Hawai i Air Service Overview August 2012

Transcription

1 Hawai i Air Service Overview August 2012

2 2 What Are The Big Issues?

3 Each Region Has Different Concerns EUROPE Need for Nonstop Struggling Carriers JAPAN Capacity Deficit Low Fare Revolution ASIA Catching the Wave (China) Absorbing Capacity (Korea) Airline/Aircraft Fit (HK & SE Asia) Struggling Carriers OCEANIA Business Model Changes New Markets 3 NORTH AMERICA Consolidation Low Fare Entry LATIN AMERICA Small Market Sizes Potential

4 4 The Big Picture

5 The Global Airline Industry Remains Volatile Erratic energy prices equal instability. New business models are causing turmoil. Consolidation occurring through alliances and mergers. Rapid growth and instability in developing markets. Dramatic changes in Japan. Turmoil in Europe. Maturity & relative stability in the U.S. 5

6 6 Domestic Markets

7 The U.S. Domestic Market is Mature Effectively no growth in 2012 and into the future. Bankruptcies and consolidation have reduced the number of carriers and hubs. Carrier revenue performance has been strong. Driven by higher fares and new ancillary revenues. Low Cost Carrier (LCC) growth has stagnated. Rising energy costs have impacted industry economics. Some long haul flights are cost challenged. 7

8 Consolidation in the Domestic Market 83% of all passengers are now carried on just five airlines. Versus eight in Domestic Traffic Share By Carrier YE3Q06 vs. YE3Q12 YE3Q12 WN, 25% AA, 12% DL, 20% UA, 16% US, 10% B6 AS F9 YE3Q06 WN, 18% AA, 14% DL, 13% UA, 12% CO, 8% NW, 8% US, 7% HP B6 AS FLF9 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: Diio Mi/T 100 8

9 Mainline Carriers Have Lost Their Grip Value carriers no longer shy away from large O&D markets. Value Carrier Enplanement Share New York City 1999: 7% 2011: 24% Boston 1999: 5% 2011: 40% Denver 1999: 8% 2011: 46% San Francisco 1999: 9% 2011: 24% Is Hawai i next??? 9 Source: Diio Mi/T 100

10 10 Hawai i Domestic Overview

11 Hawai i Mainland Traffic is Nearly Recovered Hawai'i Local Demand Changes By Domestic Market Sector (four quarter rolling total % change from 2001Q4 base) 60% 50% 40% 30% 20% 10% 0% (10%) (20%) (30%) (40%) 11,278 PDEW "Base" 18,763 PDEW "Base" 14,677 PDEW +30% 13,181 PDEW (30%) 16,760 PDEW +49% Mainland (PDEW = Passengers Daily Each Way ) Inter Island 17,588 PDEW (6%) 13,644 PDEW +21% 15,254 PDEW +35% 12,787 PDEW (32%) Inter Island Markets Mainland Mkts Source: Diio Mi, US DOT 10% Coupon Sample 11

12 20.0% 15.0% 10.0% 5.0% Aug 12 Dec 12 Apr 13 Apr 04 Aug 04 Dec 04 Apr 05 Aug 05 Dec 05 Apr 06 Aug 06 Dec 06 Apr 07 Aug 07 Dec 07 Apr 08 Aug 08 Dec 08 Apr 09 Aug 09 Dec 09 Apr 10 Aug 10 Dec 10 Apr 11 Aug 11 Dec 11 Apr Mainland Seat Capacity is Still Recovering Annualized Mainland Capacity Change (Seats) (rolling 12 month % change versus April, 2004) Impending Growth 0.0% 5.0% Source: Diio Mi T 100 flown seats 4/2004 4/2012; scheduled seats 5/2012 4/2013

