Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-Q
 
ý      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2017
or

 o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from       to       
 
Commission file number 1-31443
 HAWAIIAN HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
 
71-0879698
(State or Other Jurisdiction of
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)
3375 Koapaka Street, Suite G-350
 
 
Honolulu, HI
 
96819
(Address of Principal Executive Offices)
 
(Zip Code)
 
(808) 835-3700
(Registrant’s Telephone Number, Including Area Code)
  
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ý Yes o No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  ý Yes o No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer x
 
Accelerated filer o
Non-accelerated filer o
 
Smaller reporting company o
(Do not check if a smaller reporting company)
 
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o Yes ý No
 
As of July 19, 2017, 53,560,764 shares of the registrant’s common stock were outstanding.




Hawaiian Holdings, Inc.
Form 10-Q
Quarterly Period ended June 30, 2017
 
Table of Contents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2



PART I. FINANCIAL INFORMATION

ITEM 1.                   FINANCIAL STATEMENTS.
Hawaiian Holdings, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(unaudited)
Operating Revenue:
 
 

 
 

 
 
 
 
Passenger
 
$
593,210

 
$
518,572

 
$
1,130,800

 
$
1,000,599

Other
 
82,125

 
76,018

 
158,720

 
145,171

Total
 
675,335

 
594,590

 
1,289,520

 
1,145,770

Operating Expenses:
 
 

 
 

 
 
 
 
Wages and benefits
 
154,660

 
130,801

 
305,713

 
259,362

Aircraft fuel, including taxes and delivery
 
102,774

 
83,798

 
206,312

 
153,698

Maintenance, materials and repairs
 
52,566

 
54,585

 
111,970

 
115,089

Aircraft and passenger servicing
 
34,751

 
30,723

 
68,209

 
59,274

Aircraft rent
 
34,553

 
30,066

 
67,688

 
59,454

Commissions and other selling
 
32,557

 
31,425

 
65,738

 
64,456

Other rentals and landing fees
 
27,438

 
24,978

 
55,774

 
49,412

Depreciation and amortization
 
27,872

 
26,988

 
55,340

 
54,134

Purchased services
 
28,055

 
24,543

 
54,692

 
47,275

Special items
 
4,771

 

 
23,450

 

Other
 
32,789

 
32,731

 
64,791

 
62,714

Total
 
532,786

 
470,638

 
1,079,677

 
924,868

Operating Income
 
142,549

 
123,952

 
209,843

 
220,902

Nonoperating Income (Expense):
 
 

 
 

 
 
 
 
Interest expense and amortization of debt discounts and issuance costs
 
(7,711
)
 
(8,910
)
 
(15,714
)
 
(19,914
)
Gains (losses) on fuel derivatives
 
(4,712
)
 
21,087

 
(13,510
)
 
19,022

Other components of net periodic benefit cost
 
(4,750
)
 
(5,082
)
 
(9,501
)
 
(10,164
)
Interest income
 
1,467

 
1,087

 
2,619

 
1,931

Capitalized interest
 
2,082

 
463

 
3,842

 
688

Loss on extinguishment of debt
 

 
(6,643
)
 

 
(9,993
)
Other, net
 
433

 
2,686

 
3,261

 
9,272

Total
 
(13,191
)
 
4,688

 
(29,003
)
 
(9,158
)
Income Before Income Taxes
 
129,358

 
128,640

 
180,840

 
211,744

Income tax expense
 
48,925

 
49,070

 
63,495

 
80,708

Net Income
 
$
80,433

 
$
79,570

 
$
117,345

 
$
131,036

Net Income Per Share
 
 

 
 

 
 
 
 
Basic
 
$
1.50

 
$
1.48

 
$
2.19

 
$
2.45

Diluted
 
$
1.49

 
$
1.48

 
$
2.18

 
$
2.43

 
See accompanying Notes to Consolidated Financial Statements.


3



Hawaiian Holdings, Inc.
Consolidated Statements of Comprehensive Income
(in thousands)

 
 
Three Months Ended June 30,
 
 
2017
 
2016
 
 
(unaudited)
Net Income
 
$
80,433

 
$
79,570

Other comprehensive income (loss), net:
 
 

 
 

Net change related to employee benefit plans, net of tax expense of $897 and $745 for 2017 and 2016, respectively
 
1,390

 
1,228

Net change in derivative instruments, net of tax expense of $768 and net of tax benefit of $4,309 for 2017 and 2016, respectively
 
1,261

 
(7,080
)
Net change in available-for-sale investments, net of tax expense of $20 and $93 for 2017 and 2016, respectively
 
32

 
151

Total other comprehensive income (loss)
 
2,683

 
(5,701
)
Total Comprehensive Income
 
$
83,116

 
$
73,869


 
 
Six Months Ended June 30,
 
 
2017
 
2016
 
 
(unaudited)
Net Income
 
$
117,345

 
$
131,036

Other comprehensive loss, net:
 
 
 
 

Net change related to employee benefit plans, net of tax expense of $1,794 and $1,315 for 2017 and 2016, respectively
 
2,858

 
2,155

Net change in derivative instruments, net of tax benefit of $3,557 and $9,316 for 2017 and 2016, respectively
 
(5,836
)
 
(15,308
)
Net change in available-for-sale investments, net of tax expense of $72 and $416 for 2017 and 2016, respectively
 
118

 
683

Total other comprehensive loss
 
(2,860
)
 
(12,470
)
Total Comprehensive Income
 
$
114,485

 
$
118,566



See accompanying Notes to Consolidated Financial Statements.


