Report of unscheduled material events or corporate changes.

8-K
Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of Report (Date of Earliest Event Reported): October 19, 2017
 
HAWAIIAN HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
 
Delaware
 
1-31443
 
71-0879698
(State or Other Jurisdiction of
Incorporation)
 
(Commission File Number)
 
(I.R.S. Employer
Identification Number)
 
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)
 
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).                                
Emerging growth company ☐

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.    ☐

Item 2.02.     Results of Operations and Financial Condition.
 
On October 19, 2017, the Registrant issued a press release announcing its financial results for the quarter ended September 30, 2017 (the "Press Release").  A copy of the Press Release is furnished as Exhibit 99.1 to this report and incorporated herein by reference.
 





The information furnished in this Item 2.02 and in Exhibit 99.1 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and unless expressly set forth by specific reference in such filings, shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and regardless of any general incorporation language in such filings.

 
Item 9.01.     Financial Statements and Exhibits.
 
(d) Exhibits.
 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Dated: October 19, 2017
 
 
 
 
HAWAIIAN HOLDINGS, INC.
 
 
 
 
 
 
 
By:
/s/ Shannon L. Okinaka
 
 
Name:
Shannon L. Okinaka
 
 
Title:
Executive Vice President, Chief Financial Officer and Treasurer




Exhibit
Exhibit 99.1
NEWS
http://quotemedia.10kwizard.com/cgi/image?quest=1&rid=23&ipage=11845593&doc=3
FOR IMMEDIATE RELEASE Thursday, October 19, 2017
 
COMPANY CONTACT:
Shannon Okinaka, EVP & CFO - (808) 835-3700
Shannon.Okinaka@HawaiianAir.com
 
INVESTOR RELATIONS CONTACT:
Daniel Wong, Sr. Director - (808) 835-3291
Investor.Relations@HawaiianAir.com

MEDIA RELATIONS CONTACT:
Alison Croyle, Sr. Director - (808) 835-3886
Alison.Croyle@HawaiianAir.com


 
Hawaiian Holdings Reports 2017 Third Quarter Financial Results
 
HONOLULU — October 19, 2017 — 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 2017.
 
Third Quarter 2017 - Key Financial Metrics
 
 
GAAP
 
YoY Change
 
Adjusted
 
YoY Change
Net Income
 
$74.6M
 
($27.9M)
 
$102.6M
 
$(0.5)M
Diluted EPS
 
$1.39
 
($0.52)
 
$1.92
 
$—
Pre-tax Margin
 
16.6%
 
(7.8) pts.
 
22.8%
 
(1.8) pts.

 "The third quarter’s excellent results add to the great year we are having," said Mark Dunkerley, Hawaiian Airlines president and CEO. "Apart from the helpful environment characterized by low fuel prices, manageable industry capacity and strong demand for the Hawaii vacation, our team is doing a terrific job improving the company and widening the gap between us and our competitors."

Statistical information, as well as a reconciliation of the non-GAAP financial measures, can be found in the accompanying tables.
 
Liquidity and Capital Resources
 
On October 12, 2017, the Company announced the initiation of a quarterly cash dividend of 12 cents per share to be paid on November 30, 2017 to all stockholders of record as of November 17, 2017.

In addition, the Company repurchased approximately 1.1 million shares of common stock for approximately $46.2 million in the third quarter, which leaves $49.5 million remaining under its share repurchase program.




As of September 30, 2017, the Company had:
 
·                  Unrestricted cash, cash equivalents and short-term investments of $619 million
·                  Outstanding debt and capital lease obligations of $506 million


Third Quarter 2017 Highlights

People

Contributed $134.6 million during the quarter to employee benefit plans, comprised of a one-time payment of $18.5 million to fully fund and terminate the Hawaiian Airlines, Inc. Salaried & IAM Merged Pension Plan, a one-time payment of $101.9 million to settle a portion of the post-65 medical plan obligation in connection with the ratification of a contract amendment with the Air Line Pilots Association, representing its pilots, and a contribution of approximately $14.2 million, $12.7 million above the minimum required, to further reduce pension obligations.