13 Nonstops to Big Island and Kaua i are Big Story 120.0% 100.0% 80.0% 60.0% Annualized Mainland Capacity Change (Seats By Airport) (rolling 12 month % change versus April, 2004) Kaua i (LIH) Big Island (KOA + ITO) 40.0% 20.0% 0.0% O ahu (HNL) Maui (OGG) 20.0% Apr 04 Sep 04 Feb 05 Jul 05 Dec 05 May 06 Oct 06 Mar 07 Aug 07 Jan 08 Jun 08 Nov 08 Apr 09 Sep 09 Feb 10 Jul 10 Dec 10 May 11 Oct 11 Mar 12 Aug 12 Jan 13 Source: Diio Mi, US DOT 10% Coupon Sample 13

14 14 Legacy Carrier Hawai i Ops Are Largely Stable

15 15 Alaska & Allegiant Are New Growth Players

16 Hawaiian Airlines is an Unparalleled Asset Hawaiian s vested interest in the market is an enormous advantage. Strengths: Quality brand. Inter Island dominance. Growing experience. Threats: Smaller global player. LCC growth. Lodging inventory. 16

17 Southwest Airlines Indications that Southwest is planning on entering the Hawai i market. Public statements from CEO. New s are ETOPS qualified. Working with unions. Carrier has recently slowed growth. Hawai i network will likely be focused on West Coast markets that currently have nonstop service. 17

18 Other Players The other two carriers to watch are Virgin America and JetBlue. Neither is capable of serving Hawai i today due to lack of A320 aircraft capability. New variants will address this issue. JetBlue just signed an expanded marketing relationship with Hawaiian. 18

19 19 The Inter Island Market

20 Shifting Inter Island Carrier Shares Inter Island Carrier Shares (YE 2007Q1) Mokulele, 2% Inter Island Carrier Shares (YE 2012Q1) Pacific Wings 1% Go!, 10% Aloha, 42% Hawaiian, 47% United 1% Pacific Wings, 1% Island Air, 7% Go!, 9% Hawaiian, 81% Source: Diio Mi, US DOT 10% Coupon Sample 20

21 Higher Costs = Higher Fares = Decreased Demand Hawai i Inter lsland Capacity Growth (Rolling 12 months Average Daily Outbound Seats) 37,000 36,000 35,000 34,000 33,000 32,000 31,000 30,000 29,000 28,000 27,000 26,000 25,000 24,000 23,000 22,000 Growth driven by HA Maui Hub Operation Jan 13 Aug 12 Mar 12 Oct 11 May 11 Dec 10 Jul 10 Feb 10 Sep 09 Apr 09 Nov 08 Jun 08 Jan 08 Aug 07 Mar 07 Oct 06 May 06 Dec 05 Jul 05 Feb 05 Sep 04 Apr 04 Source: Diio Mi, US DOT T

22 Inter Island Capacity by Island 60.0% 50.0% 40.0% 30.0% Maui (OGG + JHM) Big Island (KOA + ITO) 20.0% 10.0% O ahu (HNL) Jan 12 Apr 12 Jul 12 Oct 12 Jan 13 Apr 13 Apr 04 Jul 04 Oct 04 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06 Apr 06 Jul 06 Oct 06 Jan 07 Apr 07 Jul 07 Oct 07 Jan 08 Apr 08 Jul 08 Oct 08 Jan 09 Apr 09 Jul 09 Oct 09 Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct Annualized Inter Island Capacity Change (Seats By Island) (rolling 12 month % change versus April, 2004) 0.0% 10.0% 20.0% 30.0% Kaua i (LIH)

23 $80 $70 $60 $50 $40 $30 $20 $10 $ Q4 Inter Island Fares Have More Than Doubled Inter Island Revenue & Fare Growth (Rolling four quarters daily each way) +$36 each way $1.0 $0.9 $0.8 $0.7 $0.6 $0.5 $0.4 $0.3 $0.2 $0.1 $ Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q4 23 RDEW (USD Millions) Avg. Fare Source: Diio Mi, US DOT 10% Coupon Sample

