganization process. ... (Tribune Business Times 2003)
Internal Analysis
Strengths
Hawaiian has managed to stay in business since 1929 because of the strength of its employees and the foresight of its management team to see the benefits of alliances and partnerships. Hawaiian does have many partnerships, some of which include other airlines, credit card companies, restaurants, etc in order to expand its reach of the market and to offer better services to its customers. Hawaiian’s main strengths include:
Increased Efficiency
As a result of the economic downturn Hawaii experienced after the terrorist attacks of September 11, 2002, the airline industry has undergone many measures to cut costs (Furloughs, reduction of flight availability, etc. ... But the two airlines will survive because of better efficiency. ...
Also, in an effort to further increase efficiency, Hawaiian has made steps to offer more long haul flights (Hawaiianair 2002) to keep down the operation costs associated with downtime between flights. This is because it is believed that “such long-haul flights are the airlines best bet for financial recovery” according to analysts because they allow the businesses to offset the high cost of operations with higher ticket prices than the short inter-island flights can command. ... For example, Aloha should be capitalizing on its inter-island cargo strengths and Hawaiian touting its long-haul expertise. (Hooper 2002)
Partnership with cruise lines (increased patronage)
A new contract partnering Hawaiian Airlines with cruise liner Renaissance Cruises will allow Hawaiian the ability to siphon Renaissance’s customers into its own patronage with the use of package deals and incentives. It is a lucrative option since under the $85 million contract Hawaiian will remain the exclusive provider of nonstop service for Renaissance Cruises between Los Angeles and Tahiti. Hawaiian is excited about this prospect and believes that this contract gives Hawaiian Airlines a wonderful opportunity to “build on the strengths of our charter operations while providing Renaissance’s clientele our special brand of Island-style service and hospitality.” (Isidro ****)
Service
As one of the two main Hawaii airlines, Hawaiian has received more accolades for its service (both in flight and general customer relations) than its competitor Aloha. In fact, Hawaiian Airlines was recently named the top airline in the U. ... Hawaiian even proclaims on its website that it is their business policy to respond substantively to complaints within thirty business days of receipt from customers. ... In fact, Hawaiian has never had an in-flight fatality and Quantas is the only other airline that can also claim this achievement.
Hawaiian Miles.
Hawaiian Airlines has been able to build on its reputation as a customer friendly airline by instituting a rewards program that its customers have responded to in a positive way. Hawaiian Miles enables Hawaiian customers to accumulate points by making purchases at selected retail/dining/entertainment businesses. These points are applicable toward free flights and upgrades on Hawaiian Airlines. At the beginning of 2000, Hawaiian Miles evolved into E-Awards, but offers the same rewards for patronage at select businesses. The difference is an increased client-base of businesses that honor the Hawaiian miles rewards program. ... In addition, having a Hawaiian Miles card allows customers to get discounts from local vendors, such as Hungry Lion and Hy’s Steak House.
Approximate Word count = 9721
Approximate Pages = 38.9
(250 words per page double spaced)
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