Recently, I reported on how Mokulele had filed to abandon non-subsidized service to Lanai, which invited the attention of Massachusettes-based Cape Air. Well, it turns out they weren’t interested, and instead, we’re seeing two local companies vie for the Lanai EAS rights.
For all its hoopla during its visit to engage with communities, I find it interesting that Cape Air decided against submitting a bid. Though they’re staying mum on why they chose not to pursue a bid, I suspect Cape Air saw how challenging operating in Hawaii would be and noped out. I don’t blame them. What I do find interesting, though, is that there still is a competitive bid, as we see two local companies vie for Lanai EAS rights. I honestly didn’t see that coming, though how these two companies bid is, perhaps, even more interesting.
Two Local Companies Vie for Lanai EAS
Lanai is a tough market to serve. There isn’t a lot of demand for travel to the island, but its small population (just over 3,300 residents) means that a lot of essential services aren’t available there, forcing residents to travel to Oahu and Maui for everything from back-to-school shopping to cancer treatments. That means providing affordable, reliable, high-frequency flights between Lanai and its two larger neighboring islands. This is something Mokulele has been struggling with at all levels and why they’ve sought to stop offering unsubsidized service to Lanai. Sort of.
First, the Honolulu Star-Advertiser reported on this yesterday. But I’m mostly ignoring their article, as it was a bit convoluted. Thankfully, they posted links to the actual proposals submitted by each airline to the DOT. Those two airlines, by the way, are Mokulele (Southern Air) and Pacific Air Charters.
So the first thing to know as two local companies vie for Lanai EAS rights is that Mokulele submitted three bids. Paradoxically, one of their bids is to continue offering unsubsidized EAS. Even more strange is the fact that they’re proposing to continue offering unsubsidized service with brand-new aircraft while they’re seeking subsidies to continue flying their Lanai routes with their existing fleet of Cessna 208 Grand Caravans. You know, the ones that aren’t so reliable right now. But, anyway, let’s get into the bids.
Mokulele
As two local companies vie for Lanai EAS rights, Mokulele was always going to be the dead giveaway. After all, they’re the current unsubsidized EAS operator, though they’re doing a pretty poor job of it. Prior to them, Ohana by Hawaiian held EAS rights for Lanai. At any rate, here are the bids Mokulele submitted:
- Option A
- Weekly Roundtrip Frequencies: 42 LNY-HNL + 21 LNY-OGG
- Aircraft: Cessna 208B Grand Caravan
- Aircraft Capacity: 9 passengers
- Fare: $75 “average”
- Assumed Load Factor: 92%
- Estimated Operating Profit/(Loss): ($3,590,375)
- Required Subsidy: $3,970,286
- Subsidy per Passenger: $74
- Subsidy per Flight: $615
- Option B
- Weekly Roundtrip Frequencies: 42 LNY-HNL + 21 LNY-OGG
- Aircraft: Tecnam P2012 Traveller
- Aircraft Capacity: 9 passengers
- Fare: $174 “average”
- Assumed Load Factor: 92%
- Estimated Operating Profit/(Loss): $442,977
- Required Subsidy: $0
- Subsidy per Passenger: $0
- Subsidy per Flight: $0
- Option C
- Weekly Roundtrip Frequencies: 14 LNY-HNL + 7 LNY-OGG
- Aircraft: Saab 340
- Aircraft Capacity: 28 passengers
- Fare: $75 “average”
- Assumed Load Factor: 92%
- Estimated Operating Profit/(Loss): ($3,163,436)
- Required Subsidy: $359,112
- Subsidy per Passenger: $66
- Subsidy per Flight: $1,637
What’s interesting in the above is that Mokulele says it’ll make profits (which is different from operating profit) off options A & C, and will just break even on option B. That seems like an odd thing to do for a for-profit company. And, perhaps, that’s part of their strategy to show the DOT that subsidies are needed. That said, Mokulele claims a completion factor (what number of flights don’t get canceled) of 98.5%, which is hilarious!
Mokulele canceled 5% of its flights out of Lanai this past Wednesday and delayed 30% of those flights on Monday. Further, they don’t always cancel flights… they simply delay them by 3, 6, 9, or more hours at times.