24 24 International Markets

25 Strong Growth Trend Across All Intl Markets 30.0% 25.0% Annualized International Capacity Change (Seats) (rolling 12 month % change versus April, 2004) 26.2% 20.0% 15.0% 14.6% 10.0% 5.0% 0.0% 5.0% 10.0% Apr 04 Sep 04 Feb 05 Jul 05 Dec 05 May 06 Oct 06 Mar 07 Aug 07 Jan 08 Jun 08 Nov 08 Apr 09 Sep 09 Feb 10 Jul 10 Dec 10 May 11 Oct 11 Mar 12 Aug 12 Jan % 20.0% 14.6% Source: Diio Mi T 100 flown seats 4/2004 1/2012; scheduled seats 2/2012 4/

26 26 Canada

27 Canada Capacity Approaching Decade High 50.0% 40.0% 30.0% 20.0% 10.0% Canada Annualized International Capacity Change (Seats) (rolling 12 month % change versus April, 2004) 39.4% 33.0% 0.0% 10.0% Apr 04 Sep 04 Feb 05 Jul 05 Dec 05 May 06 Oct 06 Mar 07 Aug 07 Jan 08 Jun 08 Nov 08 Apr 09 Sep 09 Feb 10 Jul 10 Dec 10 May 11 Oct 11 Mar 12 Aug 12 Jan % 13.7% Source: Diio Mi T 100 flown seats 4/2004 1/2012; scheduled seats 2/2012 4/

28 Air Canada & WestJet Compete heavily out of Vancouver. Air Canada operates a full service model. Fighting significant financial challenges. WestJet is an extremely successful low fare carrier. Operates less than ideal aircraft to Hawai i. 28

29 29 Japan

30 Japan Capacity Has Mostly Recovered 20.0% 15.0% 10.0% 5.0% Japan Annualized International Capacity Change (Seats) (rolling 12 month % change versus April, 2004) 15.3% 9.8% 0.0% 5.0% Apr 04 Sep 04 Feb 05 Jul 05 Dec 05 May 06 Oct 06 Mar 07 Aug 07 Jan 08 Jun 08 Nov 08 Apr 09 Sep 09 Feb 10 Jul 10 Dec 10 May 11 Oct 11 Mar 12 Aug 12 Jan % 15.0% 20.0% 14.9% Source: Diio Mi T 100 flown seats 4/2004 1/2012; scheduled seats 2/2012 4/

31 Japan Market is Now More Diverse Less dependent on JAL and Narita. Japan Hawai i Capacity Share 2007 vs JL, 32% DL, 31% HA, 15% CI, 8% NH, 8% UA, 6% 2007 JL, 48% DL, 25% CI, 6% NH, 6% UA, 15% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 31 Source: Diio FMi

32 Other Low Fare Carriers Have a Watchful Eye The Japan Hawai i market is a huge leisure market currently dominated by legacy type airlines. JetStar and Air Asia are in the process of setting up Japanbased regional operations. Skymark acquiring A380 and A330 aircraft. Hawai i will naturally become a market of interest for these carriers long haul affiliates. 32

33 33 China

34 34 China Revenue Is Up More Than 3x Since 09 China Hawai i Demand (Rolling 12 months daily each way) Passengers 0 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 Apr 10 May 10 Jun 10 Jul 10 Aug 10 Sep 10 Oct 10 Nov 10 Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Source: Diio FMi

35 Most Traffic Still Travels Via Seoul & Tokyo The majority of passengers traveling between China and Hawai i now transit via Seoul. 82% of Chinese visitors to Hawai i transited a non China gateway. ICN NRT Nonstop Other China Hawai i Demand By Gateway 24% 18% 15% 40% HND 3% 35 Source: Diio FMi

36 China Carrier Overview Chinese carriers have been reluctant to jump into the market for a few reasons: Visa issues. Aircraft constraints. First mover reluctance. China Eastern s entrance was an important first move. Dramatically different conversational tone in 2012 versus past years. Seasonal charter opportunities. 36

37 37 South Korea

38 Visa Waiver a Huge Success for Hawai i 400.0% 350.0% 300.0% 250.0% 200.0% 150.0% 100.0% 50.0% 0.0% 50.0% Apr 04 Sep 04 South Korea Annualized International Capacity Change (Seats) (rolling 12 month % change versus April, 2004) Feb 05 Jul 05 Dec 05 May 06 Oct 06 Mar 07 Aug 07 Jan 08 Jun 08 Nov 08 Apr 09 Sep 09 Feb 10 Jul 10 Dec 10 May 11 Oct % Mar 12 Aug 12 Jan 13 Source: Diio Mi T 100 flown seats 4/2004 1/2012; scheduled seats 2/2012 4/

