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- Hawaiian Airlines
3375 Koapaka Street, G-350
Honolulu, HI 96819
- Main hub
- Honolulu International Airport
- United States of America
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- Domestic | International
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All Nippon Airways
Delta Air Lines
Hawaiian Airlines operates from hubs at Honolulu International Airport and Kahului Airport, on the island of Maui. The carrier provides a network of domestic services throughout the Hawaiian islands and to the mainland US as well as international services to Asia, the Pacific and Australia. Hawaiian utilise a fleet of narrow and wide-body Boeing and Airbus family aircraft.
Location of Hawaiian Airlines main hub (Honolulu International Airport)
Hawaiian Airlines share price
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Virgin America joined most US airlines in recording solid financial results for 4Q2014 and CY2014 – marking the first time it has reported its performance as a publicly traded company after completing an initial public offering in late 2014.
The airline delivered solid top-line revenue growth in each period, but faced some cost headwinds stemming from increased salaries and higher airport costs. Compensation expenses will continue to pressure Virgin America’s unit costs for CY2015.
Virgin America is also facing some revenue challenges in the New York transcontinental market and in Dallas Love Field driven by significant increases in industry capacity. The airline believes that those two markets should return to a more normalised state at some point, but it does appear the competitive dynamics shaping those markets will remain intact at least through 1Q2015.
For Hawaiian Airlines, after a solid financial performance in 4Q2014 and CY2014, a combination of currency headwinds and industry capacity increases on North American routes are creating unit revenue headwinds during 1Q2015. The airline’s guidance projects the deepest decrease reported by any US airline.
The capacity pressure is driven by additions from both Hawaiian and its competitors on routes to the US mainland. During 2014 Hawaiian opted to redeploy some capacity from long-haul routes that were eliminated back to the US west coast, and still believes that the decision is producing favourable results despite the current capacity pressure.
As it navigates through some revenue challenges in 1Q2015, Hawaiian’s capacity growth is slowing from previous years, and it is also forecasting a decent cost outlook for CY2015, welcome signs that some of the headwinds it has faced in the past are starting to subside.
Delta Air Lines and Virgin Australia are seeking re-authorisation for 10 years from Australian regulators for their joint venture. The US DoT initially took longer to approve the alliance but gave indefinite approval. Virgin continues to need Delta as a partner more than Delta needs Virgin, owing to the numerous connections from US gateways Virgin needs access to. The two will account for 25% of 2015's seat capacity compared to a much larger 56% for Qantas, with the remaining 19% held by United.
There have been limited developments from the smaller carriers, and Delta and Virgin have offered little growth. Nor in their application do they suggest further growth is on the horizon. Virgin Australia is short on long-haul aircraft and anyway is focused on its core domestic market. Delta has a much larger globe to tend to. United has made incremental changes while Qantas has grown the most. Given market dynamics, there is little prospect for a new entrant.
US airlines are putting up a tough and dramatic – with elements of farce – fight for a nighttime slot at Tokyo Haneda Airport. American and Hawaiian Airlines successfully convinced the US Department of Transportation (DoT) to review whether Delta’s use of the Seattle-Haneda route is in the public interest after Delta significantly decreased capacity over northern winter 2014/2015. American and Hawaiian have applied for the slot to serve Haneda from Los Angeles and Kona, respectively.
The posturing reflects the limited access US carriers gained to Haneda following the "Big Bang" in 2010. Overall the slot would be nice for the airline but is a small part of its network. Yet the intense fight comes as Delta battles weakness in Japan and plans an overall capacity pull-down in the market during 2015. Nonetheless, this spat over a single nighttime slot shows how intense the competition is likely to be when two Haneda slots at far more valuable daytime hours are made available to US carriers, subject to final negotiations.
Moderating growth, maturing markets and less intense capital commitments are some of the main drivers of Hawaiian Airlines’ positive outlook for CY2015 that includes margin expansion and cost control.
After rapid long-haul international expansion that commenced in CY2010, Hawaiian during 2014 has entered into a slower growth period that should provide space for the airline to continue strengthening its balance sheet and meet its stated liquidity and leverage targets.
As it takes a breather from its ambitious network transformation, Hawaiian is scrutinising the role new Airbus narrowbodies will play in its route structure once the aircraft come online beginning in CY2017.
It is no surprise that the two US investment grade airlines have recorded the most consistent shareholder returns during the past few years. Neither Alaska Air Group nor Southwest Airlines shows signs of slowing their shareholder reward schemes, reflected in Southwest doubling its dividend in May-2014 and Alaska’s consistent share repurchases and dividend pay-outs in 2013 and 2014.
The two other US hybrid airlines Hawaiian and JetBlue have less definitive plans for the form their shareholder returns will take. But reflecting the increasingly vocal base of US airline shareholders, Hawaiian has declared it would outline some form of capital allocation by YE2014.
JetBlue appears to be the one US airline furthest away from offering a timeframe and structure of its shareholder rewards; but it is likely to be top of the airline’s agenda as a new CEO takes the helm in Feb-2015.
This is Part 2 of a two-part series examining US airline shareholder returns.