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AMA Hawaii talks with Mark Dunkerley, CEO of Hawaiian Airlines
 


AMA:  You have new aircraft on order … what do you have in store for them? 

Mark Dunkerley:  What we’ve committed to is a fleet of new, state-of the art, efficient aircraft.  That commitment will give us a range of options.  The delivery of the aircraft is staggered in such a way to give us flexibility in how we deploy them.  We can grow rapidly, grow slowly, stay at the same size or even decline if the markets aren’t there.  We want the benefits of new fuel efficient aircraft, as well as the flexibility to address markets as they develop.  That’s a great strategic advantage, especially when we have seen conditions change as rapidly as they have in the past few years.

AMA:  As you consider utilizing these aircraft, are you considering new markets … and if you are, how are you assessing them?

MD:  We have two needs.  One is to replace existing, older equipment on the routes where we fly now and the second is to expand our business.  When it comes to expansion, we have choices as well.  We can increase lift to the cities where we fly now or, we can choose to open new markets.  If conditions stay the same as they are currently, we’ll see a balance of both these things.  As we’re getting larger, longer-range aircraft we will have more choice as to where they might be deployed.  The existing Hawaiian fleet of 767s can fly to all domestic markets, but the economics of flying to other domestic desitnations deeper into the continental US haven’t been compelling so far.  Destinations on the east coast have been on our list of potential new markets, but developing international markets is front and center for consideration. 

AMA:  Assuming the long term price of oil settles somewhere above $100/barrel, how does that affect your plans?

MD:  There are two things about oil that we have to consider:  What is the price of oil and what is its volatility?  There is nothing that you can do about volatility.  We set our prices based on what we think our fuel costs are going to be and we’re committed to honor the price of tickets that we’ve sold.  Short term volatility in the price of fuel directly determines whether we make short term profits or losses.   Longer term, the absolute price of oil affects the size of the core market – tourism.  Our principal business is unbelievably price sensitive.  So if the price of travel goes up x%, the demand will decrease by x%. 

AMA:  If fuel prices stay high and ticket prices go up, do consumers become adjusted to the higher prices? 

The bad news is that consumers are very price sensitive, so the price of oil has an affect on demand.  The good news is that tourism has a high income elasticity of demand … so as real standards of living improve and discretionary income increases, consumers spend more of their disposable income on travel.  So structurally, we have good news and bad news and it will be interesting to see which is the stronger force.

AMA:  You’re currently chairman of Hawai‘i Visitors and Convention Center board of directors … what should the state be doing now in light of the downturn in tourism?

My biggest view is that it is really essential not to be completely transfixed by the short term.  We’re in an industry where success depends on capital investment.  Capital investment has long lead times and long paybacks.  So the risk is that we will miss the long term opportunity if we are focused solely on the short term.  We certainly need to recognize that we’re in an economic recession, but the solution to these problems does not lie in short term fixes, but rather in a community pulling together to stay on top of its game and maintain our competitive position as a destination for the years ahead.