As Hawaii reopens to tourists with a plan that lets travelers sidestep the state’s 14-day quarantine for arrivals, few companies stand to gain more than Hawaiian Airlines. Then again, few have lost more because of the shutdown.
With Hawaii’s tourism industry largely shuttered since March, the state’s dominant carrier has mostly grounded its fleet rather than flying empty airplanes across the Pacific Ocean. But that hasn’t kept the airline from bleeding millions of dollars and shedding thousands of employees.
The question is when will travel to Hawaii and elsewhere bounce back enough to help Hawaiian and other airlines rebound to where they were before the crisis? The answer: nobody knows for sure, but it’s not likely to be soon.
“This is clearly a crisis without precedent in the airline industry,” Avi Mannis, Hawaiian’s senior vice president of marketing, said this week during an online airline industry panel discussion hosted by the University of Hawaii Manoa Shidler College of Business.
As a whole, domestic air traffic in the U.S. is down 70% compared with the same time last year, Mannis said, and about one third of the U.S. commercial airline fleet is grounded.
The last “even remotely comparable crisis,” Mannis said, was the terrorist attacks of Sept. 11, 2001. But the impact from COVID-19 is proving more significant and the recovery slower. For example, Mannis said, four months after 9/11, passenger traffic was down about 15%. Four months into the COVID-19 crisis, he said, passenger traffic was down 80%.
As bad as COVID-19 has been for U.S. aviation in general, it’s been especially bad for Hawaiian. Gov. David Ige’s 14-day quarantine order, which he issued in March, caused Hawaiian’s demand to drop by 97% to 98%, Mannis said.
Meanwhile, the company has been spending about $3 million a day to cover fixed costs, he said. With little revenue coming in from operations, Hawaiian has had to borrow hundreds of millions of dollars to cover the expenses, Mannis said.
That’s on top of the $290 million it received to pay employees under the CARES Act’s $25 billion Payroll Support Program for airlines. The problem is, like with much of the CARES Act money for small businesses and individuals, that $290 million has run out. As a result, Hawaiian earlier this month was forced to cut some 2,500 employees, about a third of its work force, including many who took early retirement.
Dearth Of Data Makes Forecasting Impossible
When all of this might turn around is unclear, even for the airlines, which are known for their ability to use data and forecasting to plan how to deploy their enormously expensive airplanes and armies of crew needed to staff them.
“It is very difficult for us right now to put forward a definitive forecast,” Mannis said. “We’ve stopped using that word internally, and we talk a lot about planning assumptions.”
One planning assumption, Mannis said, envisions the airline’s capacity to be 15% to 25% smaller come next summer.
During the panel discussion, Daniel Chun, Alaska Airlines’ director of sales, community and public relations for Hawaii, said Alaska shares the view, assuming capacity could be 20% smaller by next summer.
Hiroshi Shibata, vice president and general manager for All Nippon Airways’ Honolulu office, said the Japanese aviation industry envisions it will take two years to recover.
It’s not surprising that the airlines are having trouble predicting a recovery, said Carl Bonham, executive director of the University of Hawaii Economic Research Organization who also forecasts state tax revenues for policymakers as an economist with the Hawaii Council on Revenues.
There’s been so little air travel to and from Hawaii for so long that the carriers don’t have a lot to go on, he said.
“It’s not surprising that the airlines wouldn’t have a lot of data to plug into their forecasting models,” he said.
Even Thursday’s restart is more like a “soft opening,” Bonham said, as possible bugs get worked out and word gets out to potential travelers about Hawaii’s pre-travel testing program.
Further confounding the ability to predict the future is that there are many unknowns beyond anyone’s control, like whether there’s a spike in cases from residents or travelers, that put the reopening at risk.
In a few weeks, a picture could start to get clearer, Bonham said.
“By this time in November we could have quite a bit more information,” he said. “But that information can change at the drop of a hat.”