Operational

Ranked #1 nationally for on-time performance for the months of June, July, and August 2017 as reported in the U.S. Department of Transportation Air Travel Consumer Report.

Partnerships

Announced a new partnership with Japan Airlines (JAL) that provides for extensive code sharing, lounge access and frequent flyer program reciprocity, taking effect on March 25, 2018 (subject to government approval). Also announced the intention to establish a joint venture with JAL designed to provide even more choices, convenience and enhancements to the traveling public to/from Japan and beyond to multiple Asian markets.

Increased frequencies

Announced the expansion of non-stop service between Honolulu’s Daniel K. Inouye International Airport (HNL) and New Zealand’s Auckland Airport (AKL) with up to five non-stop flights weekly beginning March 2018.

Product and loyalty

Continued remodeling the A330 fleet with the addition of lie flat premium seats and increased Extra Comfort capacity. Also announced the introduction of remodeled A330 aircraft to its non-stop service between Honolulu’s Daniel K. Inouye International Airport (HNL) and Sapporo’s New Chitose Airport (CTS) starting February 2018.

Fleet and financing
Took delivery of its 24th A330-200 in September.
Took delivery of its first ATR 72 turboprop aircraft in an all-cargo configuration in September.


Fourth Quarter and Full Year 2017 Outlook
 
The table below summarizes the Company’s expectations for the fourth quarter and full year ending December 31, 2017, expressed as an expected percentage change compared to the results for the quarter and full year ended December 31, 2016, as applicable.

The Company has revised its guidance range for economic fuel cost per gallon for the full year ending December 31, 2017 due to higher than expected year-to-date fuel costs and the forward fuel price curve as of October 9, 2017.



The Company is also providing a guidance range for operating revenue per ASM and has adjusted its guidance ranges for cost per ASM excluding fuel and special Items, ASMs, and gallons of jet fuel consumed for the full year ending December 31, 2017.

 
 
Fourth Quarter
 
 
 
GAAP Fourth Quarter
Item
 
2017 Guidance
 
GAAP Equivalent
 
2017 Guidance
Cost per ASM excluding fuel and special items (a)
 
Up 3.5% to up 6.5%
 
Cost per ASM (a)
 
Down 10.3% to down 13.5%
Operating revenue per ASM
 
Down 1.0% to up 2.0%
 
 
 
 
ASMs
 
Up 4.0% to up 6.0%
 
 
 
 
Gallons of jet fuel consumed
 
Up 5.0% to up 8.0%
 
 
 
 
Economic fuel cost per gallon (b)(c)
 
$1.75 to $1.85
 
Fuel cost per gallon (b)
 
$1.72 to $1.82
 
 
 
Full Year
 
 
 
GAAP Full Year
Item
 
2017 Guidance
 
GAAP Equivalent
 
2017 Guidance
Cost per ASM excluding fuel and special items (a)
 
Up 6.0% to up 7.0%
 
Cost per ASM (a)
 
Up 3.6% to up 5.5%
Operating revenue per ASM
 
Up 5.0% to up 6.0%
 
 
 
 
ASMs
 
Up 3.0% to up 4.0%
 
 
 
 
Gallons of jet fuel consumed
 
Up 5.5% to up 6.5%
 
 
 
 
Economic fuel cost per gallon (b)(c)
 
$1.65 to $1.75
 
Fuel cost per gallon (b)
 
$1.64 to $1.74

(a) See Table 4 for a reconciliation of GAAP operating expenses to operating expenses excluding aircraft fuel and special items.
(b) Fuel cost per gallon estimates are based on the October 9, 2017 fuel forward curve.
(c) See Table 3 for a reconciliation of GAAP fuel costs to economic fuel costs.

Investor Conference Call
 
Hawaiian Holdings’ quarterly earnings conference call is scheduled to begin today (October 19, 2017) 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 the investor relations section of the Company's website.
 
