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Island hauling

Hawaiian Airlines has undergone some far-reaching changes in recent years – including a venture into the maindeck market. Ian Putzger talks to Tim Strauss, vice president cargo sales and services

Since the demise of Northwest’s Boeing 747-200s and United’s DC-10-30s, freighters have been anathema in the boardrooms of US passenger airlines. But Hawaiian Airlines is once again singing from a different songsheet. On 21 July, the carrier announced the acquisition of three ATR 72 cargo aircraft set to operate between the Hawaiian islands. The service is slated to commence in the first half of next year, once the FAA has given its blessing.


The turboprops can carry up to 18,000lbs of cargo and will be able to handle five 88ft x 108ft pallets, up to seven LD3 containers, skidded cargo, and oversized shipments.


“Our customers have asked for a single-provider solution for movement to all major destinations within the state of Hawaii,” says Strauss. “The ability to handle inter-island containerised and palletised cargo will provide greater flexibility for any of our customers seeking seamless connections from our longhaul flights, as well as helping to grow the business on both our widebody and Boeing 717 services.”


The acquisition should give a significant boost to the airline’s share of the intra-island business, where its position has been relatively modest so far. Air freight between the islands moves predominantly on freighters, so Hawaiian has handed over a lot of its incoming volume to a competitor for the intra-islands leg, Strauss says, adding that maindeck lift within Hawaii commands higher yields.


“With the ATR 72s we can shift LD3s right across from other aircraft,” he states. This should translate into transit times of about 45 minutes, which is important for perishables, he notes.


He admits that management spent a long time thinking about this venture. “There are not many markets where we would do this,” he says. With the inter-island connection in place, Hawaiian can go after customers who look for end-to-end solutions.


Elsewhere, another big opportunity lies in the rise of online shopping. “A big driver for us is the growth in the e-commerce world. Expectations are for nearly 10% CAGR for the foreseeable future – some 57% growth from 2014 to 2018.  As much of this moves by air in Hawaii, the entire market should continue to expand nicely,” remarks Strauss.


The move into the maindeck market is not the only area where Hawaiian has bucked the trends among US legacy carriers. Strauss points out that while American, Delta and United dwarf his outfit in terms of cargo volume, the smaller carrier has eclipsed them in terms of growth momentum. Whereas the cargo share of overall revenues has declined at the large carriers, it has kept rising at Hawaiian, propelled by sustained double-digit growth in recent years. Now, its growth is the highest among them, including Alaska Airlines with its maindeck capacity.


In fact, Hawaiian’s growth in cargo resembles the trajectory of the Middle Eastern carriers more than its larger US rivals – cargo revenues climbed 103% between April 2012 and May 2015. In the first quarter of this year, Hawaiian’s non- passenger revenue was up 25.1%. Cargo, the big driver behind this, was up slightly more according to Strauss.


This meteoric growth is the result of a massive transformation caused by both a change in fleet strategy and a stronger focus on cargo. A fleet overhaul brought in Airbus A330-200s and shifted the airline’s focus away from the intra-islands and US mainland-Hawaii lanes and on to the international arena, with expansion across the Pacific. At the same time, cargo got new management with a mandate to grow the business. Strauss, formerly a senior cargo executive with Northwest and Delta, was put in charge.


The fleet overhaul was built on the introduction of the A330-200s, a move that is going to bring Hawaiian’s line up of widebodies to 29 or 30 when all the aircraft are in. Armed with the new type, the airline has started to expand its reach, launching flights to various points in Asia (such as Beijing, Seoul and Tokyo), Australia and New Zealand. The opening of a route to Taipei in 2013 turned the balance from a preponderance of US destinations to a majority of international points in the network.


Given a relatively slim basis for origin and destination traffic, Hawaiian has a strong focus on transit moves over its Honolulu hub. With the expansion of its international network, the share of interline volume has declined as transfers between Hawaiian’s own flights have gone up. In the past, interline cargo made up as much as 30% of the loads in its widebodies. While this traffic has grown in terms of volume and revenue, its share has dwindled below 5%.


The other big catalyst for growth has been management’s decision to expand the cargo business. Culturally, this has manifested itself in greater flexibility and a willingness to take on business that had previously been deemed unsuitable. Strauss cites the route between San Jose (CA) and Maui, where Hawaiian originally chose not to carry freight due to a lack of cargo infrastructure in San Jose. Now, the airline trucks in freight from Los Angeles on a daily basis, with all the TSA-related paperwork completed before the truck departs LA.


“There was no cargo business in the past. Now we are almost consistently full,” remarks Strauss. “We learned to say yes, where in the past we would have said no.”


To many of the sales force, this new attitude arguably came quite naturally. That being said, in Hawaii the airline uses GSAs to sell its cargo services. Strauss is happy with the initiative that these have shown, adding that they are remarkably strong on the operations side, too. “I don’t think we would get the same benefits if we put on our own people,” he reflects.


The latest piece in his expansion jigsaw is a new IT platform that went live in late June, after trials that had commenced back in November 2014. Hawaiian went from an earlier version of iCargo to SmartKargo, a cloud-based set-up that is intuitive and logical, according to Strauss. “Our employees love it,” he declares. >>

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