The COVID-19 pandemic decimated business for the entire airline industry. However, no U.S. airline was hurt quite so much as Hawaiian Holdings (NASDAQ:HA). In late March, state officials in Hawaii implemented a mandatory 14-day quarantine for all people arriving from outside the state, effectively eliminating the Hawaii tourist market. Meanwhile, stay-at-home orders dramatically reduced air travel within the state.

Starting on Aug. 1, Hawaii will finally offer an option for out-of-state visitors to avoid a 14-day quarantine. As a result, Hawaiian Airlines plans to resume most of its mainland-Hawaii routes over the next several weeks in order to capture pent-up leisure travel demand before the summer travel season ends.

Hawaii relaxes quarantine rules

The quarantine and stay-at-home orders implemented in Hawaii earlier this year helped the state avoid a huge COVID-19 outbreak, despite the crowding that is typical of the state's beaches, resorts, malls, restaurants, and other attractions. Hawaii has reported just over 1,000 cases since the pandemic began, and only 1.2% of COVID-19 tests administered in the state have come back positive. Those numbers are far better than most of the country.

However, Hawaii paid a high price to prevent a public health disaster. Tourism normally accounts for over 20% of the state economy. The quarantine rules reduced that to nearly zero, leading to a massive number of job losses.

Starting next month, Hawaii will test a strategy to reopen the tourism industry while minimizing the risk of a big COVID-19 outbreak. Visitors will be allowed to skip the mandatory quarantine by getting a COVID-19 test from a certified lab up to 72 hours before boarding their flight to Hawaii and showing proof of their negative result upon arrival in Hawaii.

A Hawaiian Airlines plane flying over the ocean, with mountains in the background

Image source: Hawaiian Airlines.

Of course, this plan isn't foolproof. Some travelers may get false negatives on their preflight tests; others could get infected between taking the test and arriving in Hawaii. Still, it enables tourism to resume while significantly reducing the risk of "importing" a major outbreak.

Most Hawaiian Airlines routes to the mainland will resume

For the past several months, Hawaiian Airlines has been operating a skeleton schedule between Hawaii and the U.S. mainland. Initially, it only offered daily flights from Los Angeles and San Francisco to Honolulu. In May, it added a daily Seattle-Honolulu flight. The airline maintained these routes to support essential travel needs and to meet cargo demand.

A month from now, Hawaiian will be operating a much more normal mainland-Hawaii schedule. It already resumed daily Portland-Honolulu service last week. Sacramento-Honolulu and San Diego-Honolulu flights will restart on July 15. And around Aug. 1, it will resume a slew of nonstop routes, including flights from Honolulu to Boston, Las Vegas, New York, Oakland, Phoenix, and San Jose. Five nonstop routes to Maui will also relaunch then, along with a few routes from the mainland to Kona and Lihue. Long Beach-Honolulu flights will come back in mid-August.

In conjunction with the return of most mainland-Hawaii routes, Hawaiian Airlines plans to ramp up its interisland schedule to 114 daily flights to enable connections beyond Honolulu.

Some of Hawaiian's routes will operate less frequently than they did previously, and a handful of nonstop routes from the mainland to secondary markets in Hawaii remain on hold for now. International service will also be slower to resume. Nevertheless, the leisure-focused airline's current plans should allow it to salvage some of the summer travel season.

Barriers to success remain substantial

In some markets, there appears to be significant pent-up demand for travel to Hawaii. That said, fares on other routes are quite low, especially for the summer. Furthermore, COVID-19 case numbers are rising rapidly in California and some other key inbound tourist markets, which could disrupt plans to get back to normal. The high number of COVID-19 cases in the U.S. could also lead to continuing government travel restrictions that delay the resumption of international tourism in Hawaii.

In another setback, at least 13 Hawaiian Airlines employees recently tested positive for COVID-19 after being present at a flight attendant training program.

All in all, demand for travel to Hawaii seems likely to remain severely depressed -- even more so than demand in other domestic markets -- until the pandemic subsides. As a result, Hawaiian Holdings could be one of the last airlines to recover from the disruption of COVID-19.