About Hawaiian Airlines
 
Hawaiian®, the world's most punctual airline as reported by OAG, has led all U.S. carriers in on-time performance for each of the past 13 years (2004-2016) as reported by the U.S. Department of Transportation. Consumer surveys by Condé Nast Traveler and Travel + Leisure have ranked Hawaiian among the highest of all domestic airlines serving Hawai‘i.

Now in its 88th year of continuous service, Hawaiian is Hawai‘i’s biggest and longest-serving airline.

Hawaiian offers non-stop service to Hawai‘i from more U.S. gateway cities (11) than any other airline, along with service from Japan, South Korea, China, Australia, New Zealand, American Samoa and Tahiti. Hawaiian also provides approximately 170 jet flights daily between the Hawaiian Islands, with a total of more than 250 daily flights system-wide.

Hawaiian Airlines, Inc. is a subsidiary of Hawaiian Holdings, Inc. (NASDAQ: HA). Additional information is available at HawaiianAirlines.com. Follow updates on Twitter about Hawaiian (@HawaiianAir) and its special fare offers (@HawaiianFares), and become a fan on its Facebook page (Hawaiian Airlines). For career postings and updates, follow Hawaiian's LinkedIn page.

For media inquiries, please visit Hawaiian Airlines' online newsroom.




Forward-Looking Statements
 
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the Company’s current views with respect to certain current and future events and financial performance.  Such forward-looking statements include, without limitation, the Company’s expectations regarding cost per available seat mile, cost per available seat mile excluding fuel and special items, operating revenue per available seat mile, available seat miles, gallons of jet fuel consumed, fuel cost per gallon, and economic fuel cost per gallon for the quarter and full year ending December 31, 2017; and statements as to other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing.  Words such as “expects,” “anticipates,” “projects,” “intends,” “plans,” “believes,” “estimates,” variations of such words, and similar expressions are also intended to identify such forward-looking statements.  These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and assumptions relating to the Company’s operations and business environment, all of which may cause the Company’s actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. These risks and uncertainties include, without limitation, the Company’s ability to accurately forecast quarterly and annual results; economic volatility; macroeconomic developments; political developments; the price and availability of aircraft fuel; fluctuations in demand for transportation in the markets in which the Company operates; the Company’s dependence on tourist travel; labor negotiations and related developments; competitive pressures, including the potential impact of rising industry capacity between North America and Hawai‘i; the Company's ability to continue to generate sufficient cash flow to support the payment of a quarterly dividend; changes in the Company's future capital needs; foreign currency exchange rate fluctuations; and the Company’s ability to implement its growth strategy.

The risks, uncertainties and assumptions referred to above that could cause the Company’s results to differ materially from the results expressed or implied by such forward-looking statements also include the risks, uncertainties and assumptions discussed from time to time in the Company’s other public filings and public announcements, including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and the Company’s subsequent Quarterly Reports on Form 10-Q, as well as other documents that may be filed by the Company from time to time with the Securities and Exchange Commission.  All forward-looking statements included in this document are based on information available to the Company on the date hereof.  The Company does not undertake to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date hereof even if experience or future changes make it clear that any projected results expressed or implied herein will not be realized.



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,
 
 
2017
 
2016 (a)
 
% Change
 
2017
 
2016 (a)
 
% Change
Operating Revenue:
 
 

 
 

 
 
 
 
 
 
 
 
Passenger
 
$
634,475

 
$
591,496

 
7.3
 %
 
$
1,765,275

 
$
1,592,095

 
10.9
 %
Other
 
85,084

 
80,341

 
5.9
 %
 
243,804

 
225,512

 
8.1
 %
Total
 
719,559

 
671,837

 
7.1
 %
 
2,009,079

 
1,817,607

 
10.5
 %
Operating Expenses:
 
 

 
 

 
 
 
 
 
 
 
 
