Hawaiian Holdings (HA -0.59%) has typically maintained an all-widebody fleet to serve its routes to the U.S. mainland and international destinations. Today, this role is filled by a fleet of 294-seat A330s.

Hawaiian Airlines mainly uses A330s for its long-range flights today. Image source: Wikimedia Commons.

Meanwhile, competitors like Alaska Air (ALK -2.87%) have thrived flying between the West Coast and Hawaii with smaller narrowbody aircraft in recent years. With smaller planes, Alaska Airlines has had the flexibility to fly routes that simply wouldn't work for Hawaiian Airlines.

However, a solution is coming soon. In about two years, Hawaiian Airlines will receive its first long-range narrowbody. By 2020, it will have a fleet of 16 A321neos with the ability to fly between Hawaii and the West Coast. Here are four ways that this fleet change could transform Hawaiian Airlines for the better.

New West Coast gateways
The arrival of the A321neo could potentially allow Hawaiian Airlines to open new West Coast gateways that weren't feasible to serve with widebody planes. (Flying an A321neo from the West Coast to Hawaii will likely cost 30%-40% less than flying one of Hawaiian's widebodies.)

For example, Hawaiian Airlines briefly flew from Honolulu to Ontario, Calif., more than a decade ago, but it dropped the route due to low demand. With a smaller plane, there's a much better chance that this route would work. The carrier could also consider flying to one of the other Los Angeles-area secondary airports rather than operating all of its flights at LAX.

Vancouver is another city that Hawaiian Airlines could serve with the A321neo. The airline doesn't fly to Canada today, but with a smaller plane it would be cheaper to enter the market. Airlines offered more than 900 seats per day on average from Vancouver to Hawaii in 2014, so there's a well-established market that Hawaiian Airlines could tap into.

New routes to the neighbor islands
An even bigger opportunity that the A321neo will unlock for Hawaiian Airlines is the market for direct flights to Maui, the Big Island, and Kauai.

Alaska Airlines has thrived by operating point-to-point routes from non-hub cities in California to these outlying islands for the past five years or so. Unlike Hawaiian, Alaska Airlines' current fleet is ideally suited to these routes with slightly less passenger traffic.

Alaska Airlines' fleet of 737s is ideal for lower-traffic routes to Hawaii. 

Hawaiian Airlines has built a significant presence in the West Coast-Maui market since opening a small hub in Maui a few years ago, but it still doesn't serve some big routes like Portland-Maui or San Diego-Maui. And it only offers direct service to the other islands during the peak season, though it will experiment with off-season nonstop flights from Los Angeles to Kauai this winter.

A wide variety of these routes should become viable when Hawaiian Airlines gets its A321neos. At the very least, it should be able to expand its schedule of direct flights to the neighbor islands in the large Bay Area, Los Angeles, and San Diego markets.

Rationalizing capacity where necessary
Adding the A321neo to the Hawaiian Airlines fleet is mostly about exploiting new growth opportunities. However, the plane will also be useful for trimming capacity in certain markets. Since Hawaiian flies most of its routes once a day, having a smaller aircraft available will allow it to better fine-tune capacity to match demand.

Most of the company's West Coast routes seem to be working pretty well today. However, a few routes may have a bit too much capacity. And as Hawaiian starts to add more direct flights to Kauai and the Big Island, it will cannibalize demand for connecting flights through Honolulu or Maui.

By downgauging to the A321neo on some of those routes as it adds flights to the other islands, Hawaiian will maintain enough capacity to serve customers flying to Honolulu and Maui without oversupplying the market.

New opportunities beyond Hawaii?
While Hawaiian Airlines' main growth opportunity lies in adding new routes to its home state, the A321neo could also potentially unlock growth opportunities in American Samoa. Today, Hawaiian Airlines flies twice a week between Honolulu and American Samoa. Those flights are American Samoa's only direct link to the outside world beyond neighboring Samoa.

For a long time, American Samoa's government has been interested in attracting more flights to stimulate commerce and tourism. The A321neo has enough range to fly from Honolulu to American Samoa, and with this smaller plane, Hawaiian Airlines could easily increase service to three or four times per week.

Furthermore, American Samoa is within a four- to six-hour flight of Sydney, Brisbane, and Auckland: Hawaiian Airlines' three destinations in Australia and New Zealand. Moreover, it is nearly on the direct line between Auckland and Hawaii, and just a few hundred miles out of the way on the path from Hawaii to Sydney and Brisbane.

This means that Hawaiian Airlines could potentially offer one-stop service from Australia and New Zealand to Hawaii via American Samoa. It could gradually develop American Samoa as a tourist market by promoting it to customers in Australia and New Zealand as a nearby, cheap tropical vacation destination. But since the flights would continue to Hawaii, the airline wouldn't need to fill the entire plane with customers traveling to American Samoa.

Hawaiian Airlines may decide that flying from American Samoa to Australia and New Zealand is too far outside its wheelhouse to be worth pursuing. However, it's the best positioned airline to operate profitably in American Samoa, so it should at least consider this possibility.

An exciting future
Hawaiian Airlines will start receiving A321neos in late 2017, with the bulk of its order scheduled for delivery in 2018 and 2019. The company has a lot of great opportunities to grow its earnings by deploying the A321neos on existing routes, routes to new West Coast gateway cities, direct flights to the outlying islands, and possibly even routes from American Samoa.

Depending on the success of the initial batch of A321neo routes, Hawaiian Airlines could expand its A321neo fleet further after 2020. It has a number of A330 leases expiring between 2022 and 2025. If the A321neo offers a significant margin improvement over the A330, as I expect, Hawaiian Airlines could ultimately make the A321neo its main aircraft for West Coast flights.