39 South Korean Market Carrier Overview Revenue has kept pace with traffic growth. Seoul has become the primary transit point for China Hawai i traffic. Korean now at double daily service. New entrants Asiana and Hawaiian already going to daily service. 39

40 40 Taiwan

41 Taiwan Market Carrier Overview Taiwan revenue has been flat for several years. China Airlines current daily service is routed via Tokyo Narita. Impending U.S. visa waiver program likely to lead to substantial growth. 41

42 42 Hong Kong & Southeast Asia

43 43 Hawai i is Ripe for Hong Kong Capacity 70 Hong Kong Hawai i Demand (Rolling 12 months daily each way) Passengers 0 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 Apr 10 May 10 Jun 10 Jul 10 Aug 10 Sep 10 Oct 10 Nov 10 Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Source: Diio FMi

44 Hong Kong Market Carrier Overview Carrier related obstacles stand in the way of Hong Kong service. Cathay Pacific operates aircraft capable of operating to Honolulu. However, the carrier operates in the premium segment of the market. Dragonair and Hongkong Airlines are currently operationally precluded from serving Hawai i from Hong Kong. Opportunity for Hawaiian? 44

45 45 SE Asia Carrier Evaluation & Recruitment

46 46 Oceania

47 Oceania Capacity at Record High and Climbing 40.0% 30.0% 20.0% 10.0% Oceania Annualized International Capacity Change (Seats) (rolling 12 month % change versus April, 2004) 14.1% 34.6% 0.0% 10.0% 20.0% Apr 04 Sep 04 Feb 05 Jul 05 Dec 05 May 06 Oct 06 Mar 07 Aug 07 Jan 08 Jun 08 Nov 08 Apr 09 Sep 09 Feb 10 Jul 10 Dec 10 May 11 Oct 11 Mar 12 Aug 12 Jan % 40.0% 50.0% 42.1% Source: Diio Mi T 100 flown seats 4/2004 1/2012; scheduled seats 2/2012 4/

48 Oceania Market Carrier Overview Until now, the Oceania Hawai i market has been concentrated at Sydney. Hawaiian adds Brisbane in November 2012 and Auckland in March JetStar adds Melbourne in December

49 49 International Opportunities

50 Opportunities Are Focused On The Pacific Rim Bang for the buck is greatest in markets reachable nonstop. 4,500 4,000 3,950 Top International Markets By Daily Passengers Each Way (ranked for period YE March, 2012) 3,500 3,000 2,500 2,000 1,500 1,214 1, Source: Diio FMi

51 Opportunities Will be Driven By Fleet Growth Asia/Pacific growth opportunities will be driven by fleet growth. Boeing forecasts 11,450 new airplanes will be delivered in the region by

52 Aircraft Range From HNL Economic factors, along with aircraft capability, limit the markets airlines will choose to deploy aircraft in. 6,000sm 767 A330 7,500sm A350 ETOPS Restrictions Crew Time Fuel Price Aircraft Configuration Aircraft Value vs. Opportunity 52

53 Increasing Premium Traffic is an Important Goal Global competition is increasing and geographic isolation does Hawai i few favors in terms of aircraft economics. Building and retaining a premium airline revenue base is vital to ensuring continued growth. Fewer frequent flyer awards. More business, meeting and convention travel. 53

54 54 Moving Forward

55 Moving Forward Hawaiian Airlines is a precious resource. Stability in the Inter Island market has empowered the carrier to expand internationally. Mainland market growth will likely be driven by newer entrants like Alaska, Allegiant, and others. The most significant growth potential lies in Asia/Pacific markets reachable by nonstop flights. Oceania, China, Taiwan, Korea and Japan. Asian airlines are GROWING. 55

56 Questions? Brad DiFiore Managing Partner Will Berchelmann Managing Partner 56