Hawaiian Holdings Reports 2014 Third Quarter Financial Results
21-Oct-2014 Hawaiian Holdings, Inc. (NASDAQ: HA) ("Holdings" or the "Company"), parent company of Hawaiian Airlines, Inc. ("Hawaiian"), today reported its financial results for the third quarter of 2014.
- GAAP net income in the third quarter of $35.6 million or $0.56 per diluted share.
- Adjusted net income, reflecting economic fuel expense, in the third quarter of $49.5 million or $0.79 per diluted share, an increase of $12.7 million or $0.10 cents per diluted share year-over-year.
- Operating revenue per available seat mile (RASM) increase of 4.6% and passenger revenue per available seat mile (PRASM) increase of 2.2%.
- Unrestricted cash, cash equivalents and short-term investments of $582 million.
"We are pleased with our 35 percent improvement in adjusted net income for the third quarter versus last year," said Mark Dunkerley, Hawaiian Airlines president and chief executive officer. "Strong demand across each of our main geographies, the impact of several new routes maturing and a favorable cost environment combined in this last quarter to bolster our results. Assuming these conditions continue and allowing for the uncertainties of competitor behavior, we look forward to continued improvements in the remainder of the year."
"As we approach our 85th anniversary in a few days' time, I'd like to thank all of Hawaiian's 'ohana, presently employed by the company or retired, who over these eight and a half decades have made this company what it is today. Our next decade looks bright thanks to their effort and dedication."
Statistical data, as well as a reconciliation of the reported non-GAAP financial measures, can be found in the accompanying tables.
Liquidity and Capital Resources
As of September 30, 2014 the Company had:
- Unrestricted cash, cash equivalents and short-term investments of $582 million.
- Outstanding debt and capital lease obligations of approximately $1,057 million consisting of the following:
- $701 million outstanding under secured loan agreements to finance a portion of the purchase price for 11 Airbus A330-200 aircraft.
- $141 million outstanding under secured loan agreements to finance a portion of the purchase price for 15 Boeing 717-200 aircraft.
- $104 million in capital lease obligations to finance the acquisition of an Airbus A330-200, two Boeing 717-200 aircraft and aircraft-related equipment.
- $31 million outstanding under floating rate notes to finance the acquisition of two Boeing 767-300 ER aircraft.
- $80 million of outstanding Convertible Senior Notes.
Third Quarter 2014 Highlights
Operational
- Ranked #1 nationally for on-time performance for the months of June, July and August 2014.
New routes and increased frequencies
- Announced new service from San Francisco to Maui beginning November 2014.
- Operated Los Angeles to Kona, three-times-weekly, and Los Angeles to Lihu'e, four-times-weekly, summer seasonal service through the beginning of September.
- Operated Oakland to Kona, three-times-weekly and Oakland to Lihu'e, four-times-weekly, summer seasonal service through the beginning of September.
- Operated Los Angeles to Maui second daily summer seasonal service through the beginning of September.
Fleet and financing
- Paid off debt on an existing A330 financing using cash in October.
Fourth Quarter 2014 Outlook
The table below summarizes the Company's expectations for the fourth quarter ending December 31, 2014, expressed as an expected percentage change compared to the results for the quarter ended December 31, 2013 (the results for which are presented for reference).
