Maui Log

Pacific Business News reports that a majority of people responding to a recent survey have yet to ride the Superferry. Of the over 700 responders 85% say they have not yet ridden the ferry, 14% say they have and I guess the other 1% is not sure.

What surprises me is that this is news. Honolulu’s population is just over 900,000. Superferry just had it’s best month ever with a little over 20,000 riders. You do the math, most residents have not yet ridden the Superferry.

There were some interesting comments from a few riders though. To quote one responder:

“Have made about six trips with my car and I love it. With the shutdown of Aloha and interisland fares consistently going up, I would guess some of the so-called ‘Superferry activists’ both here on Maui and Kauai are re-thinking their position.”

Use the link above to see the rest of the comments in their original context.

Any “Superferry activists” out there re-thinking their position?

Here’s a link to a video you may have seen making the rounds on NBC.  A group of sharks approaches some Hawaii beachgoers playing in the surf and surprisingly a few of the men stay in the water.

With all the talk of the problems airlines are having with the high fuel costs, I began to wonder what it costs to fly an airliner to Hawaii. I decided to do a little research, here’s what I found.  I’m going to use Hawaiian Airlines non-stop flight from Oakland California to Honolulu as an example. Hawaiian Airlines flies Boeing 767-300’s on this route. Average flight time is about 5 hours.

A 767-300 burns about 2200 gallons of jet fuel per hour, so it will use about 11,000 gallons for the flight. At $4 per gallon that’s $44,000 just for the fuel.

According to the FAA other costs (maintenance and so on) to operate the aircraft were about $1100 per hour in 2004. Using that figure it adds another $5,500 to the cost of our flight.

Adding it up we see the cost to fly the 767 from Oakland to Honolulu is about $50,000.

At a full load of 230 passengers the cost per seat for the flight is about $217 one-way or $434 round-trip, just for the aircraft. Overhead is a whole different matter.

Still wonder why you can’t find those cheap seats to the Islands anymore?

Photo Credit: Boeing

The National Transportation Safety Board (NTSB) has confirmed that two go! airlines pilots unintentionally fell asleep during a flight from Oahu to the Big Island in February. The flight flew 15 miles past Hilo, it’s intended destination, as air traffic controllers franticly tried to contact the crew. The flight landed safely at Hilo.

The NTSB recommended that the Federal Aviation Administration (FAA) help airlines design fatigue management systems for their flight crews.

FAA spokesman Ian Gregor said, “There’s a lot of personal responsibility (that) comes into play here that flight crews are responsible for ensuring that they report to work rested.”

According to Gregor the go! pilots had nearly 15 hours to rest before the flight. “That’s almost double the minimum allowed under FAA regulations, so clearly these pilots had plenty of time to rest.”

The pilots were fired by the airline. The FAA has not yet determined what kind of discipline the pilots will face. It could range from suspension of their pilot licenses to a warning letter.

Island Air Expanding Interisland Service Pacific Business News is reporting that Island Air is expanding it’s interisland schedule. Flights from Honolulu to Lihue; Honolulu to Maui and between Maui and Kona, and Maui and Lihue were added. Island Air now operates 444 interisland flights weekly. The carrier has also decided relinquish it’s Midwest EAS contract that we reported on earlier. Photo credit: Island Air

Judge Lifts Superferry Traffic Order Maui News reports that Circuit Judge Joel August has temporarily lifted an order requiring traffic control officers to be on hand each time the Superferry docks in Maui. A traffic study indicates that the Superferry’s impact on nearby intersections was less than expected.

Discounts Help Travelers Get To Hawaii The Hawaii Visitors & Convention Bureau has launched a $3 million advertising campaign aimed at convincing travelers that Hawaii is still affordable. $200 discounts and other perks are available through a number of travel sites.  See GoHawaii.com/summerfun.

The following article was contributed by observer, researcher, writer Brad Parsons otherwise known as MauiBrad on the net. Formerly of Maui, now living on Kauai. This article was first published on SaveKauai.Org and is reprinted here with his permission. It does not necessarily represent the view of MauiLog.Com.

HSF Business Viability notes from Kauai Eco-Roundtable

Date: Tue, 20 May 2008

1. I’m honored to be here, was inspired by events here on Kauai last August and September, 2007.

2. Last fall I decided to start a research project and evaluation of HSF making use of standard company, industry, and economic analysis…to try and read beyond the headlines and between the lines of what the likely real situation is on this issue.

3. Was asked to speak today about the economic and business viability of Hawaii Superferry. I have only a few minutes here, so I’ll try to be brief, but I will post a more complete version of this on my blog within a few days.

4. First, the events of the broader global economy have much to do with the increasing cost of energy, namely oil-derived energy and fuel, but also the declining value of the U.S. dollar and ballooning U.S. debt., and the increasing economic status and energy consumption of China and India. Quoting the AP, the increasing global demand for oil is being driven by China and India, ‘which guarantee a market into the long term.’

