January, 2002

Hawaii is so dependent on airlines that the state became its own worst enemy in the wake of the Sept. 11 terrorist attacks. As federal officials ordered a shutdown of airports across the nation, Hawaii scrambled to accommodate thousands of stranded passengers – including those from seven diverted international flights. The result: billions of dollars in lost revenues.

The past few months have been clouded with turbulence, but the future seems clearer these days. We now know that September 2001 and October 2001 visitor arrivals to Hawaii dropped 34 percent and 30 percent over the same months in the previous year. International passenger arrivals in September fell 43.5 percent, while the number of domestic passengers dropped 28 percent. What was supposed to have been an 8.5 percent drop in air seat capacity last September, turned out to be an 18.1 percent decline, instead. “It’s a challenge for the airline industry – we’ve reduced capacity 30 percent across the board,” says Tom Renville, managing director-Hawaii for United Airlines.


Aloha Airlines: Less than two weeks after airports resumed operation, Aloha Airlines reduced its interisland flights by 26 percent, or 121 flights per day. Jet services between Maui and Hilo and from Maui to Kona were replaced by sister company Island Air. Island Air, in the meantime, upped its daily flights from 38 to 54, using 37-seat propeller aircraft. Aloha Airlines continues to operate its Boeing 737 fleet for flights to the U.S. mainland. As of late November, the company laid off 250 of its 3,000 employees.

Hawaiian Airlines: The number of Hawaiian Airlines passengers dropped 21.4 percent and 15.8 percent in September and October. Load factor rose 4.5 percent between September and October, however, that was a result of a 20 percent cut in services. The company in late September furloughed 430 employees, or 12 percent of its workforce of 3,524. Economic uncertainties, however, did not stop Hawaiian Airlines from introducing the first of 16 new Boeing 767-300 Extended Range aircraft on Sept. 15. The wide-bodied, fuel-efficient planes will replace the DC-10 fleet by the year 2003 – a corporate agenda that was executed more than a year before the Sept. 11 incident. Early last year, the company began replacing its DC-9s with Boeing 717-200 aircraft.

United Airlines: The carrier reduced its overall operations by 27 percent, affecting daily direct flights to and from Hawaii and the U.S. mainland. Immediately after Sept. 11, United cut two daily nonstop flights each between Hawaii and San Francisco and Hawaii and Los Angeles. However, load factors between the Islands and the mainland average 80 percent. Of the company’s 1,800 Hawaii-based team, 200 positions were furloughed. Not only did United offer these employees 90 days of medical benefits, but they also provided job-placement services over the company’s intranet.

Continental Airlines: The Houston-based company beginning Feb. 15 is scheduled to add a second daily nonstop flight between Honolulu and Houston, which will boost Hawaii services 23 percent. Approximately 60 of the company’s 500 Hawaii-based employees have been laid off. The majority chose early retirement, while the rest joined other Continental posts in the U.S. mainland or in Micronesia. On Oct. 1, the air carrier introduced Boeing 767-400 extended-range planes, which replace the older DC-10s.

Japan Airlines: Flights from Japan to Hawaii between November 2001 and March of this year either were temporarily suspended or reduced. During the holiday season, Japan Airlines cut its Tokyo-Honolulu flights from 24 to 14, and Osaka-Honolulu flights from 14 to seven. The airline late this year is scheduled to merge with Japan Air System Co., under an incorporated holding company. It will create the world’s sixth-largest carrier.


“I think people are coming back despite the terrorist attacks,” says Ron Wright, managing director for Continental Airlines. “With 4,000 to 5,000 flights a day, it’s still safer to fly statistically than it is to drive.”

In the case of Hawaii, where driv-ing is not an option, security is a crucial issue. Luggage checks, U.S. air marshals and camouflaged National Guardsmen are now a normal part of the travel routine. All aircraft have been installed with reinforced cockpit doors. United Airlines announced on Nov. 19 that it would supply its cockpits with Taser weapons, stun guns that fire an electronic charge that temporarily disables an attacker. Hawaii-based United officials at the time of this writing (one week after the announcement) still had no formal plans to install the stun guns. The skies are safer now, but to what degree do airport personnel scrutinize passengers, without smudging the lines of customer service?

To curb dramatic losses sustained by airlines, the U.S. government on Sept. 21 passed the Air Transportation Safety Stabilization Act, which allocated $10 billion toward federal loan guarantees and credits. Another $5 billion compensated passenger and cargo airlines, including those that service the Islands. Locally, the Hawaii state government dispensed $10 million to jumpstart tourism, waive airline landing fees and lower rent for airport tenants.

“The airlines have been helped tremendously,” Wright says. “One of the things the local government can do is continue to have very robust promotional activities, marketing activities.”

President George W. Bush on Nov. 19 signed a federal aviation bill, designed to heighten airline security across the country. The bill mandates federal control of airport screeners, adds more federal marshals on flights and develops a database for checking passenger names.

There are additions to the bill, exemptions that Washington leaders created only for Hawaii; they allow Hawaii’s Department of Transportation to use federal airport-improvement funds for security and other air-transportation uses; allow Hawaii to send emergency and medical supplies throughout the Islands and to the mainland, in the event of another air travel ban; and permit local airports to bend security rules on interisland flights.

In addition, what the federal aviation bill also does is exempt local, interisland airlines from federal antitrust laws that ban airline companies from working together on schedules and pricing. As of this writing in early November, it was too early for Aloha and Hawaiian airlines to speculate on the anititrust exemption. “Although the exemption’s wording is broad, the only thing Hawaiian is seeking is the ability to try to coordinate flight schedules with Aloha,” says Keoni Wagner, senior director of corporate communications for Hawaiian Airlines. “If the two carriers can coordinate flight schedules to the extent that we reduce costly excess capacity, while still ensuring that there is plenty of service in each market to satisfy the need, we gain a level of efficiency posed by the post-Sept. 11 business environment.”

Airline industry leaders are optimistic that the security and financial measures will gradually boost business to pre-Sept. 11 levels. But the question remains: what else will it take to encourage passengers to fly again? “In the end, it really becomes an individual thing,” Renville says. “Some people will fly no matter what, because they have to or won’t let this incident change their lifestyle. It may be as simple as having the right schedules and making sure you have the right level of service. And others may want to take advantage of incentives – you’d be surprised.”

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Cathy S. Cruz