|
Fourth Quarter |
||
|
Item |
2013 |
Guidance |
|
Cost per ASM Excluding Fuel (cents) |
7.74 |
Up 5.5% to up 8.5% |
|
Operating Revenue Per ASM (cents) |
12.70 |
Up 4.5% to up 7.5% |
|
ASMs (millions) |
4,189.1 |
Up 1% to up 3% |
|
Gallons of jet fuel consumed (millions) |
56.4 |
Up 1% to up 3 |
|
Table 1. Hawaiian Holdings, Inc. Consolidated Statements of Operations (in thousands, except for per share data) (unaudited) |
||||||||||||
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
|
2014 |
2013 |
% Change |
2014 |
2013 |
% Change |
|||||||
|
(unaudited) |
||||||||||||
|
Operating Revenue: |
||||||||||||
|
Passenger |
$ |
566,985 |
$ |
543,315 |
4.4 |
% |
$ |
1,541,795 |
$ |
1,464,715 |
5.3 |
% |
|
Other |
72,477 |
55,983 |
29.5 |
% |
198,245 |
159,265 |
24.5 |
% |
||||
|
Total |
639,462 |
599,298 |
6.7 |
% |
1,740,040 |
1,623,980 |
7.1 |
% |
||||
|
Operating Expenses: |
||||||||||||
|
Aircraft fuel, including taxes and delivery |
182,219 |
181,334 |
0.5 |
% |
527,497 |
525,046 |
0.5 |
% |
||||
|
Wages and benefits |
114,469 |
112,150 |
2.1 |
% |
334,441 |
318,269 |
5.1 |
% |
||||
|
Aircraft rent |
26,724 |
27,575 |
(3.1) |
% |
79,098 |
81,879 |
(3.4) |
% |
||||
|
Maintenance materials and repairs |
51,293 |
51,705 |
(0.8) |
% |
168,002 |
160,000 |
5.0 |
% |
||||
|
Aircraft and passenger servicing |
31,848 |
31,080 |
2.5 |
% |
92,929 |
89,367 |
4.0 |
% |
||||
|
Commissions and other selling |
32,015 |
32,288 |
(0.8) |
% |
94,123 |
98,285 |
(4.2) |
% |
||||
|
Depreciation and amortization |
24,384 |
22,092 |
10.4 |
% |
70,960 |
60,993 |
16.3 |
% |
||||
|
Other rentals and landing fees |
23,637 |
21,996 |
7.5 |
% |
65,855 |
60,773 |
8.4 |
% |
||||
|
Other |
46,704 |
44,644 |
4.6 |
% |
139,335 |
129,469 |
7.6 |
% |
||||
|
Total |
533,293 |
524,864 |
1.6 |
% |
1,572,240 |
1,524,081 |
3.2 |
% |
||||
|
Operating Income |
106,169 |
74,434 |
42.6 |
% |
167,800 |
99,899 |
68.0 |
% |
||||
|
Nonoperating Income (Expense): |
||||||||||||
|
Interest expense and amortization of debt discounts and issuance costs |
(17,104) |
(13,479) |
(48,111) |
(37,019) |
||||||||
|
Interest income |
471 |
173 |
1,088 |
426 |
||||||||
|
Capitalized interest |
1,834 |
3,005 |
6,584 |
9,336 |
||||||||
|
Gains (losses) on fuel derivatives |
(27,892) |
2,536 |
(28,506) |
(10,931) |
||||||||
|
Other, net |
(5,114) |
749 |
(3,804) |
(3,457) |
||||||||
|
Total |
(47,805) |
(7,016) |
(72,749) |
(41,645) |
||||||||
|
Income Before Income Taxes |
58,364 |
67,418 |
95,051 |
58,254 |
||||||||
|
Income tax expense |
22,789 |
26,814 |
37,224 |
23,479 |
||||||||
|
Net Income |
$ |
35,575 |
$ |
40,604 |
$ |
57,827 |
$ |
34,775 |
||||
|
Net Income Per Common Stock |
||||||||||||
|
Basic |
$ |
0.66 |
$ |
0.78 |
$ |
1.08 |
$ |
0.67 |
||||
|
Diluted |
$ |
0.56 |
$ |
0.76 |
$ |
0.94 |
$ |
0.65 |
||||
|
Weighted Average Number of Common Stock Shares Outstanding: |
||||||||||||
|
Basic |
53,878 |
52,303 |
53,359 |
51,994 |
||||||||
|
Diluted |
63,050 |
53,512 |
61,685 |
53,160 |
||||||||
|
Table 2. Hawaiian Holdings, Inc. Selected Statistical Data (unaudited) |
||||||||||||||||
|
Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
|
2014 |
2013 |
% Change |
2014 |
2013 |
% Change |
|||||||||||
|
(in thousands, except as otherwise indicated) |
||||||||||||||||
|
Scheduled Operations (c) : |
||||||||||||||||
|
Revenue passengers flown |
2,707 |
2,644 |
2.4 |
% |
7,638 |
7,523 |
1.5 |
% |
||||||||
|
Revenue passenger miles (RPM) |
3,780,301 |
3,668,535 |
3.0 |
% |
10,402,081 |
10,279,673 |
1.2 |
% |
||||||||
|
Available seat miles (ASM) |
