Hawaiian Airlines narrows net loss
The company's parent beats estimates by a nickel for the quarter
Despite facing continued pressure on both its mainland and interisland routes, Hawaiian Airlines' parent said yesterday its second-quarter loss narrowed dramatically to $3.9 million as it began benefiting from its recent company restructuring, as well as the outsourcing of accounting services to India and reservation activities to the Philippines.
Hawaiian Holdings Inc. beats analysts' consensus earnings forecast by a nickel as it recorded a loss of 8 cents a share compared with a loss of 56 cents in the second quarter of 2006 when it had a net loss of $26.4 million. That year-earlier loss included a one-time charge of $28 million related to the company's redemption of its then-outstanding subordinated convertible notes in April 2006.
With the last of four aircraft being added to its fleet last quarter, Hawaiian's revenue increased 8.8 percent in the second quarter to $244.2 million from $224.5 million while its seating capacity rose 18.9 percent. The company's unrestricted cash rose to $152.8 million from $130.7 million at the end of the first quarter.
Operating expenses rose 13.6 percent to $244.8 million as fuel, representing 28 percent of expenses, increased 15.1 percent to $68.2 million. Wages and benefit expenses rose 6.9 percent to $59.9 million and included a $2.5 million charge for severance payments associated with a 2.7 percent work-force reduction and voluntary separation packages offered to employees affected by outsourcing.
"We've done a good job of controlling costs and there's more to come in this regard even though the rising price of fuel is offsetting some of the gain," said Mark Dunkerley, president and chief executive of Hawaiian.
During the second quarter, Hawaiian laid off 98 nonunion employees and eliminated an additional 38 unfilled nonunion positions to try to conform to the changing nature of the business. The layoffs were in operations, marketing and sales, and information technology.
In addition, the company began outsourcing its call center, accounting and information technology activities to third-party vendors. About 80 employees accepted separation packages in the affected areas. Some customers attempting to make reservations have experienced longer wait times because of the outsourcing to the Philippines, but Dunkerley said he expects that aspect of the operation to improve.
Chief Financial Officer Peter Ingram said Hawaiian should see about $15 million to $20 million in annual savings from its cost-cutting initiatives beginning in 2008.
Analyst Nick Capuano of Imperial Capital LLC praised Hawaiian's execution from a cost standpoint.
"They're still facing difficult markets in the interisland market because of the overcapacity, and it's been a fairly difficult pricing environment in trans-Pacific, but I think they did a good job on execution."
CORRECTIONWednesday, August 1, 2007
» An earnings arrow with a Hawaiian Airlines story on Page C1 in yesterday's morning edition should have shown a second-quarter loss of $3.9 million and a year-earlier loss of $26.4 million rather than gains with those same numbers.
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