NEW YORK Hawaiian Airlines expects to double its revenue from selling hotel rooms and rental cars over the next few years, part of a wide-ranging strategy to lift its top line even as it scales back capacity growth, a senior executive said on Monday.
The Honolulu-based carrier says broadening the range of products customers can book on its website is already generating significant revenue, and it expects the amount to double in the next three to four years.
"We've got plans in place on how to sell that better in the future," Peter Ingram, chief commercial officer at parent Hawaiian Holdings Inc (HA.O), said in an interview ahead of an investor meeting on Tuesday in New York.
Ingram said investors should expect the airline's capacity, as measured by available seat-miles, to increase between 5.5 percent and 8.5 percent in 2014, down from more than 10 percent annual growth over the last three years.
He explained the drop in growth is because the rapid expansion that added five destinations in Japan, and others in Australia, New Zealand and South Korea, has tapered off.
In 2014, Hawaiian's main new route will be three weekly flights to Beijing, Ingram said. Capacity will grow because the airline will use Airbus SA EAD.PA A330 jets on routes previously served by Boeing Co (BA.N) 767s. The A330s have 294 seats, compared with 264 in the 767s, he said.
The switch to Airbus A330s from Boeing 767s is also paying off because it can transport more cargo, Ingram said.
Revenue from cargo operations has nearly doubled since 2010, as Hawaiian retired 767s and put A330s into service, Ingram said. The A330 carries more cargo, and as more 767s are replaced the capacity grows.
Hawaiian has put in place the sales and support to handle a larger cargo operation, and the airline expects revenue to continue growing in 2014.
"The A330 is a better cargo airplane," Ingram said.
The growth in cargo is surprising because it comes amid a slump in air cargo demand. Air cargo growth has averaged just 3.7 percent a year since 2001, well below the forecast of 5 percent, according to Boeing's World Air Cargo Forecast.
But Hawaiian's cargo growth coincides with the airline's entry into new destinations in Asia.
Hawaiian earns about 90 percent of its revenue from ticket sales. But like other airlines, it is trying to find ancillary revenue streams, since these often are much higher margin than the low-profit business of carrying passengers.
Hawaiian's base as a largely vacation destination airline means it has a better opportunity than mainline carriers to offer hotels, rental cars and other vacation purchases, from its website.
Such holiday sales are currently generating about $7 million a year, Ingram said, and is expected to double in three to four years as Hawaiian refines its website to make more products available and make them more appealing to customers, he said.
The revenue from hotel and car books may seem small, but it is significant when compared with the airline's net profit. In the third quarter, Hawaiian reported net income of $40.6 million on revenue of $599.3 million. Since the incremental cost of sales for holiday bookings is modest, the impact on the bottom line can be significant, Ingram said.
(Reporting by Alwyn Scott; Editing by Gary Hill and Diane Craft)