4,499,108 |
4,406,504 |
2.1 |
% |
12,795,342 |
12,578,342 |
1.7 |
% |
||||||||
|
Passenger revenue per RPM (Yield) |
15.00 |
¢ |
14.81 |
¢ |
1.3 |
% |
14.82 |
¢ |
14.25 |
¢ |
4.0 |
% |
||||
|
Passenger load factor (RPM/ASM) |
84.0 |
% |
83.3 |
% |
0.7 |
pt. |
81.3 |
% |
81.7 |
% |
(0.4) |
pt. |
||||
|
Passenger revenue per ASM (PRASM) |
12.60 |
¢ |
12.33 |
¢ |
2.2 |
% |
12.05 |
¢ |
11.64 |
¢ |
3.5 |
% |
||||
|
Total Operations (c) : |
||||||||||||||||
|
Revenue passengers flown |
2,709 |
2,647 |
2.3 |
% |
7,641 |
7,528 |
1.5 |
% |
||||||||
|
Revenue passenger miles (RPM) |
3,783,584 |
3,675,222 |
2.9 |
% |
10,410,466 |
10,294,818 |
1.1 |
% |
||||||||
|
Available seat miles (ASM) |
4,502,856 |
4,415,096 |
2.0 |
% |
12,804,599 |
12,596,765 |
1.6 |
% |
||||||||
|
Passenger load factor (RPM/ASM) |
84.0 |
% |
83.2 |
% |
0.8 |
pt. |
81.3 |
% |
81.7 |
% |
(0.4) |
pt. |
||||
|
Operating revenue per ASM (RASM) |
14.20 |
¢ |
13.57 |
¢ |
4.6 |
% |
13.59 |
¢ |
12.89 |
¢ |
5.4 |
% |
||||
|
Operating cost per ASM (CASM) |
11.84 |
¢ |
11.89 |
¢ |
(0.4) |
% |
12.28 |
¢ |
12.10 |
¢ |
1.5 |
% |
||||
|
CASM excluding aircraft fuel (b) |
7.80 |
¢ |
7.78 |
¢ |
0.3 |
% |
8.16 |
¢ |
7.93 |
¢ |
2.9 |
% |
||||
|
Aircraft fuel expense per ASM (a) |
4.04 |
¢ |
4.11 |
¢ |
(1.7) |
% |
4.12 |
¢ |
4.17 |
¢ |
(1.2) |
% |
||||
|
Revenue block hours operated |
43,688 |
42,205 |
3.5 |
% |
124,012 |
121,777 |
1.8 |
% |
||||||||
|
Gallons of jet fuel consumed |
60,232 |
59,265 |
1.6 |
% |
172,333 |
169,824 |
1.5 |
% |
||||||||
|
Average cost per gallon of jet fuel (actual) (a) |
$ |
3.03 |
$ |
3.06 |
(1.0) |
% |
$ |
3.06 |
$ |
3.09 |
(1.0) |
% |
||||
|
Economic fuel cost per gallon (a)(d) |
$ |
3.10 |
$ |
3.12 |
(0.6) |
% |
$ |
3.10 |
$ |
3.16 |
(1.9) |
% |
||||
|
(a) |
Includes applicable taxes and fees. |
|||||||||||||||
|
(b) |
Represents adjusted unit costs, a non-GAAP measure. We believe this is a useful measure because it better reflects our controllable costs. See Table 4 for a reconciliation of operating expenses excluding aircraft fuel. |
|||||||||||||||
|
(c) |
Includes the operations of our contract carrier under a capacity purchase agreement. |
|||||||||||||||
|
(d) |
See Table 3 for a reconciliation of economic fuel costs. |
|||||||||||||||
|
Table 3.
|
|
|
The Company believes that economic fuel expense is the best measure of the effect of fuel prices on its business as it most closely approximates the net cash outflow associated with the purchase of fuel for its operations in a period. The Company defines economic fuel expense as GAAP fuel expense plus (gains)/losses realized through actual cash (receipts)/payments received from or paid to hedge counterparties for fuel hedge derivative contracts settled during the period. |
|
Three months ended September 30, 2014 |
Nine months ended September 30, 2014 |
|||||||||||
|
2014 |
2013 |
Change |
2014 |
2013 |
Change |
|||||||
|
(in thousands, except per-gallon amounts) |
(in thousands, except per-gallon amounts) |
|||||||||||
|
Aircraft fuel expense, including taxes and delivery |
$ |
182,219 |
$ |
181,334 |
0.5 |
% |
$ |
527,497 |
$ |
525,046 |
0.5 |
% |
|
Realized losses on settlement of fuel derivative contracts |
4,632 |
3,790 |
22.2 |
% |
6,530 |
11,226 |
(41.8) |
% |
||||
|
Economic fuel expense |
$ |
186,851 |
$ |
185,124 |
0.9 |
% |
$ |
534,027 |
$ |
536,272 |
(0.4) |
% |
|
Fuel gallons consumed |
60,232 |
59,265 |
1.6 |
% |
172,333 |
169,824 |
1.5 |
% |
||||
|
Economic fuel costs per gallon |
$ |
3.10 |
$ |
3.12 |
(0.6) |
% |
$ |
3.10 |
$ |
3.16 |
(1.9) |
% |
|
Table 4.
