Hawaiian Airlines' chief executive, unconcerned about a threat from another new interisland competitor, said yesterday that a sharp drop in fuel prices will help the carrier in the current quarter but that the company's enthusiasm for the short and medium term is tempered by the effect that the waning economy might have on the demand for Hawaii vacations.

Mark Dunkerley, president and CEO of the state's largest airline, made the remarks yesterday on a conference call after parent company Hawaiian Holdings Inc. announced that third-quarter earnings fell 69.2 percent from the year-earlier period. Hawaiian attributed the decline to a $9.2 million charge it took for fuel-hedge contracts and a higher-than-typical tax rate of 58 percent.

Still, Dunkerley noted, Hawaiian's results “;bettered the sizable losses posted by many of our competitors.”;

Net income fell to $6 million, or 12 cents a share, from $19.6 million, or 41 cents a share, a year ago.

Revenue jumped 24.7 percent to $339.9 million from $272.5 million with interisland and trans-Pacific operations posting “;substantial improvements,”; Dunkerley said.

Operating income rose 6.9 percent to $27.3 million from $25.6 million.

Hawaiian, which two years ago had to deal with the entry into the interisland market by Mesa Air Group's go!, now faces another challenge from Kona-based Mokulele Airlines, which through a partnership and $150 million equipment and cash infusion from Indianapolis-based Republic Airways plans to begin interisland service next month with two Embraer 170 jets. The initial service will be from Honolulu to Kona and Lihue, with two additional jets coming into service in the first quarter of next year from Honolulu to Kahului and Hilo.

But Dunkerley said he doesn't believe Mokulele has the resources to mount a serious challenge.

“;While the details over how this is going to play out remains to be seen, in this case, the new entrant is pledging not to start a fare war, and there is also no indication that either the new entrant or go! have the financial resources to wage the kind of attritional battle that took two years to deliver the collapse of Aloha,”; he said.

Dunkerley said he's confident that Hawaiian will be able to use its 80-year history, large fleet, “;superior cost structure”; and “;tremendous group of employees”; to maintain and build upon its strong market position.

Analyst Robert McAdoo, of Prairie Village, Kan.-based Avondale Partners LLC, said Hawaiian's numbers looked “;good.”;

“;Hawaiian is very lucky,”; McAdoo said. “;They've been in the right place when two major competitors (Aloha and ATA) have disappeared.”;

Despite a rapid decline in the price of fuel, Hawaiian was hit hard in that area last quarter as fuel costs skyrocketed 70.8 percent to $131.2 million from $76.8 million and represented 42 percent of operating expenses. Hawaiian's average cost of fuel increased 67.9 percent to $3.83 during the quarter over the year-ago period.

“;Although prices declined from their most eye-watering levels over the course of the quarter, our realization of this benefit is somewhat lagged because most of our fuel-supply contracts provide for pricing to be based on prior-week or prior-month pricing,”; Dunkerley said. “;This means we see an average of about a three-week delay in the realization of spot market price changes. As a result, our third-quarter results reflect the worst of the June and July peak in spot market prices.”;

  Overall, operating expenses jumped 26.6 percent last quarter to $312.6 million form $247 million.

Analyst Nick Capuano, of Los Angeles-based Imperial Capital, said Hawaiian matched his earnings forecast of 12 cents a share and actually performed better than anticipated because he wasn't expecting the higher tax rate.

Dunkerley said it's difficult to gauge the company's booking trend now because of “;quite dramatic, almost day-to-day changes in booking activity.”;

As a rule, he said, trans-Pacific customers tend to book ahead and there were a “;fair store”; of bookings ahead of the most recent economic turmoil. Interisland passengers, he said, tend to book closer to their departure date.

“;Close-in bookings are holding up better than bookings further out,”; he said.

Dunkerley also said that the second of four Boeing 717s that the company recently acquired has now been delivered and will be put into service next month. As a result, he said, the company will now eliminate the long-haul Boeing 767 it has been using for Honolulu-Maui service.

He also said that Hawaiian, which began charging a trans-Pacific first-checked-bag fee of $15 on Oct. 1, is also experimenting with other ancillary revenue ideas, such as the selling of tourism-related activities on Oahu, and lei greetings for arriving passengers.

Hawaiian finished the quarter with $224.8 million in unrestricted cash and $34.7 million in restricted cash.