4



Hawaiian Holdings, Inc.
Consolidated Balance Sheets
(in thousands, except shares)
 
 
 
June 30, 2017
 
December 31, 2016
 
 
(unaudited)
 
 
ASSETS
 
 

 
 

Current Assets:
 
 

 
 

Cash and cash equivalents
 
$
578,694

 
$
325,991

Restricted cash
 
1,000

 
5,000

Short-term investments
 
265,059

 
284,075

Accounts receivable, net
 
86,472

 
96,067

Spare parts and supplies, net
 
23,024

 
20,363

Prepaid expenses and other
 
46,612

 
66,740

Total
 
1,000,861

 
798,236

Property and equipment, less accumulated depreciation and amortization of $393,388 and $454,231 as of June 30, 2017 and December 31, 2016, respectively
 
1,662,614

 
1,654,567

Other Assets:
 
 

 
 

Long-term prepayments and other
 
123,583

 
132,724

Intangible assets, less accumulated amortization of $21,006 and $20,337 as of June 30, 2017 and December 31, 2016, respectively
 
15,742

 
16,411

Goodwill
 
106,663

 
106,663

Total Assets
 
$
2,909,463

 
$
2,708,601

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 

 
 

Current Liabilities:
 
 

 
 

Accounts payable
 
$
118,043

 
$
116,507

Air traffic liability
 
619,292

 
482,496

Other accrued liabilities
 
159,933

 
172,214

Current maturities of long-term debt and capital lease obligations
 
59,102

 
58,899

Total
 
956,370

 
830,116

Long-Term Debt and Capital Lease Obligations
 
468,409

 
497,908

Other Liabilities and Deferred Credits:
 
 

 
 

Accumulated pension and other postretirement benefit obligations
 
352,521

 
355,968

Other liabilities and deferred credits
 
176,625

 
173,613

Deferred tax liability, net
 
168,363

 
170,543

Total
 
697,509

 
700,124

Commitments and Contingencies
 


 


Shareholders’ Equity:
 
 

 
 

Special preferred stock, $0.01 par value per share, three shares issued and outstanding as of June 30, 2017 and December 31, 2016
 

 

Common stock, $0.01 par value per share, 53,583,833 and 53,435,234 shares outstanding as of June 30, 2017 and December 31, 2016, respectively
 
536

 
534

Capital in excess of par value
 
119,501

 
127,266

Accumulated income
 
773,491

 
656,146

Accumulated other comprehensive loss, net
 
(106,353
)
 
(103,493
)
Total
 
787,175

 
680,453

Total Liabilities and Shareholders’ Equity
 
$
2,909,463

 
$
2,708,601

 

See accompanying Notes to Consolidated Financial Statements.

5



Hawaiian Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
 
 
 
Six Months Ended June 30,
 
 
2017
 
2016
 
 
(unaudited)
Net cash provided by Operating Activities
 
$
335,440

 
$
302,725

Cash flows from Investing Activities:
 
 

 
 

Additions to property and equipment, including pre-delivery payments
 
(96,278
)
 
(70,291
)
Proceeds from purchase assignment and leaseback transactions
 

 
31,851

Proceeds from disposition of property and equipment
 
33,511

 

Purchases of investments
 
(107,533
)
 
(138,235
)
Sales of investments
 
125,881

 
150,651

Net cash used in investing activities
 
(44,419
)
 
(26,024
)
Cash flows from Financing Activities:
 
 

 
 

Repayments of long-term debt and capital lease obligations
 
(30,484
)
 
(183,607
)
Repurchases and redemptions of convertible notes
 

 
(1,426
)
Repurchases of common stock
 
(4,299
)
 
(10,075
)
Other
 
(7,535
)
 
(7,628
)
Net cash used in financing activities
 
(42,318
)
 
(202,736
)
Net increase in cash and cash equivalents
 
248,703

 
73,965

Cash, cash equivalents, and restricted cash - Beginning of Period
 
330,991

 
286,502

Cash, cash equivalents, and restricted cash - End of Period
 
$
579,694

 
$
360,467

 
See accompanying Notes to Consolidated Financial Statements.


6



Hawaiian Holdings, Inc. 
Notes to Consolidated Financial Statements (Unaudited)
 
1. Business and Basis of Presentation
 
Hawaiian Holdings, Inc. (the Company or Holdings) is a holding company incorporated in the State of Delaware. The Company’s primary asset is its sole ownership of all issued and outstanding shares of common stock of Hawaiian Airlines, Inc. (Hawaiian). The accompanying unaudited financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (SEC).  Accordingly, these interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements.  In the opinion of management, the accompanying financial statements contain all adjustments, including normal recurring adjustments, necessary for the fair presentation of the Company’s results of operations and financial position for the periods presented.  Due to seasonal fluctuations, among other factors common to the airline industry, the results of operations for the periods presented are not necessarily indicative of the results of operations to be expected for the entire year.  The accompanying unaudited Consolidated Financial Statements should be read in conjunction with the financial statements and the notes of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
 
2. Significant Accounting Policies
 
Recently Adopted Accounting Pronouncements

In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, requiring an employer to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. ASU 2017-07 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption only permitted in the first quarter of 2017. The Company early adopted this standard during the first quarter of 2017. The adoption of ASU 2017-07 resulted in a reclassification of $5.1 million and $10.2 million from wages and benefits to other components of net periodic benefit cost on the Company's consolidated statement of operations for the three and six months ended June 30, 2016, respectively.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, Restricted Cash, requiring restricted cash and restricted cash equivalents to be included with cash and cash equivalents on the statement of cash flows when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company early adopted this standard during the first quarter of 2017. Restricted cash is now included as a component of cash, cash equivalents, and restricted cash on the Company's condensed consolidated statement of cash flows. The inclusion of restricted cash increased the beginning and ending balances of the condensed consolidated statement of cash flows by $5.0 million for the six months ended June 30, 2016.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, requiring all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. ASU 2016-09 will also allow an employer to withhold more shares for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016. The Company adopted this standard during the first quarter of 2017. The primary impact of the adoption of the standard on the Company's consolidated financial statements was the recognition of excess tax benefits in the provision for income taxes rather than additional paid-in capital, which reduced income tax expense by $0.4 million and $5.6 million for the three and six months ended June 30, 2017, respectively. The Company also reclassified $17.3 million of excess tax benefits for share-based payments in the cash flow statement from financing activities to operating activities for the six months ended June 30, 2016.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases, requiring a lessee to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018. ASU 2016-02 requires entities to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative

7



period in the financial statements. Full retrospective application is prohibited. The Company is currently evaluating the effect that the provisions of ASU 2016-02 will have on its consolidated financial statements and related disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. ASU 2014-09 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company expects to use the full retrospective transition method at the date of adoption.

