Southwest Eyes Hawaii’s Lucrative Island-Hopping Routes

Once Southwest Airlines Co. starts flying to Hawaii as early as next year, it may well add a compelling wrinkle to its schedule: flights between the islands. The carrier is mulling whether to include some in-state travel along with its trans-Pacific routes, which the company plans to offer starting next year.

Southwest Chief Executive Officer Gary Kelly said last month that island-hopping flights are something it’s “obviously” considering—they’re attractive in terms of year-round demand, easy weather, and steady prices. While Southwest would face off against Hawaiian Airlines, a deeply entrenched competitor which enjoys a virtual monopoly in the state, it does have a secret weapon. Andrew Watterson, the Southwest executive who oversees revenue and is in charge of cracking the Hawaii nut financially, worked at Hawaiian for three years and knows the market well.

Flying in Hawaii is “a bigger business than people perhaps have in mind,” Mark Dunkerley, Hawaiian Holdings Inc.’s chief executive, told Bloomberg’s P&L podcast last month. Of the 6 million in-state passengers, about 30 percent are connecting from long-haul flights, he said. This traffic accounts for a quarter of the airline’s annual revenue.