|
|
|
The Company evaluates its financial performance utilizing various GAAP and non-GAAP financial measures, including net income, diluted net income per share, CASM, PRASM, RASM and Passenger Revenue per RPM. Pursuant to Regulation G, the Company has included the following reconciliation of reported non-GAAP financial measures to comparable financial measures reported on a GAAP basis. The Company believes that excluding fuel costs from certain measures is useful to investors because it provides an additional measure of management's performance excluding the effects of a significant cost item over which management has limited influence. |
|
Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
|
2014 |
2013 |
2014 |
2013 |
|||||||||||||
|
Net Income |
Diluted Net Income Per Share |
Net Income |
Diluted Net Income Per Share |
Net Income |
Diluted Net Income Per Share |
Net Income |
Diluted Net Income Per Share |
|||||||||
|
As reported - GAAP |
$ |
35,575 |
$ |
0.56 |
$ |
40,604 |
$ |
0.76 |
$ |
57,827 |
$ |
0.94 |
$ |
34,775 |
$ |
0.65 |
|
Add: unrealized losses (gains) on fuel derivatives |
13,956 |
0.23 |
(3,796) |
(0.07) |
13,185 |
0.21 |
(177) |
- |
||||||||
|
Reflecting economic fuel expense |
$ |
49,531 |
$ |
0.79 |
$ |
36,808 |
$ |
0.69 |
$ |
71,012 |
$ |
1.15 |
$ |
34,598 |
$ |
0.65 |
|
Three months ended September 30, |
Nine months ended September 30, |
|||||||||||
|
2014 |
2013 |
2014 |
2013 |
|||||||||
|
(in thousands, except as otherwise indicated) |
||||||||||||
|
GAAP operating expenses |
$ |
533,293 |
$ |
524,864 |
$ |
1,572,240 |
$ |
1,524,081 |
||||
|
Less: aircraft fuel, including taxes and delivery |
(182,219) |
(181,334) |
(527,497) |
(525,046) |
||||||||
|
Adjusted operating expenses - excluding aircraft fuel |
$ |
351,074 |
$ |
343,530 |
$ |
1,044,743 |
$ |
999,035 |
||||
|
Available Seat Miles |
4,502,856 |
4,415,096 |
12,804,599 |
12,596,765 |
||||||||
|
CASM - GAAP |
11.84 |
¢ |
11.89 |
¢ |
12.28 |
¢ |
12.10 |
¢ |
||||
|
Less: aircraft fuel |
(4.04) |
(4.11) |
(4.12) |
(4.17) |
||||||||
|
CASM - excluding aircraft fuel |
7.80 |
¢ |
7.78 |
¢ |
8.16 |
¢ |
7.93 |
¢ |
||||
|
Table 5.
|
|
|
The Company utilizes heating oil swaps and purchased put options to hedge against price volatility of its future aircraft fuel consumption. Swap positions are outlined below: |
|
Weighted Average Contract Price |
Percentage of Projected Fuel Requirements Hedged |
Fuel Barrels Hedged |
||||
|
Fourth Quarter 2014 |
||||||
|
Heating Oil Swaps |
$ |
2.94 |
65 |
% |
919,000 |
|
|
First Quarter 2015 |
||||||
|
Heating Oil Swaps |
$ |
2.89 |
48 |
% |
678,000 |
|
|
Second Quarter 2015 |
||||||
|
Heating Oil Swaps |
$ |
2.83 |
34 |
% |
493,000 |
|
|
Third Quarter 2015 |
||||||
|
Heating Oil Swaps |
$ |
2.80 |
19 |
% |
281,000 |
|
|
Fourth Quarter 2015 |
||||||
|
Heating Oil Swaps |
$ |
2.62 |
12 |
% |
59,000 |
|
Refer to full documentation in attachments box, located at the top left, below the headline.
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