Hawaiian Air nets $27.5 million


POSTED: Tuesday, July 28, 2009

The parent of Hawaiian Airlines, navigating through a tumultuous period in an industry plagued by high fuel costs and reduced travel demand, posted a $27.5 million profit in the second quarter and breezed past analysts' estimates.

Hawaiian Holdings Inc. also said it was terminating the stock-purchase program it initiated in March after its stock price more than doubled. Shares closed yesterday up 40 cents, or 6 percent, at $7.09 on the Nasdaq. Earnings were released after the stock market closed.

Net income was down 49.4 percent from the year-earlier period. However, that was nearly entirely due to a $52.5 million legal settlement in April 2008 with go! parent Mesa Air Group after a federal Bankruptcy Court judge ruled the Phoenix-based carrier had misused proprietary Hawaiian Airlines information when entering the interisland market in 2006. In that year-earlier quarter, Hawaiian had net income of $54.3 million, or $1.09 a share. In the just-concluded period, Hawaiian's earnings per share were 53 cents, easily surpassing the consensus estimate of 32 cents by three analysts.

“;This company is generating record earnings when the economy in the U.S. is in the worst recession in decades,”; said analyst Robert McAdoo, of Prairie Village, Kan.-based Avondale Partners LLC. “;I think that speaks well of the company, and it's showing itself to be a survivor in difficult times and prospering in difficult times. I think that bodes well for when times get better.

“;It probably will have record earnings for the full year, and that's something most airlines, or companies of any kind, can't say in this environment.”;

Hawaiian, which also has had to deal with an interisland airfare war initiated first by go!, then by Mokulele Airlines, saw operating revenue drop 8.5 percent to $292 million from $319.2 million.

Revenue per available seat mile was 11.99 cents in the quarter, down 10.2 percent from 13.35 cents a year ago.





Second-quarter net


$27.5 million


Year-earlier net


$54.3 million


Fuel costs decreased 55.7 percent to $54.7 million from $123.4 million last quarter and represented 21 percent of operating expenses. A year ago, fuel costs represented 38.2 percent of operating expenses.

Mark Dunkerley, president and chief executive of Hawaiian, said with fuel prices rising again and fares remaining low, the period ahead will be even more challenging.

He said the airline is continually looking at what its competitors are doing to generate ancillary revenue, and that the company is considering some changes implemented by other carriers.

“;There are some limitations we peculiarly have on ancillary revenue,”; he said. “;For example, our 767s come in, I believe, five different interior configurations that make it more difficult for us to secure pricing for premium seating on the airplanes. We are not shy about going for ancillary revenue. ... I would imagine that we will be actually pretty aggressive on ancillary revenue going forward.”;

Dunkerley said the challenging environment for airlines and the stock-price appreciation prompted Hawaiian to end its buyback after purchasing 201,651 shares.

“;I think the uncertainty of the immediate future puts a larger premium on holding cash than it would have done in any other period of time,”; he said. “;We're also mindful of the fact that though not immediately, in the next three to four years, we have both some loan facilities that need to be renegotiated and some fleet expansion that needs to be financed. Our view is that we need to have the strongest possible balance sheet when that time comes so that we get the best access to credit available at the time.”;

Hawaiian increased its cash over the previous quarter and on June 30 had $282.6 million in unrestricted cash and $31.9 million in restricted cash. Restricted cash accounts for money from transaction that credit-card processors hold back for financial protection until a passenger completes his or her travel.

At the end of the first quarter, Hawaiian had $248 million in unrestricted cash and $34.7 million in restricted cash.