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Hawaiian Airlines makes USD58m swing to loss

28-Jul-2011

Hawaiian Airlines reported a second quarter loss yesterday at USD50 million compared with the USD9 million profit posted in 2Q2010. This was despite a 25% increase in revenues to USD395 million compared with USD315.8 million a year ago.

Much of the problem related to a non-recurring, pre-tax lease termination expense of USD70 million as it moved 15 Boeing 717-200s from operating leases which were off balance sheet to ownership positions. CEO Mark Dunkerley reported that the transaction to transfer the 15 717s has a positive net present value and offers more flexibility to the company than it would otherwise have.

Mr Dunkerley echoed his mainland counterparts in citing fuel, saying they overwhelmed revenue increases. He also cited the USD6 million the aftermath of the Japanese earthquake cost the company but said that the Japanese market was showing strong recover while the US domestic services remained healthy. Load factors out of Tokyo are now in the 70% after losing 20-30 percentage points after the earthquake.

Still in the throws of its Asian expansion, third quarter capacity is expected to rise 15-17% year on year reflecting its international expansion. Meanwhile, neighbour-island capacity will be flat in the coming quarter while North America declines slightly as aircraft are moved to international service. Full-year capacity will be up 17-19%. Third quarter load factor will decline slightly on its international expansion to down two points to flat.

Yields in the third quarter will be up 8-11% for a PRASM expectation of up 6.5-9.5%. Other revenue is expected to continue to grow at a slower pace since first bag fees are not charged on international routes. Operating revenue per available seat mile is expected to increase 2-3 percentage points, less than expected PRASM growth.

The carrier is also taking three additional 717s to supplement its inter-island fleet and to respond to the growing connecting traffic from Asia. The extra aircraft will also allow it to better accommodated maintenance and operational disruptions since the airline did not have spare aircraft. The additional capacity will go to increase peak-hour and peak-day capacity but will add less an 1% to total ASMs in the fourth quarter.

On the cost side, CASM ex fuel will be stable in the range of down .5 to up 2.5%. It will continue to see upward pressure on costs from maintenance and revenue-related costs.

Mr Dunkerley indicated its rising capacity well offset that a little. Rental costs will decline between USD6 million-7 million with the change in ownership of the 717s offset by a USD3 million increase in depreciation and amortization for the aircraft.

Alaska has diluted Hawaiian’s San Diego-Honolulu traffic although that has been offset by the increase in connecting traffic from Asia as Honolulu is the single point of entry for international traffic. It also sees no weakness in its mainland-Hawaii demand resulting from the dismal headlines from Washington which is causing a dramatic decline in consumer confidence. Indeed, it sees strong demand between the West Coast and Hawaii continuing in the Autumn meaning fares will probably not come down.

Comparative statistics reported to date

2Q 2011 vs 2101

ALK

AMR

DAL

HA

JBLU

LUV

UAL

LCC

ALGT

Profit

USD

28.8

down

50.9%

(286M)

vs

(11M)

 

(50M)

vs

(49M)

25M

vs

31M

 

538M

down

11.9%

92M

vs

279M

 

Op Revs

USD

1.1B

up

13.7%

6.114B

up

7.8%

 

395M

vs

315M

1.1B

up

22.4%

 

9.8B

up

10.3%

3.5B

up

10.5%

 

Op Exp

USD

1B

up

21.5%

6.192B

up

13%

 

465.1M

vs

291.8M

1B

up

26%

 

9.1B

up

12.1%

3.3B

up

18.8%

 

ASMs

7.4B

up

7.2%

39.2B

up

2.1%

 

2.9B

up

21.2%

9.4B

up

8.7%

 

56.4B

up

1.1%

19.1B

up

3.3%

 

LF

84.3

up

2.4 pts

83.6%

down

0.3 pts

 

83.9%

down

1.7 pts

81.5%

down

0.5 pts

 

84%

down

0.9 pts

83.8%

up

0.9 pts

 

Yield

Cents

14.39

up

3.9%

13.90

up

4.6%

 

14.12

up

7.2%

13.60

up

13.9%

 

14.46

up

10.3%

16.30

up

6.5%

 

Prasm

Cents

13.58

up

6.8%

11.62

up

4.9%

 

11.85

up

5.1%

11.08

up

13.2%

 

12.15

up

9.1%

13.66

up

7.6%

 

CASM

Cents

 

14.52

up

9..8%

 

15.59

up

31.6%

11.28

up 16%

 

12.97

up

10.7%

14.59

up

15%

 

CASM ex fuel/

Cents

8.46

down

3.1%

9.36

up

1.4%

 

11.05

up

27.6%

6.62

up

1.7%

 

8.17

up

3%

9.14

up

0.9%

 

Anc/Other

Revs

USD

66.9

up

7.4%

659M

up

5.5%

 

41.6M

vs

38.1M

105M

up

17%

 

780M

up

0.9%

345M

up

3.9%

 

The company ended the quarter with USD305.5 million in unrestricted cash and cash equivalents  and USD5.2 million in restricted cash. Outstanding long-term debt reached USD409 million


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