Expansion
costs reduce
Hawaiian Air net

Despite higher revenue, earnings
fall 42.6% as the company
gears up for future growth

By Russ Lynch
Star-Bulletin

Hawaiian Airlines Inc. today reported a 42.6 percent drop in third-quarter earnings but said it was mostly caused by big spending to gear up for expansion.

Hawaiian had a profit of $3.5 million, or 8 cents a share, for the three months through Sept. 30, down from a profit of $6.1 million, or 15 cents a share, in the year-earlier quarter. Operating revenues were up 16.9 percent at $135 million in the latest quarter, compared with $115.5 million in the 1998 quarter. Third-quarter passenger revenues of $112 million were up 15 percent from $97.4 million in a year earlier.

In other news, the airline today announced:

A second daily nonstop flight between San Francisco and Honolulu will start in June.
It has leased two long-range DC-10 aircraft from Continental Airlines Inc. for the nonstop Los Angeles-Maui route and for charters.
It has paid its first $1 million downpayment to Boeing Co. on its purchase of at least 13 new Boeing 717-200 aircraft, worth more than $430 million, to replace its interisland fleet of McDonnell Douglas DC-9s. Hawaiian said it expects a $15 million increase in annual pretax earnings in 2002 as a result of the efficiency of the new B717 fleet. Deliveries will start in February 2001 and the last B717 is to be delivered by the end of 2001.

Commenting on the company's latest earnings, Paul J. Casey, president and chief executive officer, said higher passenger ticket sales shows why the company had to invest in new equipment and other changes to meet future growth.

"Our substantially higher passenger revenue in the third quarter is an indicator of the increasing demand for Hawaiian Airlines in our markets," he said.

"To support that demand, as well as successfully attain our growth plan of a 20 percent increase in capacity, we have been making investments in our infrastructure," he said.

The investments that affected Hawaiian's net profit included the cost of hiring and training additional flight crews and other personnel, and increased administrative and maintenance expenses, he said.

The airline reported third-quarter operating expenses of $127.9 million, up 23 percent from $104 million in last year's period. Included were a 35.8 percent year-over-year increase in fuel costs, to $20.5 million from $15.1 million; a 30.7 percent increase in maintenance costs, to $20.5 million from $15.1 million; and a 15.2 percent increase in wages and benefits, to $36.3 million from $31.5 million.

Resumption of landing fees at Hawaii's airports Sept. 1, after a two-year moratorium, cost the airline $600,000 in the latest quarter.