5. Crude oil prices have more than doubled in the past year, from $62.50 a barrel in May 2007 to $100 a barrel in February 2008 to $125-$126 late last week, and $129 today. Most transportation companies are hoping that this is just a speculative run-up and that prices will subside some and soon. But, oil experts and Wall Street industry analysts have voiced opinion in the media over the past few weeks that they expect oil prices to stay in the $100 to $150 per barrel for the rest of this year.

6. Here in Hawaii transportation companies, including Aloha and ATA, are having terminal difficulty with these escalating oil/fuel prices. In fact, all transportation companies would be having difficulty with this. As a result the state has lost 10% to 15% of the flight capacity in and out of the state and projections from the Council on Revenues and almost all economic research bureaus within the state have changed their forecasts within the past few months to little or no growth in the state’s economy for the next year or two.

7. Regarding the Superferry, from Pacific Business News last year, “Whether Hawaii Superferry will be profitable is something that concerns Alan Lerchbacker, the former CEO of Austal USA, which built the ferry. ‘I just worry about them getting enough business to cover costs because of the sheer size of it,’ said Lerchbacker. Lerchbacker said he suggested a 72-meter vessel only to see the company order the 100-meter model. ‘For a smoother ride on the ocean, that ferry will have to go over 35 knots, and it costs a lot of money on fuel to go that fast,’ he said.”

8. Late last year HSF disclosed their operating costs were $650,000 per week, with the increase in marine diesel oil (MDO) fuel cost to over $1000 per metric ton or over $3.75/gal* for MDO at the retail level, their weekly costs since last fall have increased at least an additional $105,000 per week due to fuel alone. That means the 1/4 ridership/vehicle capacity they needed before just to cover fuel costs has increased now to about 1/3 capacity just to cover fuel costs. HSF has been running recently at loads of 1/4 to 1/3 capacity for the early runs and a 1/4 or less for the evening runs. A little more than their second and third quarters of ridership are needed to cover the rest of their expenses, leaving less than the top quarter of full capacity to net income, at current prices. If HSF doubled their current prices per person from $39 to $80 and per vehicle from $55 to $110, their ridership breakeven levels would be half what they are now, but demand would likely drop off for their services.

9. HSF competitors for transporting people interisland are Hawaiian, Island Air, and Go Airlines (with parent co. Mesa expecting financing difficulties soon). All are currently charging about $100 to $125 and more for one-way tickets actually available online. HSF is currently charging 1/3 of that. HSF’s competitor for transporting cars interisland is Young Brothers. YB currently charges about $250 to move a car interisland. HSF currently charges 1/4 of that. Of those two the one with the greatest disparity and the greatest market potential for HSF is the fast movement of cars interisland.

10. HSF burns about 6000 gallons of marine diesel oil fuel one-way from Oahu to Kauai in 3 hours. I spoke with Hawaiian pilots yesterday and they burned 400 gallons of jet fuel (about the same price as MDO, 3.60 to 3.80 per gallon*) from Oahu to Kauai in 30 to 35 minutes, transporting 123 people. That’s 1/15th or 6.5% of the fuel that HSF requires to do the same route. If you multiply 15 times the 123 people, Hawaiian transports 1845 people burning the same amount of fuel cost that it takes for HSF to transport a maximum of about 866 people. Hawaiian Air is at least twice as efficient at moving people interisland as is HSF.

11. Regarding this vessel’s cost ineffectiveness at these route distances. With the 4 diesel jet engines and the amount of fuel they burn, the Alakai and other vessels like it around the world in the past have been cost effective on one-way routes of 1 to 2 hours or distances of 30 to 75 miles per revenue generating load. Distances further than that with the same revenue generating load are cost ineffective. HSF’s planned one-way route distances in Hawaii are about 105 to 160 miles, with the 3rd and 4th hours of fuel expense under the same revenue generating load being cost ineffective.

12. HSF also appears to have close working relationships with Roberts Hawaii, Loves, Fedex, Commodity Freight Forwarders (CFF), Expediters and recently increasing military and civil service personnel on vacation from Oahu bases. Individual commercial businesses (not making use of CFF) from Maui (or an outer island) to Oahu would have to stay overnight. Currently, only businesses from Oahu to Maui can return later the same day. Hertz, Alamo/National, Dollar, and Thrifty all allow their cars to be transported on HSF. HSF does not have a fly-drive arrangement with Hawaiian Air, verified with HSF’s reservations department, referred to by CEO Fargo in PBN.

13. In recap, HSF is unlikely to ever be profitable as a commercial business only. Furthermore, it is only marginally competitive moving people interisland. HSF’s most noticeable market potential is in rapid transport of vehicles interisland, quite likely at the expense of Young Brothers. Little to no road improvements on islands such as Kauai do not appear to be ready to receive that kind of influx. HSF may have an uptick in ridership in June, July, and August, but will likely have a drop off in Fall 2008 and problems again with high surf in Winter 2008-9. In the meantime HSF investors appear to be willing to accept operating losses at current levels provided progress continues on other related investments.

