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Hawaiian Airlines' challenge: 'Basic economy' class that doesn't insult passengers

Leslie Josephs
James D. Morgan | Getty Images. Hawaiian Airlines is mulling a no-frills, basic-economy class, but its CEO is wary of insulting passengers.

Hawaiian Airlines (HA) is debating whether to launch basic economy class, a bare-bones product that other carriers love because passengers will pay more to avoid it . The airline's challenge is how to offer a bare-bones class of service that doesn't insult passengers in the process, Hawaiian Airlines' CEO Mark Dunkerley told CNBC. Hawaiian Airlines is tiny compared with other U.S. behemoth airlines, but its home market is growing rapidly amid a boom in tourism to the islands. Cutting certain perks that are currently free could backfire, said Dunkerley, who is retiring early next year.

A vacation "is a moment in time when the breadwinners of the family can express to their children that they are capable of providing more than just a roof over their head and clothes that they grow out of every six months," he said. "When you're going to Hawaii, when you're plunking down that level of household expenditure, you don't want to be told that you're so cheap that you don't rate a meal." It's particularly important for Hawaiian Airlines to hold onto core leisure customers. Southwest Airlines (LUV) announced in October its long-awaited service to Hawaii. Dunkerley has shrugged off suggestions that the Hawaiian air travel market could see the so-called Southwest Effect, in which the Texas-based airline's presence in a market can lead to lower fares across the board. What passengers get on basic economy varies across airlines. Passengers in basic economy generally board last and can't pick their seat assignments. American (AAL)and United Airlines (UAL) also prohibit them from using overhead bins. Dunkerley said that Hawaiian isn't totally sold on the concept, but it's examining how the process has gone for other airlines.

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