By Kari Paul, MarketWatch
Traveling to the Hawaiian islands could soon be easier — and less expensive.
On Wednesday, the Federal Aviation Administration granted approval to Southwest Airlines to expand routes there. The budget airline’s entrance into the market could lead fares to the state to decrease by 30% across all carriers, an analysis published by Morgan Stanley analyst Rajeev Lalwani found.
The airline has said it will start offering low-cost flights to the islands by the end of 2019. It plans to open up flights at four airports there: Daniel K. Inouye International Airport in Honolulu (HNL), Kahului Airport on Maui (OGG), Lihue Airport on Kauai (LIH), and Ellison Onizuka Kona International Airport at Keahole (KOA) on the leeward side of The Island of Hawaii.
Southwest /zigman2/quotes/201071949/composite LUV -0.71% did not respond to request for comment, but confirmed the first test touchdown at Daniel K. Inouye International Airport in a press release on Feb. 5. One-way fares to Hawaii currently hover around $200, the Morgan Stanley report said, but Southwest has hinted at entry-level fares of $100-140 from California. This could have major effects on other carriers there, including Alaska /zigman2/quotes/200972303/composite ALK -0.21% and Hawaiian /zigman2/quotes/203188135/composite HA -2.34% airlines, the report said.
The market in Hawaii is complicated, said Christopher Elliott, airline expert and consumer advocate at Elliott.org, and it’s difficult to say if these new flights will bring down all costs. Costs of inter-island flights will likely be more significantly affected than those between the continental U.S. and Hawaii, he said.
“The flights within the islands will be more competitive, as they are more expensive historically,” he said. “I would expect prices in some markets will go down but not in all of them.”
Hawaii is historically a tricky market to enter, Elliott said. Allegiant Air /zigman2/quotes/208507686/composite ALGT -0.28% previously tried to expand to the area in 2012 but started phasing out the flights by 2015 and ended the route entirely by 2017. The long flight over the Pacific Ocean requires additional maintenance of planes and flying between islands to small airports can be complicated as well, he said.
Southwest will be adding 17 planes over the next 12 to 18 months, the Morgan Stanley report said, and price reductions are expected by mid to late 2020.
“When it comes to Hawaii, Southwest is in a unique position as the disruptor,” the report said.
Shares of Southwest were down 7.7% over the past 12 months as of Wednesday, compared to a 2.4% increase for the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.95% and a 1.82% increase for the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.39% .