*All fuel prices have been increasing on a weekly if not daily basis recently, so the above calculations include fuel prices that are now conservative yet still accurately portray the situation.

Aloha, Brad

Hawaii Superferry reports that it’s ridership has been steadily increasing during May. The company estimates that, based on current bookings, it will surpass 21,000 passengers and 5,800 vehicles during the month. It carried more than 5,500 passengers and 1500 vehicles on the Memorial weekend alone.

Superferry has also announced that it will extend promotional pricing into September, $49 per passenger and $65 per vehicle. It will also wave the fuel surcharge for the promotional period.

Let’s do a little reality check here. Looking at the Memorial weekend figures above and doing a little math we can see that Superferry is still not paying it’s bills. During this period the average passenger load was 392 per trip and the average vehicle load was 107 per trip. (The vessel made 14 trips) That generated about $21,000 in revenue per trip at $39 per passenger and $55 per vehicle. Superferry uses 6,000+ gallons of fuel per trip. At around $3.50 per gallon for marine diesel each trip costs about $21,000 for fuel alone. As you can see Superferry is just approaching the point to where it will cover just it’s fuel costs.

Why is this important? Hawaii depends on it’s interisland travel network. For passengers this network is made up almost exclusively of air carriers. Aloha Airlines is now gone. Go! Airlines parent Mesa is teetering on the edge of bankruptcy. Island Air has put on hold any thoughts of expansion until the current market sorts itself out. Should Go! shutdown, that would leave Hawaiian as the only large interisland air carrier. Hawaiian has just raised it’s minimum interisland fare to $64. You see where we’re going here, with little or no competition interisland air fares are going to go substantially higher.

Hawaii Superferry could provide significant passenger competition for the airlines. (not to mention it’s cargo carrying ability) At full capacity it can haul 18,000 passengers a week on the Oahu Maui run, equaling over 160 flights of Hawaiian’s Boeing 717’s. That’s the kind of competition the airlines would have to take seriously as they set their fares.

Now the reality is with the price of oil at $130 per barrel interisland fares are going to go up, on the airlines and the Superferry. But, if the Superferry is not around they’re going to go even higher.

So, we suggest that if you want to keep some competition in the market and keep interisland travel more affordable, ride the Superferry.

Photo Credit: Hawaii Superferry

Hawaiian Airlines has been in the news a lot this week, some good and some bad.

First of all they’ve entered into a codeshare agreement with United Airlines. This will allow passengers flying to Hawaii on United to connect seamlessly with Hawaiian Airlines interisland flights. Hawaiian passengers will also be able to earn and redeem United Mileage Pluse miles on Hawaiian flights. This agreement replaces the one United had with the now defunct Aloha Airlines.

From personal experience we suggest earning United miles for any of these flights. Under the previous agreement with Aloha we were converting our United Milage Plus miles to Aloha frequent flyer miles and lost them all when Aloha went under.

Secondly, Hawaiian Airlines April passenger traffic was up over 25%, it’s first full month of operation since the shutdowns of Aloha and ATA. Predictably their stock went down.

Now for the bad news, two Hawaiian Airlines flights had in-flight emergencies that forced them to turn around. On May 16th flight 29 from Portland to Oahu returned to Portland after a wing panel came loose in flight. The crew noticed the problem soon after take off and returned at Portland.

The day before a Portland bound Hawaiian Airlines 767 had to shut down an engine almost 2 hours into the flight and return to the islands. The flight was re-routed to Maui where it landed safely.

Photo credit: Boeing

A $1.1 million grant from the Federal Emergency Management Agency has been received by Hawaii to repair the quake damaged Pi’ilana Highway, along the east coast of Maui, the so called “back way to Hana.”

The highway was damaged on Oct. 15, 2006 when a strong earthquake rocked the islands. The quake damaged retaining walls along three sections of the highway eventually leading to it’s closure because of safety concerns.

Maui County officials hope to complete the work by October.

Maui News Article

Photo Credit: www.HawaiianKingdom.info

In response to a projected decline in visitors to Hawaii in 2008 the Hawaii Tourism Authority has approved $3 million in additional funds to market the state on the mainland.

HTA estimates a potential 11% drop in visitors to the Islands in 2008 from the 2007 total of 7.4 million.

The shutdowns of Aloha Airlines and ATA Airlines has removed over a million seats per year from North America to Hawaii. The resulting higher ticket prices are causing potential visitors to look elsewhere.

The $3 million allocated by the HTA, along with another $1.5 million from Hawaii hotels will be directed towards increasing air passenger traffic from the mainland to Hawaii.

Whether this will be a marketing campaign designed to increase demand or subsidies to airlines to increase capacity wasn’t clear to us.

In any case Hawaii is facing stiff competition from other tourist destinations. We’ve noticed out on the west coast Mexico’s resort areas are advertising heavily and offering steeply discounted rates to attract visitors.