Hawaii works hard for its money. We took a look at 12 different businesses—from Matson to L&L Drive-Inn to a downtown parking garage—to find out just what it takes to make a living in paradise.
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How it works: Few industries are more competitive than the airline business. Its capital-intensive nature means price wars are almost inevitable. Once Hawaiian Airlines buys its aircraft, fuels them up and hires the pilots and flight attendants, the incremental cost of carrying one extra passenger is very small. “The temptation is to sell that last seat for whatever you can get for it,” says Peter Ingram, Hawaiian Airlines’ chief financial officer. “It’s essentially found money, in the short-term sense. The challenge is that if you get into the practice of selling that last seat very cheaply, people come to expect it, and the market drives down prices and squeezes profit margins.”
Sardines: In a time of $39, $19 and even $1 fares, the airline’s best chance of recouping costs is to pack each flight as full as possible. In the first half of 2007, Hawaiian’s planes were 87.3 percent full, on average—significantly higher than the industry-wide average of 78.8 percent.
People movers: In 2006, Hawaiian Airlines flew about 17,000 people each day.
Major costs of business
27 percent: fuel
25 percent: wages/benefits
10 percent: airplane ownership expenses (rent, depreciation, interest)
10 percent: maintenance
Fill ‘er up: A typical Maui/Oahu flight consumes 350 gallons of jet fuel. Cost per gallon—$2.10. Cost per gallon in 2002—72 cents.
Weight-watchers: The airline can’t control the cost of fuel, but it can slim down—the lighter a plane, the greater its fuel efficiency. Everything is subject to scrutiny. Hawaiian is currently replacing its food-service carts with a lower weight version. Weight savings per plane? About 20 pounds.
City and County of Honolulu
This chart visually represents how the City and County of Honolulu spent your tax dollars in 2006. Each circle is proportional, so you can easily compare how much of the total $1.5 billion budget was spent by different departments. For most departments, we also represent—in scale—their major functions. There is, for example, one large circle for Public Safety, and then a breakdown into police, fire department, etc.
—Additional reporting by Joshua Duvauchelle
How it works: Beyond the basic push to sell as many cars for as much as possible, one of the biggest challenges for a car dealership is stocking the right mix of cars. With all the different available options for a given model—color, engine size, luxury packages—there are hundreds of possible configurations, and it’s impossible to stock them all. Dealerships can’t ship unpopular models back to the manufacturer, so it’s critical that they choose their inventory wisely. “Once the car is built, it’s going to be sold somewhere,” says Rick Ching, general manager of Servco Automotive. “The only question is for how much.”
Volume: A successful car salesperson will sell 10 to 20 cars a month. Servco’s two Lexus dealerships sell about 150 new vehicles a month.
Profit margin: Ching says Servco’s overall profit margin on new car sales ends up being a “single digit percentage” of the dealer cost. “It’s not as high as everyone thinks. There’s been a lot of pressure on new car pricing.”