Pacific Air Charters
As two local companies vie for Lanai EAS rights, it’s worth noting that Pacific Air Charters is the only truly local company, as Mokulele is owned by Florida-based Southern Airways. However, Pacific Air Charters tendered two bids that are somewhat similar to Mokulele’s but are also quite different.
- Option A
- Weekly Roundtrip Frequencies: 42 LNY-HNL + 21 LNY-OGG
- Aircraft: Tecnam P2012 Traveller
- Aircraft Capacity: 9 passengers
- Fare: $101
- Assumed Load Factor: 75%
- Estimated Operating Profit/(Loss): ($7,516,184)
- Required Subsidy: $8,115,418
- Subsidy per Passenger: $184
- Subsidy per Flight: $1,235
- Option B
- Weekly Roundtrip Frequencies: 42 LNY-HNL + 21 LNY-OGG
- Aircraft: Tecnam P2012 Traveller
- Aircraft Capacity: 9 passengers
- Fare: $101
- Assumed Load Factor: 75%
- Estimated Operating Profit/(Loss): ($7,589,275)
- Required Subsidy: $8,192,164
- Subsidy per Passenger: $186
- Subsidy per Flight: $1,247
What I find interesting here is that Pacific Air Charters submitted two identical bids, save for how the aircraft are routed when fulfilling the promised frequencies. Interesting. What’s also interesting is how their operating expenses, and thus, required subsidies, are so much higher than Mokulele’s, even when looking at the same aircraft type.
Unpacking it All
There’s a lot to look at and consider as two local companies vie for Lanai EAS rights. On the one hand, Mokulele’s bids come at much lower costs to the government than Pacific Air Charters. Mokulele is also an actual airline that maintains a regular schedule, albeit, they’re not good at actually flying that schedule. However, it’s interesting that Mokulele has chosen to offer the objectively superior Tecnam 2012 bid with the highest passenger fares of the bunch with no subsidies. Why? Do they not want to operate these aircraft?
Mokulele also made their Saab 340 proposal fairly unattractive, slashing LNY-HNL frequencies by 67% and LNY-OGG frequencies by 34%. Sure, the Saab holds three times as many passengers as the Cessna or Tecnam, but that would be a disservice to the people of Lanai.
For what it’s worth, The Tecnam 2012 is a twin-prop commuter aircraft in the same size class as the Cessna 208B. However, the Tecnam’s fuel consumption is roughly 31 gal/hour, while the Cessna’s ranges from 47 to 60 gal/hour. This is due to the fact that the Tecnam uses piston engines, while the Cessna uses a turboprop. It also means that the Tecnam has a slower cruise speed – 198 mph true airspeed vs 214 mph.
It’s worth noting that, as two local companies vie for Lanai EAS rights, Maui officials have come to back Pacific Air Charters. They reason that Pacific Air Charters is a locally owned and operated company, so they think it’ll be more in-touch with our needs. I think this is a polite way of saying that their constituents are fed up with Southern Air/Mokulele and don’t trust them to be able to deliver on their promises. I don’t blame them.
Two Local Companies Vie for Lanai EAS, Final Thoughts
As we watch two local companies vie for Lanai EAS rights, it’s easy to forget that another option exists. Larry Ellison’s Lanai Air also offers flights between Lanai and Honolulu, though they’re quite a bit more expensive at $320 roundtrip. The service is also focused on providing a luxurious connection to Lanai from Honolulu for people staying at the island’s resorts. So, I suppose that makes this option moot for the most part.
Going back to watching two local companies vie for Lanai EAS rights, it’ll be interesting to see which the DOT chooses. Ideally, it would seem Mokulele would be the better option, especially if they could offer Tecnam service with subsidies to keep fares down while offering better reliability. After all, the Cessna and Saab are old aircraft, and Mokulele claims they’re having difficulties finding parts. But, if not, it may be best to give Pacific Air Charters a shot. Unfortunately, Mokulele hasn’t proved that it’s up to the task, and the people of Lanai need a more reliable option.