The Company is currently evaluating the overall effect that the provisions of ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has reached conclusions on the applicability of the standard on accounting for contracts with customers and has determined that the new standard, once effective, will affect the Company's accounting policies regarding frequent flyer, ticket breakage, credit card fees, booking fees, and upgrade fee accounting. The standard will preclude the Company from applying the incremental cost method of accounting for free travel awards earned by passengers issued from the HawaiianMiles program through flight activity. The Company will instead be required to allocate consideration received between the ticket and miles earned by passengers and defer the value of the miles until redemption, resulting in a significant increase to the deferred revenue liability on the balance sheet. Passenger revenue is currently recognized for unflown tickets when tickets expire unused. Under the new standard, the Company expects to estimate tickets that will expire unused and recognize revenue at the ticketed flight date. Fees for changing itineraries are currently recognized when received. The Company expects to defer the recognition of these fees until the related transportation is provided. Amounts currently classified in other revenue (e.g. bag and other ancillary fees) will be reclassified to passenger revenue. The adoption of the standard will have a significant impact on the Company's financial statements. The Company is currently in the process of quantifying the effects of the new standard on the Company's financial statements.

3. Accumulated Other Comprehensive Income (Loss)
 
Reclassifications out of accumulated other comprehensive income (loss) by component are as follows: 
Details about accumulated other comprehensive (income) loss components
 
Three months ended June 30,
 
Six months ended June 30,
 
Affected line items in the statement where net income is presented
 
2017
 
2016
 
2017
 
2016
 
 
 
(in thousands)
 
 
Derivatives designated as hedging instruments under ASC 815
 
 

 
 

 
 

 
 

 
 
Foreign currency derivative gains, net
 
$
(480
)
 
$
(868
)
 
$
(1,692
)
 
$
(3,521
)
 
Passenger revenue
Interest rate derivative losses, net
 

 
1,235

 

 
944

 
Interest expense
Total before tax
 
(480
)
 
367

 
(1,692
)
 
(2,577
)
 
 
Tax expense (benefit)
 
182

 
(141
)
 
641

 
973

 
 
Total, net of tax
 
$
(298
)
 
$
226

 
$
(1,051
)
 
$
(1,604
)
 
 
Amortization of defined benefit plan items
 
 

 
 

 
 

 
 

 
 
Actuarial loss
 
$
2,228

 
$
1,915

 
$
4,456

 
$
3,830

 
Other components of net periodic benefit cost
Prior service cost
 
60

 
57

 
120

 
114

 
Other components of net periodic benefit cost
Total before tax
 
2,288

 
1,972

 
4,576

 
3,944

 
 
Tax benefit
 
(898
)
 
(747
)
 
(1,765
)
 
(1,493
)
 
 
Total, net of tax
 
$
1,390

 
$
1,225

 
$
2,811

 
$
2,451

 
 
Short-term investments
 
 

 
 

 
 

 
 

 
 
Realized gain on sales of investments, net
 
$
(12
)
 
$
(58
)
 
$
(20
)
 
$
(61
)
 
Other nonoperating income
Total before tax
 
(12
)
 
(58
)
 
(20
)
 
(61
)
 
 
Tax expense
 
5

 
19

 
8

 
20

 
 
Total, net of tax
 
(7
)
 
$
(39
)
 
$
(12
)
 
$
(41
)
 
 
Total reclassifications for the period
 
$
1,085

 
$
1,412

 
$
1,748

 
$
806

 
 

8




A rollforward of the amounts included in accumulated other comprehensive income (loss), net of taxes, for the three and six months ended June 30, 2017 and 2016 is as follows:
Three months ended June 30, 2017
 
Interest Rate Derivatives
 
Foreign Currency Derivatives
 
Defined Benefit
Plan Items
 
Short-Term Investments
 
Total
 
 
(in thousands)
Beginning balance
 
$

 
$
(26
)
 
$
(108,734
)
 
$
(276
)
 
$
(109,036
)
Other comprehensive income before reclassifications, net of tax
 

 
1,559

 

 
39

 
1,598

Amounts reclassified from accumulated other comprehensive income (loss), net of tax
 

 
(298
)
 
1,390

 
(7
)
 
1,085

Net current-period other comprehensive income
 

 
1,261

 
1,390

 
32

 
2,683

Ending balance
 
$

 
$
1,235

 
$
(107,344
)
 
$
(244
)
 
$
(106,353
)

Three months ended June 30, 2016
 
Interest Rate Derivatives
 
Foreign Currency Derivatives
 
Defined Benefit Plan Items
 
Short-Term Investments
 
Total
 
 
(in thousands)
Beginning balance
 
$
(768
)
 
$
(2,500
)
 
$
(102,938
)
 
$
160

 
$
(106,046
)
Other comprehensive income (loss) before reclassifications, net of tax
 

 
(7,306
)
 
3

 
190

 
(7,113
)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax
 
768

 
(542
)
 
1,225

 
(39
)
 
1,412

Net current-period other comprehensive income (loss)
 
768

 
(7,848
)
 
1,228

 
151

 
(5,701
)
Ending balance
 
$

 
$
(10,348
)
 
$
(101,710
)
 
$
311

 
$
(111,747
)

