Hawaii's EAS Airports Caught Up in Expanding Air War

Three airlines - Aloha, Hawaiian and upstart go! - are locked in a fare war in Hawaii's lucrative major market airports that has featured lawsuits, allegations of industrial espionage and ticket prices so low they might be mistaken for cab fare.

Now, it seems the war has opened a new front - Hawaii's small airports - and dragged at least two more carriers - Island Air and Pacific Wings, LLC - into the combat.

The new hostilities come after go!, a unit of Mesa Air Group, signed a code sharing agreement with inter-island carrier Mokulele Airlines. Beginning in mid-December, Mokulele will fly as go! Express on routes from Honolulu to Kapalua, Maui, Lanai and Molokai. Island Air and Pacific Wings already fly similar routes.

Earlier this week, Pacific Wings asked the U.S. Department of Transportation to investigate Mokulele for allegedly violating a handful of DOT guidelines including using the go! Express name before it was certified to do so and misrepresenting financial and personnel information on government filings.

Pacific Wings declined to comment pending the outcome of an investigation, but Mokulele's Chief Operating Officer Rob McKinney called the move "dirty tricks" and said Pacific Wings intended to "throw dust up instead of actually competing."

There could be more sparks in the near future. The DOT is soliciting bids for a two-year contract to operate subsidized flights to a trio of even smaller island airports - Hana, Kalaupapa and Kamuela - that wouldn't receive service otherwise.

Pacific Wings, which holds the Essential Air Service contract, is expected to bid as will Mokulele.

Pacific Wings has received about $3.1 million in subsidies over the life of its contract to fly 40 weekly, round-trip flights between the EAS airports and Honolulu and Kahlui airports. The new contract begins in April. The DOT is accepting bids through Nov. 30. It evaluates the contracts based on service reliability, agreements with larger carriers to provide service beyond the hub, community input and the amount of subsidy requested.

While go! is operating at a loss against Hawaiian and Aloha at Hawaii's larger airports, aviation experts do not think Mokulele or Pacific Wings will low-ball the bid for EAS service just to win the contract.

"You are playing with fire if you try to undercut yourself because of the uncertainty in the price of fuel these days," said Mike Mooney, senior vice president of The Boyd Group. "Fuel prices could jump because of the Iranian thing or a number of other factors."

Mokulele's McKinney confirmed that view saying he believes Mokulele can win the bid by offering better, more convenient service than Pacific Wings.

"I plan to only bid what will be a viable bid. It's not going to be some bargain basement thing that won't sustain us," McKinney said. The bidding process has high stakes: Mooney said he does not believe there is enough of a customer base in the market to support non-subsidized flights.

Click here to access the DOT docket on the EAS solicitation.