Hawaiian Air
lost $75M
in 2004

Reorganization costs and
high fuel prices hurt the
carrier's net earnings

Hawaiian Airlines' losses jumped 52 percent last year, to $75.4 million, as the carrier was socked with nearly $130 million in bankruptcy reorganization expenses and surging fuel costs.

Excluding the expenses -- related to renegotiated airplane leases and a Boeing 767 plane rejected by Hawaiian -- and a $16.8 million tax charge, Hawaiian's operating profit fell 8 percent to $71.1 million in 2004 from $77.5 million in 2003.

However, the numbers also were skewed by a $16 million federal grant the airline received in 2003, Hawaiian Airlines Trustee Joshua Gotbaum said yesterday.

Excluding the grant, operating profits increased 17.5 percent last year.

Hawaiian said its revenue grew 9.5 percent to $764 million for all of last year from $693 million for 2003. The airline is benefiting from increased travel to Hawaii, Gotbaum said.

"I think that as more and more people realized how good Hawaiian was, we kept on getting a better and better share of that traffic," he said.

By focusing on service, Hawaiian's brand recognition has grown on the mainland, Gotbaum said, enabling it to operate with among the fullest planes in the industry.

"People come to Hawaiian first," Gotbaum said. "That means our planes fill up faster, and they fill up with higher average fares."

But like all airlines, Hawaiian is dealing with rapidly rising fuel costs and intense competition making it difficult for carriers to increase fares. The carrier's fuel costs increased 40 percent last year to $135.9 million from 2003, with the brunt of the price hikes weighing more heavily through 2004 and into 2005, Gotbaum said.

Hawaiian and other airlines have tried to increase trans-Pacific fares, Gotbaum said, but most have not stuck.

"There's been lots of movement, but the end result is that (the fare has) been almost exactly where it was," he said.

At the same time, jet fuel prices increased from $1.22 a gallon on Dec. 31 to $1.75 a gallon on March 18, according to an annual report filed yesterday by Hawaiian's parent company, Hawaiian Holdings Inc. Each one-cent price increase translates to $1.1 million in higher annual operating costs, the report said, adding that fuel costs are expected to grow another $38 million this year.

The airline's labor costs increased 5.5 percent last year to $227.3 million.

Savings from recently renegotiated contracts with Hawaiian's unions won't take effect until the Air Line Pilots Association, the last group without a new contract, ratifies a pact.

The airline last week entered its third year in Chapter 11 bankruptcy protection, and is hoping to emerge late this month. Early this week, Hawaiian had sought to have the U.S. Bankruptcy Court impose a contract on its pilots, but after hearing a day of testimony Judge Robert Faris delayed the remainder of the hearing until April 13, and urged both sides to continue negotiating.

Gotbaum said the airline and the pilots have talked since Monday's hearing and will meet again next week.

"We're going to try to get an agreement by the 13th," he said.