Six months ended June 30, 2017
 
Interest Rate Derivatives
 
Foreign Currency Derivatives
 
Defined Benefit Pension Items
 
Short-Term Investments
 
Total
 
 
(in thousands)
Beginning balance
 
$

 
$
7,071

 
$
(110,202
)
 
$
(362
)
 
$
(103,493
)
Other comprehensive income (loss) before reclassifications, net of tax
 

 
(4,785
)
 
47

 
130

 
(4,608
)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax
 

 
(1,051
)
 
2,811

 
(12
)
 
1,748

Net current-period other comprehensive income (loss)
 

 
(5,836
)
 
2,858

 
118

 
(2,860
)
Ending balance
 
$

 
$
1,235

 
$
(107,344
)
 
$
(244
)
 
$
(106,353
)

Six months ended June 30, 2016
 
Interest Rate Derivatives
 
Foreign Currency Derivatives
 
Defined Benefit Pension Items
 
Short-Term Investments
 
Total
 
 
(in thousands)
Beginning balance
 
$
81

 
$
4,879

 
$
(103,865
)
 
$
(372
)
 
$
(99,277
)
Other comprehensive income (loss) before reclassifications, net of tax
 
(668
)
 
(13,036
)
 
(296
)
 
724

 
(13,276
)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax
 
587

 
(2,191
)
 
2,451

 
(41
)
 
806

Net current-period other comprehensive income (loss)
 
(81
)
 
(15,227
)
 
2,155

 
683

 
(12,470
)
Ending balance
 
$

 
$
(10,348
)
 
$
(101,710
)
 
$
311

 
$
(111,747
)


9



4. Earnings Per Share
 
Basic earnings per share, which excludes dilution, is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period.
 
Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the three and six months ended June 30, 2017 and 2016, anti-dilutive shares excluded from the calculation of diluted earnings per share were nil.
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(in thousands, except for per share data)
Numerator:
 
 

 
 

 
 

 
 

Net Income
 
$
80,433

 
$
79,570

 
$
117,345

 
$
131,036

Denominator:
 
 

 
 

 
 

 
 

Weighted average common stock shares outstanding - Basic
 
53,626

 
53,634

 
53,595

 
53,574

Assumed exercise of stock options and awards
 
288

 
219

 
353

 
247

Assumed conversion of convertible note premium
 

 

 

 
12

Weighted average common stock shares outstanding - Diluted
 
53,914

 
53,853

 
53,948

 
53,833

Net Income Per Share
 
 

 
 

 
 

 
 

Basic
 
$
1.50

 
$
1.48

 
$
2.19

 
$
2.45

Diluted
 
$
1.49

 
$
1.48

 
$
2.18

 
$
2.43


Stock Repurchase Program

In April 2017, the Company's Board of Directors approved a modification to the Company's stock repurchase program under which the Company may now repurchase up to $100 million of its outstanding common stock over a two-year period through May 2019 via the open market, established plans or privately negotiated transactions in accordance with all applicable securities laws, rules and regulations. The stock repurchase program is subject to further modification or termination at any time.

The Company spent $4.3 million to repurchase and retire approximately 83 thousand shares of the Company's common stock in open market transactions during the three months ended June 30, 2017. As of June 30, 2017, the Company had $95.7 million remaining to spend under the newly modified stock repurchase program.

5. Short-Term Investments
 
Debt securities that are not classified as cash equivalents are classified as available-for-sale investments and are stated at fair value.  Realized gains and losses on sales of investments are reflected in nonoperating income (expense) in the unaudited consolidated statements of operations.  Unrealized gains and losses on available-for-sale securities are reflected as a component of accumulated other comprehensive loss.

The following is a summary of short-term investments held as of June 30, 2017 and December 31, 2016:
 
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
June 30, 2017
 
(in thousands)
Corporate debt
 
$
170,591

 
$
73

 
$
(237
)
 
$
170,427

U.S. government and agency debt
 
47,862

 

 
(153
)
 
47,709

Municipal bonds
 
22,422

 
16

 
(48
)
 
22,390

Other fixed income securities
 
24,535

 

 
(2
)
 
24,533

Total short-term investments
 
$
265,410

 
$
89

 
$
(440
)
 
$
265,059

 

10



 
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
December 31, 2016
 
(in thousands)
Corporate debt
 
$
171,139

 
$
84

 
$
(357
)
 
$
170,866

U.S. government and agency debt
 
53,916

 
8

 
(134
)
 
53,790

Municipal bonds
 
22,893

 
1

 
(144
)
 
22,750

Other fixed income securities
 
36,670

 

 
(1
)
 
36,669

Total short-term investments
 
$
284,618

 
$
93

 
$
(636
)
 
$
284,075


Contractual maturities of short-term investments as of June 30, 2017 are shown below. 
 
 
Under 1 Year
 
1 to 5 Years
 
Total
 
 
(in thousands)
Corporate debt
 
$
76,363

 
$
94,064

 
$
170,427

U.S. government and agency debt
 
34,068

 
13,641

 
47,709

Municipal bonds
 
7,875

 
14,515

 
22,390

Other fixed income securities
 
15,640

 
8,893

 
24,533

Total short-term investments
 
$
133,946

 
$
131,113

 
$
265,059

 
The Company classifies investments as current assets as these securities are available for use in its current operations.
 
6.  Fair Value Measurements
 
ASC Topic 820, Fair Value Measurement (ASC 820) defines fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.  As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.  As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
 
Level 1 — Observable inputs such as quoted prices in active markets for identical assets or liabilities;
 
Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term for the assets or liabilities; and
 
Level 3 — Unobservable inputs for which there is little or no market data and that are significant to the fair value of the assets or liabilities.


