Oct. 31, 2016, © Leeham Co.: Hawaiian Airlines continues to ponder the possibility of acquiring one or two Airbus A380s, its CEO said on the third quarter earnings call—something that raises eyebrows and a lot of questions with industry officials.
Mark Dunkerley, responding to a question on the call, said there are two or three routes that could support the giant A380.
“We’ve got a small number of discrete markets that have enough demand where a large capacity vehicle would make some sense,” Dunkerley said, according to a
transcript on SeekingAlpha.com. “I think arguing against it is complexity the fact that a fleet size would necessarily be very small indeed to look after these markets.
“I think in general, we’re always interested in finding out more about what the manufacturers are producing in terms of aircraft, what their capabilities are because I think we learn a great deal that way. I think in that sense, we’re always interested in finding out more. But the A380 would be an extremely large airplane in our network and it would necessarily be limited to two, maybe three routes.”
Dunkerley did not identify the routes, but it’s assumed to be Japan. The Japan-Hawaii market is a big one and generally lucrative. Further, with plans by Japanese carrier ANA to acquire three A380s (ex-Skymark), the assumption is likewise ANA will put at least some of them on routes to Hawaii.
Airbus likes to say you can only compete with an A380 with another A380.
Hawaiian also has ambitions to fly to Europe. The A380 could theoretically be assigned to this service.
But Dunkerley’s reference to fleet complexity and a small number of A380s argue against acquiring the airplanes.
Indeed, Hawaiian has a fleet of just 52: three ATR turboprops, 23 Airbus A330-200s, 18 Boeing 717s and eight Boeing 767s. It has 16 Airbus A321neos and six A330-800s on order and it’s acquiring two more 717s. The 767s are on their way out.
Adding two or three A380s adds to complexity: scheduling, crewing, maintenance, gates, passenger bookings and more, including operations.
Such a small fleet begs unique problems in the event of a flight cancellation or mechanical issue.
Hawaiian’s A330s are common worldwide. Cooperation with other airlines for parts and Airbus supply centers are readily accessible. It’s also easy, relatively speaking, for Hawaiian to substitute one A330 for another if the assigned airplane must be taken out of service for a mechanical issue.
With only two or three A380s, aircraft substitution becomes problematic.
Where would Hawaiian get the airplanes for such a grand experiment and what would it cost?
Acquiring new aircraft adds to the risk factor for an airline Hawaiian’s size. So does timing. Airbus might be able to accommodate on the latter, but the former could be an issue. Airbus could do a sweetheart lease arrangement to get another operator for the A380, and the first US-based airline. Thus, pricing might not be an insurmountable issue.
Leasing in a use A380 might make more sense. Singapore Airlines was the first operator and it’s already said it will return the first A380 (a 2007 model) to the lessor next year. There are four others come off lease is quick succession. HAL might take up the two or three from Singapore.
The appraisal firm Aviation Specialists, in its September Guide, pegs the current market value (CMV) of the A380 at $91.1m. This implies a lease rate of $728,800 to $910,000 per month under a balanced supply-and-demand situation.
But with demand for the A380 on the secondary market so far to be (1) unproved (there have been no previous transactions) and (2) at face value, dismal at best (Very Large Aircraft, be it the A380 or Boeing 747, or even the Boeing 777-300ER, are out of favor right now in a sluggish wide-body market), HAL might be in the position to get very, very favorable lease rates and terms.
One of its new A330-200s has a CMV of $90m, according to Aviation Specialists.
If HAL can fill the A380, which easily carries more than twice the passengers of the A330-200 (and it flies farther), it can be a profitable airplane for the same lease rate—or less.