Hawaiian Holdings, Inc. (“Holdings” or the “Company”), parent company of Hawaiian Airlines, Inc. (“Hawaiian”), today reported consolidated net income for the three months ended March 31, 2012 of $7.3 million, or $0.14 per diluted share, on total operating revenue of $435.5 million, compared to net income of $0.9 million, or $0.02 per diluted share, on total operating revenue of $365.6 million for the three months ended March 31, 2011.
Adjusted for economic fuel expense, the Company reported net income of $3.3 million, or $0.06 per diluted share for the three months ended March 31, 2012. This compares with adjusted net loss of $3.2 million, or $0.06 per diluted share, for the three months ended March 31, 2011, reflecting economic fuel expense. Table 4 sets forth a reconciliation of net income and diluted net income per share on a GAAP basis and non-GAAP net income and diluted net income per share reflecting economic fuel expense. The Company believes that the presentation of economic fuel expense most closely approximates the net cash outflow associated with the purchase of fuel for its operations in a period.
Mark Dunkerley, the Company’s president and chief executive officer, commented that “We are pleased to report a profit during a seasonally weak period when the business was nonetheless growing rapidly. Despite higher fuel costs, demand for our long haul services has stayed strong. Adding a sixth A330 and inaugurating our Fukuoka-Honolulu service were the operational highlights of the quarter. Continuing the eventful period we are in, we have three more A330s arriving in the second quarter, allowing us to start service to New York and boost capacity on a number of other routes. Our employees continue to do a peerless job of caring for our customers. In that vein, we are particularly pleased to have reached a long term labor agreement with our Flight Attendant union.”
First Quarter Financial Results
The Company reported operating income of $12.9 million in the first quarter of 2012, compared with operating loss of $4.9 million in the prior-year period.
First quarter 2012 operating revenue was $435.5 million, a 19.1% increase compared with the first quarter of 2011. Capacity for the quarter increased 12.8% year-over-year to 3.1 billion available seat miles (ASMs), resulting in operating revenue per ASM (RASM) of 13.86 cents, up 5.6% from the first quarter a year ago. First quarter scheduled passenger load factor declined 0.4 percentage points to 83.8%, while passenger yield (passenger revenue per revenue passenger mile) increased 7.0% to14.86 cents and PRASM increased 6.5% to 12.45 cents. Selected Statistical Data is included in Table 2.
Total operating expenses for the first quarter of 2012 increased 14.0% year-over-year to $422.6 million, resulting in an operating cost per available seat mile (CASM) of 13.45 cents, up 1.1% versus the same period a year ago. First quarter CASM excluding fuel decreased 4.2% to 8.99 cents when compared to the same period a year ago. A reconciliation of the GAAP and non-GAAP financial measures is included in Tables 3, 4 and 6.
Aircraft fuel costs in the first quarter of 2012 increased 28.3% year-over-year to $140.3 million and represented 33.2% of operating expenses. Hawaiian’s average cost per gallon of jet fuel increased 13.8% year-over-year to $3.25 (including taxes and delivery). The financial impact of hedging activities is included in nonoperating income/expenses, and as such is not reflected in fuel expense. Nonoperating income in the first quarter of 2012 reflects $5.8 million in net gains from Hawaiian’s fuel hedging activity.
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. For the three months ended March 31, 2012, economic fuel expense was $141.2 million ($3.27 per gallon), compared with $107.8 million ($2.82 per gallon) in the prior year period. An analysis of economic fuel expense for the three months ended March 31, 2012 and 2011 and pro-forma net income and diluted net income per share reflecting economic fuel expense is included in Tables 3 and 4.
First quarter 2012 nonoperating expense totaled $1.0 million, compared with nonoperating income of $6.4 million in the first quarter of 2011. The shift from nonoperating income to expense is primarily due to the increase in interest expense and amortization of debt discounts and issuance costs, which increased to $9.0 million compared to $3.2 million in the prior-year period due to the additional financing for aircraft deliveries. Additionally during the first quarter of 2012, the Company recognized nonoperating income of $5.8 million related to fuel hedging activities compared to $8.4 million in the prior year period. In the first quarter 2012, hedging income reflects $0.9 million of realized losses on derivative contracts settled in the quarter, the reversal of $1.8 million of previously recorded losses on these same contracts, and $4.9 million in unrealized gains related to fuel derivative contracts settling in future periods.
Liquidity, Capital Resources and Fuel Hedging
As of March 31, 2012, the Company had:
- Unrestricted cash and cash equivalents of $376 million and $5.2 million in restricted cash.
- Current available borrowing capacity of $56.6 million under Hawaiian’s Revolving Credit Facility.
- Outstanding debt and capital lease obligations of $539.7 million consisting of the following:
- $70.0 million outstanding under Convertible Senior Notes.
- $74.3 million outstanding under floating rate notes issued in conjunction with the acquisition of three Boeing 767-300 ER aircraft.
- $182.1 million secured loan agreements for a portion of the purchase price for 15 previously leased Boeing 717-200 aircraft.
- $192.8 million outstanding under three secured loan agreements to finance a portion of the purchase price for Airbus A330-200 aircraft.
- $20.0 million in capital lease obligations for Boeing 717-200 aircraft delivered in the first quarter 2012.
- $0.5 million of non-aircraft related capital lease obligations.
A summary of the Company’s fuel derivatives contracts as of April 13, 2012 is included as Table 5.
First Quarter 2012 Highlights
- For the 8th consecutive year, ranked as the nation’s #1 airline in on-time performance for 2011, as reported (in February 2012) by the U.S. Department of Transportation Air Travel Consumer Report.
- Led the U.S. airline industry in January 2012, ranking #1 nationally for on-time performance, as reported by the U.S. Department of Transportation Air Travel Consumer Report.
- Ranked second in overall performance in the 2012 Airline Quality Rating Report.
- In January 2012, implemented code-sharing and frequent flyer agreements between Hawaiian and All Nippon Airways (ANA).
- In January 2012, announced the introduction of a Maui hub offering improved connections between Maui and Neighbor Island destinations, as well as flights to and from the West Coast.
- In January 2012, announced a broad set of commercial agreements with JetBlue. The agreements provide for immediate interline connections between the carriers and in the near future encompass code-sharing and a reciprocal frequent flyer partnership. In addition, Hawaiian’s new HNL – JFK service will operate from JetBlue’s Terminal 5 in New York beginning in June.
- In February 2012, became the first airline to receive aviation carbon credits for reducing carbon dioxide emissions by nearly 22,000 metric tons over the past six years by implementing eco-friendly engine washing technology.
- In March 2012, reached a five-year agreement with the Association of Flight Attendants.
- In April 2012, the Company launched daily non-stop service from Honolulu to Fukuoka, Japan.
Investor Conference Call
Hawaiian Holdings’ quarterly earnings conference call is scheduled to begin today (Tuesday, April 24, 2012) at 4:30 p.m. Eastern Time (USA). The conference call will be broadcast live over the Internet. Investors may listen to the live audio webcast on the investor relations section of the Company’s website at www.HawaiianAirlines.com. For those who are not available for the live webcast, the call will be archived for 90 days on Hawaiian’s investor website.