11



The tables below present the Company’s financial assets and liabilities measured at fair value on a recurring basis:
 
 
Fair Value Measurements as of June 30, 2017
 
 
Total
 
Level 1
 
Level 2
 
Level 3
 
 
(in thousands)
Cash equivalents
 
$
369,665

 
$
332,567

 
$
37,098

 
$

Restricted cash
 
1,000

 
1,000

 

 

Short-term investments
 
265,059

 

 
265,059

 

Fuel derivative contracts:
 
 
 
 

 
 

 
 

Crude oil call options
 
3,254

 

 
3,254

 

Jet fuel swaps
 
84

 

 
84

 

Foreign currency derivatives
 
5,525

 

 
5,525

 

Total assets measured at fair value
 
$
644,587

 
$
333,567

 
$
311,020

 
$

Fuel derivative contracts:
 
 

 
 

 
 

 
 

Jet fuel swaps
 
$
488

 
$

 
$
488

 
$

Foreign currency derivatives
 
3,270

 

 
3,270

 

Total liabilities measured at fair value
 
$
3,758

 
$

 
$
3,758

 
$

 
 
 
Fair Value Measurements as of December 31, 2016
 
 
Total
 
Level 1
 
Level 2
 
Level 3
 
 
(in thousands)
Cash equivalents
 
$
123,120

 
$
104,113

 
$
19,007

 
$

Restricted cash
 
5,000

 
5,000

 

 

Short-term investments
 
284,075

 

 
284,075

 

Fuel derivative contracts:
 
 
 
 

 
 

 
 

Crude oil call options
 
8,489

 

 
8,489

 

Heating oil swaps
 
6,601

 

 
6,601

 

Foreign currency derivatives
 
12,906

 

 
12,906

 

Total assets measured at fair value
 
$
440,191

 
$
109,113

 
$
331,078

 
$

Foreign currency derivatives
 
1,469

 

 
1,469

 

Total liabilities measured at fair value
 
$
1,469

 
$

 
$
1,469

 
$


Cash equivalents.  The Company's level 1 cash equivalents consist of money market securities and the level 2 cash equivalents consist of U.S. agency bonds, mutual funds, and commercial paper. The instruments classified as level 2 are valued using quoted prices for similar assets in active markets.

Restricted cash.  The Company’s restricted cash consists of cash held as collateral by institutions that process our credit card transactions for advanced ticket sales, which is valued similarly to the money market securities held as cash equivalents.
 
Short-term investments.  Short-term investments include U.S. and foreign government notes and bonds, U.S. agency bonds, variable-rate corporate bonds, asset backed securities, foreign and domestic corporate bonds, municipal bonds, and commercial paper.  These instruments are valued using quoted prices for similar assets in active markets or other observable inputs.

Fuel derivative contracts.  The Company’s fuel derivative contracts consist of crude oil call options and jet fuel swaps which are not traded on a public exchange. The fair value of these instruments are determined based on inputs available or derived from public markets including contractual terms, market prices, yield curves, and measures of volatility among others.
 
Foreign currency derivatives.  The Company’s foreign currency derivatives consist of Japanese Yen and Australian Dollar forward contracts and are valued based primarily on data available or derived from public markets.

The table below presents the Company’s debt (excluding obligations under capital leases) measured at fair value: 

12



Fair Value of Debt
June 30, 2017
 
December 31, 2016
Carrying
 
Fair Value
 
Carrying
 
Fair Value
Amount
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Amount
 
Total
 
Level 1
 
Level 2
 
Level 3
(in thousands)
$
457,541

 
$
467,400

 
$

 
$

 
$
467,400

 
$
481,874

 
$
484,734

 
$

 
$

 
$
484,734

 
The fair value estimates of the Company’s debt were based on the discounted amount of future cash flows using the Company’s current incremental rate of borrowing for similar instruments.
 
The carrying amounts of cash, other receivables, and accounts payable approximate fair value due to the short-term nature of these financial instruments.
 
7.  Financial Derivative Instruments
 
The Company uses derivatives to manage risks associated with certain assets and liabilities arising from the potential adverse impact of fluctuations in global fuel prices and foreign currencies.
 
Fuel Risk Management

The Company’s operations are inherently dependent upon the price and availability of aircraft fuel. To manage economic risks associated with fluctuations in aircraft fuel prices, the Company periodically enters into derivative financial instruments. During the three and six months ended June 30, 2017, the Company primarily used crude oil call options and jet fuel swaps to hedge its aircraft fuel expense.  These derivative instruments were not designated as hedges under ASC Topic 815, Derivatives and Hedging (ASC 815), for hedge accounting treatment. As a result, any changes in fair value of these derivative instruments are adjusted through other nonoperating income (expense) in the period of change.

The following table reflects the amount of realized and unrealized gains and losses recorded as nonoperating income (expense) in the unaudited Consolidated Statements of Operations.
 
 
Three months ended June 30,
 
Six months ended June 30,
Fuel derivative contracts
 
2017
 
2016
 
2017
 
2016
 
 
(in thousands)
Gains (losses) realized at settlement
 
$
(1,902
)
 
$
(8,799
)
 
$
687

 
$
(27,824
)
Reversal of prior period unrealized amounts
 
3,441

 
22,882

 
(4,506
)
 
40,692

Unrealized gains (losses) that will settle in future periods
 
(6,251
)
 
7,004

 
(9,691
)
 
6,154

Gains (losses) on fuel derivatives recorded as Nonoperating income (expense)
 
$
(4,712
)
 
$
21,087

 
$
(13,510
)
 
$
19,022


Foreign Currency Exchange Rate Risk Management
 
The Company is subject to foreign currency exchange rate risk due to revenues and expenses denominated in foreign currencies, with the primary exposures being the Japanese Yen and Australian Dollar. To manage exchange rate risk, the Company executes its international revenue and expense transactions in the same foreign currency to the extent practicable.  
The Company enters into foreign currency forward contracts to further manage the effects of fluctuating exchange rates. The effective portion of the gain or loss of designated cash flow hedges is reported as a component of accumulated other comprehensive income (AOCI) and reclassified into earnings in the same period in which the related sales are recognized as passenger revenue. The effective portion of the foreign currency forward contracts represents the change in fair value of the hedge that offsets the change in the fair value of the hedged item. To the extent the change in the fair value of the hedge does not perfectly offset the change in the fair value of the hedged item, the ineffective portion of the hedge is immediately recognized as nonoperating income (expense). Foreign currency forward contracts that are not designated as cash flow hedges are recorded at fair value, and any changes in fair value are recognized as other nonoperating income (expense) in the period of change.
 
The Company believes that its foreign currency forward contracts that are designated as cash flow hedges will continue to be effective in offsetting changes in cash flow attributable to the hedged risk. The Company expects to reclassify a net gain of approximately $0.8 million into earnings over the next 12 months from AOCI based on the values at June 30, 2017.

13



 
The following tables present the gross fair value of asset and liability derivatives that are designated as hedging instruments under ASC 815 and derivatives that are not designated as hedging instruments under ASC 815, as well as the net derivative positions and location of the asset and liability balances within the unaudited Consolidated Balance Sheets.

Derivative position as of June 30, 2017 
 
 
Balance Sheet
Location
 
Notional Amount
 
Final
Maturity
Date
 
Gross fair
value of
assets
 
Gross fair
value of
(liabilities)
 
Net
derivative
position
 
 
 
 
(in thousands)
 
 
 
(in thousands)
Derivatives designated as hedges
 
 
 
 
 
 
 
 

 
 

 
 

Foreign currency derivatives
 
Prepaid expenses and other
 
16,282,275 Japanese Yen
44,327 Australian Dollars
 
June 2018
 
3,748

 
(2,969
)
 
779

 
 
Long-term prepayments and other
 
5,068,850 Japanese Yen
7,386 Australian Dollars
 
June 2019
 
1,623

 
(243
)
 
1,380

Derivatives not designated as hedges
 
 
 
 
 
 
 
 

 
 

 
 
Foreign currency derivatives
 
Prepaid expenses and other
 
1,081,750 Japanese Yen
2,651 Australian Dollars
 
September 2017
 
154

 
(58
)
 
96

Fuel derivative contracts
 
Prepaid expenses and other
 
91,266 gallons
 
June 2018
 
3,338

 
(488
)
 
2,850

 
Derivative position as of December 31, 2016
 
 
Balance Sheet
Location
 
Notional Amount
 
Final
Maturity
Date
 
Gross fair
value of
assets
 
Gross fair
value of
(liabilities)
 
Net
derivative
position
 
 
 
 
(in thousands)
 
 
 
(in thousands)
Derivatives designated as hedges
 
 
 
 
 
 
 
 

 
 

 
 

Foreign currency derivatives
 
Prepaid expenses and other
 
16,121,500 Japanese Yen
41,917 Australian Dollars
 
December 2017
 
9,803

 
(1,349
)
 
8,454

 
 
Long-term prepayments and other
 
4,371,900 Japanese Yen
8,434 Australian Dollars
 
December 2018
 
2,632

 
(59
)
 
2,573

Derivatives not designated as hedges
 
 
 
 
 
 
 
 

 
 

 
 
Foreign currency derivatives
 
Prepaid expenses and other
 
879,050 Japanese Yen
5,802 Australian Dollars
 
March 2017
 
471

 
(61
)
 
410

Fuel derivative contracts
 
Prepaid expenses and other
 
17,850 gallons
 
December 2017
 
15,090

 

 
15,090

 
The following table reflects the impact of cash flow hedges designated for hedge accounting treatment and their location within the unaudited Consolidated Statements of Comprehensive Income. 
 
 
(Gain) loss recognized in AOCI on derivatives (effective portion)
 
(Gain) loss reclassified from AOCI
into income (effective portion)
 
(Gain) loss recognized in
nonoperating (income) expense
(ineffective portion)
 
 
Three months ended June 30,
 
Three months ended June 30,
 
Three months ended June 30,
 
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
 
(in thousands)
Foreign currency derivatives
 
$
(2,505
)
 
$
10,938

 
$
(480
)
 
$
(868
)
 
$

 
$

Interest rate derivatives
 

 

 

 
1,235

 

 



14



 
 
(Gain) loss recognized in AOCI on derivatives (effective portion)
 
(Gain) loss reclassified from AOCI
into income (effective portion)
 
(Gain) loss recognized in
nonoperating (income) expense
(ineffective portion)
 
 
Six months ended June 30,
 
Six months ended June 30,
 
Six months ended June 30,
 
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
 
(in thousands)
Foreign currency derivatives
 
$
7,705

 
$
20,155

 
$
(1,692
)
 
$
(3,521
)
 
$

 
$

Interest rate derivatives
 

 
923

 

 
944

 

 


Risk and Collateral
 
Financial derivative instruments expose the Company to possible credit loss in the event the counterparties fail to meet their obligations. To manage such credit risks, the Company (1) selects its counterparties based on past experience and credit ratings, (2) limits its exposure to any single counterparty, and (3) regularly monitors the market position and credit rating of each counterparty. Credit risk is deemed to have a minimal impact on the fair value of the derivative instruments as cash collateral would be provided by the counterparties based on the current market exposure of the derivative.

ASC 815 requires a reporting entity to elect a policy of whether to offset rights to reclaim cash collateral or obligations to return cash collateral against derivative assets and liabilities executed with the same counterparty under a master netting agreement, or present such amounts on a gross basis. The Company’s accounting policy is to present its derivative assets and liabilities on a net basis, including any collateral posted with the counterparty. The Company had no collateral posted with counterparties as of June 30, 2017 and December 31, 2016.

The Company is also subject to market risk in the event these financial instruments become less valuable in the market. However, changes in the fair value of the derivative instruments will generally offset the change in the fair value of the hedged item, limiting the Company’s overall exposure.

8.  Debt
 
As of June 30, 2017, the expected maturities of long-term debt for the remainder of 2017 and the next four years, and thereafter, were as follows (in thousands): 
Remaining months in 2017
$
24,469

2018
48,244

2019
72,927

2020
21,413

2021
49,060

Thereafter
241,428

 
$
457,541


9.  Leases

The Company leases aircraft, engines, and other assets under long-term lease arrangements. Other leased assets include real property, airport and terminal facilities, maintenance facilities, and general offices. Certain leases include escalation clauses and renewal options. When lease renewals are considered to be reasonably assured, the rental payments that will be due during the renewal periods are included in the determination of rent expense over the life of the lease.

15



As of June 30, 2017, the scheduled future minimum rental payments under operating leases with non-cancellable basic terms of more than one year were as follows:
 
Aircraft
 
Other
 
(in thousands)
Remaining in 2017
$
64,008

 
$
2,926

2018
127,235

 
7,311

2019
118,070

 
6,939

2020
97,717

 
6,690

2021
64,730

 
6,768

Thereafter
222,227

 
107,760

 
$
693,987

 
$
138,394

10. Employee Benefit Plans
 
The components of net periodic benefit cost for the Company’s defined benefit and other postretirement plans included the following: 
 
 
Three months ended June 30,
 
Six months ended June 30,
Components of Net Period Benefit Cost
 
2017
 
2016
 
2017
 
2016
 
 
(in thousands)
Service cost
 
$
3,813

 
$
3,713

 
$
7,626

 
$
7,426

Other cost:
 
 
 
 
 
 
 
 
Interest cost
 
7,259

 
7,582

 
14,518

 
15,164

Expected return on plan assets
 
(4,796
)
 
(4,472
)
 
(9,592
)
 
(8,944
)
Recognized net actuarial loss
 
2,287

 
1,972

 
4,574

 
3,944

Total other components of the net periodic benefit cost
 
4,750

 
5,082

 
$
9,500

 
$
10,164

Net periodic benefit cost
 
$
8,563

 
$
8,795

 
$
17,126

 
$
17,590

 
The Company contributed $8.0 million and $14.4 million to its defined benefit and other postretirement plans during the three and six months ended June 30, 2017, respectively. The Company contributed $11.0 million and $11.3 million to its defined benefit and other postretirement plans during the three and six months ended June 30, 2016, respectively.

In 2016, the Hawaiian Airlines, Inc. Pension Plan for Salaried Employees (the Salaried Plan) was consolidated into the Hawaiian Airlines, Inc. Pension Plan for Employees Represented by the International Association of Machinists (IAM), which established the Hawaiian Airlines, Inc. Salaried & IAM Merged Pension Plan (the Merged Plan). At that time, the net liabilities of the Salaried Plan were transferred to the Merged Plan. The benefits under the Merged Plan have remained consistent with the prior plan documents. In June 2017, the Company received a favorable determination letter from the Department of Labor to settle the Merged Plan.  The Company will take the necessary action to terminate the Merged Plan and expects to make a one-time cash payment of approximately $17 million to $22 million to settle the plan obligations in the third quarter of 2017. 

In March 2017, the Company announced the ratification of a 63-month contract amendment with its pilots as represented by the Air Line Pilots Association (ALPA). As further discussed in Note 12, during the six months ended June 30, 2017, the Company made a one-time payment to reduce the future 401K employer contribution for certain pilot groups, which is not recoverable once paid. In the third quarter of 2017, the Company currently estimates to make a one-time cash payment of approximately $102 million to settle a portion of its outstanding other post-retirement medical plan obligation with its pilots. 

11. Commitments and Contingent Liabilities
 
Commitments

As of June 30, 2017, the Company had the following capital commitments consisting of firm aircraft and engine orders and purchase rights:

16



Aircraft Type
 
Firm Orders
 
Purchase Rights
 
Expected Delivery Dates
A330-200 aircraft
 
1

 

 
In 2017
A321neo aircraft
 
16

 
9

 
Between 2017 and 2020
A330-800neo aircraft
 
6

 
6

 
Between 2019 and 2021
Pratt & Whitney spare engines:
 
 

 
 

 
 
A321neo spare engines
 
3

 
2

 
Between 2017 and 2019
Rolls-Royce spare engines:
 
 

 
 

 
 
A330-800neo spare engines
 
2

 
2

 
Between 2019 and 2026

The Company has operating commitments with a third-party to provide aircraft maintenance services which require fixed payments as well as variable payments based on flight hours for its Airbus fleet through 2027. The Company also has operating commitments with third-party service providers for IT, accounting services, and a capacity purchase agreement through 2024.
 
Committed capital and operating expenditures include escalation amounts based on estimates. The gross committed expenditures and committed payments for those deliveries as of June 30, 2017 are detailed below: 
 
 
Capital
 
Operating
 
Total Committed
Expenditures
 
 
(in thousands)
Remaining in 2017
 
$
145,666

 
$
38,885

 
$
184,551

2018
 
454,545

 
64,754

 
519,299

2019
 
499,622

 
59,406

 
559,028

2020
 
241,349

 
58,292

 
299,641

2021
 
169,771

 
56,551

 
226,322

Thereafter
 
131,440

 
400,430

 
531,870

 
 
$
1,642,393

 
$
678,318

 
$
2,320,711

 
Litigation and Contingencies
 
The Company is subject to legal proceedings arising in the normal course of its operations. Management does not anticipate that the disposition of any currently pending proceeding will have a material effect on the Company’s operations, business or financial condition.

General Guarantees and Indemnifications
 
In the normal course of business, the Company enters into numerous aircraft financing and real estate leasing arrangements that have various guarantees included in the contract. It is common in such lease transactions for the lessee to agree to indemnify the lessor and other related third-parties for tort liabilities that arise out of or relate to the lessee’s use of the leased aircraft or occupancy of the leased premises. In some cases, this indemnity extends to related liabilities arising from the negligence of the indemnified parties, but usually excludes any liabilities caused by their gross negligence or willful misconduct. Additionally, the lessee typically indemnifies such parties for any environmental liability that arises out of or relates to its use of the real estate leased premises. The Company believes that it is insured (subject to deductibles) for most tort liabilities and related indemnities described above with respect to the aircraft and real estate that it leases. The Company cannot reasonably estimate the potential amount of future payments, if any, under the foregoing indemnities and agreements.
 
Credit Card Holdback
 
Under the Company’s bank-issued credit card processing agreements, certain proceeds from advance ticket sales may be held back to serve as collateral to cover any possible chargebacks or other disputed charges that may occur. These holdbacks, which are included in restricted cash in the Company’s unaudited Consolidated Balance Sheets, totaled $1.0 million at June 30, 2017 and $5.0 million at December 31, 2016.
 
In the event of a material adverse change in the Company's business, the holdback could increase to an amount up to 100% of the applicable credit card air traffic liability, which would also cause an increase in the level of restricted cash. If the Company is unable to obtain a waiver of, or otherwise mitigate the increase in the restriction of cash, it could have a material adverse impact on the Company.

17




12. Special Items

 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(in thousands)
Special Items
 
$
4,771

 
$

 
$
23,450

 
$


In April 2017, the Company executed a sale leaseback transaction with an independent third party for three Boeing 767-300 aircraft. The lease term for the three aircraft commenced in April 2017 and goes through November 2018, December 2018, and January 2019, respectively. During the three and six months ended June 30, 2017, the Company recorded a loss on sale of aircraft of $4.8 million.

In February 2017, the Company reached a tentative agreement with ALPA, covering the Company's pilots. In March 2017, the Company received notice from ALPA that the agreement was ratified by its members.  The agreement was effective April 1, 2017 and has a term of 63 months.  The contract includes, among other various benefits, a pay adjustment and ratification bonus computed based on previous service. During the six months ended June 30, 2017, the Company expensed $18.7 million related to (1) a one-time payment to reduce the future 401K employer contribution for certain pilot groups, which is not recoverable once paid, and (2) a one-time true up of the pilot vacation accrual at the new negotiated contract rates.

13. Supplemental Cash Flow Information
 
Non-cash investing and financing activities for the six months ended June 30, 2017 and 2016 were as follows:
 
Six months ended June 30,
 
2017
 
2016
 
(in thousands)
Investing and Financing Activities Not Affecting Cash:
 
 
 
Property and equipment acquired through a capital lease
$

 
$
6,092


14. Condensed Consolidating Financial Information

The following condensed consolidating financial information is presented in accordance with Regulation S-X paragraph 210.3-10 because, in connection with the issuance by two pass-through trusts formed by Hawaiian (which is also referred to in this Note 14 as Subsidiary Issuer / Guarantor) of pass-through certificates, the Company (which is also referred to in this Note 14 as Parent Issuer / Guarantor) is fully and unconditionally guaranteeing the payment obligations of Hawaiian, which is a 100% owned subsidiary of the Company, under equipment notes issued by Hawaiian to purchase new aircraft.

Condensed consolidating financial statements are presented in the following tables:


18



Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
Three months ended June 30, 2017
 
 
Parent Issuer /
Guarantor
 
Subsidiary
Issuer /
Guarantor
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
Operating Revenue
 
$

 
$
673,606

 
$
1,837

 
$
(108
)
 
$
675,335

Operating Expenses:
 
 

 
 

 
 

 
 

 
 

Wages and benefits
 

 
154,660

 

 

 
154,660

Aircraft fuel, including taxes and delivery
 

 
102,774

 

 

 
102,774

Maintenance materials and repairs
 

 
52,137

 
429

 

 
52,566

Aircraft and passenger servicing
 

 
34,751

 

 

 
34,751

Commissions and other selling
 
18

 
32,546

 
19

 
(26
)
 
32,557

Aircraft rent
 

 
34,183

 
370

 

 
34,553

Other rentals and landing fees
 

 
27,438

 

 

 
27,438

Depreciation and amortization
 

 
26,919

 
953

 

 
27,872

Purchased services
 
177

 
27,646

 
247

 
(15
)
 
28,055

Special charges
 

 
4,771

 

 

 
4,771

Other
 
1,308

 
31,001

 
547

 
(67
)
 
32,789

Total
 
1,503

 
528,826

 
2,565

 
(108
)
 
532,786

Operating Income (Loss)
 
(1,503
)
 
144,780

 
(728
)
 

 
142,549

Nonoperating Income (Expense):
 
 

 
 

 
 

 
 

 
 

Undistributed net income of subsidiaries
 
81,110

 

 

 
(81,110
)
 

Interest expense and amortization of debt discounts and issuance costs
 

 
(7,711
)
 

 

 
(7,711
)
Other components of net periodic pension cost
 

 
(4,750
)
 

 

 
(4,750
)
Interest income
 
70

 
1,397

 

 

 
1,467

Capitalized interest
 

 
2,082

 

 

 
2,082

Losses on fuel derivatives
 

 
(4,712
)
 

 

 
(4,712
)
Other, net
 

 
433

 

 

 
433

Total
 
81,180

 
(13,261
)
 

 
(81,110
)
 
(13,191
)
Income (Loss) Before Income Taxes
 
79,677

 
131,519

 
(728
)
 
(81,110
)
 
129,358

Income tax expense (benefit)
 
(756
)
 
49,681

 

 

 
48,925

Net Income (Loss)
 
$
80,433

 
$
81,838

 
$
(728
)
 
$
(81,110
)