Aircraft fuel, including taxes and delivery
 
110,111

 
94,818

 
16.1
 %
 
316,423

 
248,516

 
27.3
 %
Wages and benefits
 
161,059

 
136,356

 
18.1
 %
 
466,772

 
395,718

 
18.0
 %
Aircraft rent
 
35,195

 
32,891

 
7.0
 %
 
102,883

 
92,345

 
11.4
 %
Maintenance, materials and repairs
 
49,396

 
51,812

 
(4.7
)%
 
161,366

 
166,901

 
(3.3
)%
Aircraft and passenger servicing
 
36,360

 
33,971

 
7.0
 %
 
104,569

 
93,245

 
12.1
 %
Commissions and other selling
 
32,930

 
29,480

 
11.7
 %
 
98,668

 
93,936

 
5.0
 %
Depreciation and amortization
 
28,447

 
27,495

 
3.5
 %
 
83,787

 
81,629

 
2.6
 %
Other rentals and landing fees
 
30,989

 
28,926

 
7.1
 %
 
86,763

 
78,338

 
10.8
 %
Purchased services
 
24,736

 
25,614

 
(3.4
)%
 
79,428

 
72,889

 
9.0
 %
Special items
 

 

 
 %
 
23,450

 

 
100.0
 %
Other
 
36,585

 
31,565

 
15.9
 %
 
101,376

 
94,279

 
7.5
 %
Total
 
545,808

 
492,928

 
10.7
 %
 
1,625,485

 
1,417,796

 
14.6
 %
Operating Income
 
173,751

 
178,909

 
(2.9
)%
 
383,594

 
399,811

 
(4.1
)%
Nonoperating Income (Expense):
 
 

 
 

 
 
 
 
 
 
 
 
Other nonoperating special items
 
(50,202
)
 

 
 
 
(50,202
)
 

 
 
Interest expense and amortization of debt discounts and issuance costs
 
(7,578
)
 
(8,539
)
 
 
 
(23,292
)
 
(28,453
)
 
 
Interest income
 
1,861

 
1,113

 
 
 
4,480

 
3,044

 
 
Capitalized interest
 
2,416

 
719

 
 
 
6,258

 
1,407

 
 
Gains (losses) on fuel derivatives
 
3,282

 
(3,601
)
 
 
 
(10,228
)
 
15,421

 
 
Loss on extinguishment of debt
 

 

 
 
 

 
(9,993
)
 
 
Other components of net periodic benefit cost
 
(3,792
)
 
(5,054
)
 
 
 
(13,293
)
 
(15,218
)
 
 
Other, net
 
(100
)
 
612

 
 
 
3,161

 
9,884

 
 
Total
 
(54,113
)
 
(14,750
)
 
 
 
(83,116
)
 
(23,908
)
 
 
Income Before Income Taxes
 
119,638

 
164,159

 
 
 
300,478

 
375,903

 
 
Income tax expense
 
45,072

 
61,705

 
 
 
108,567

 
142,413

 
 
Net Income
 
$
74,566

 
$
102,454

 
 
 
$
191,911

 
$
233,490

 
 
Net Income Per Share
 
 

 
 

 
 
 
 
 
 
 
 
Basic
 
$
1.40

 
$
1.92

 
 
 
$
3.59

 
$
4.37

 
 
Diluted
 
$
1.39

 
$
1.91

 
 
 
$
3.57

 
$
4.35

 
 
Weighted Average Number of Common Stock Shares Outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
53,185

 
53,427

 
 
 
53,456

 
53,488

 
 
Diluted
 
53,509

 
53,588

 
 
 
53,799

 
53,715

 
 




(a) 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. Accounting Standard Update 2017-07 (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 for the Company in the first quarter of 2017, provided all provisions of the ASU are adopted. 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 $15.2 million from wages and benefits to other components of net periodic benefit cost on the Company's consolidated statement of operations for the three months and nine months ended September 30, 2016, respectively.




Table 2.
Hawaiian Holdings, Inc.
Selected Statistical Data (unaudited)
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2017
 
2016
 
% Change
 
2017
 
2016
 
% Change
 
 
(in thousands, except as otherwise indicated)
 
(in thousands, except as otherwise indicated)
Scheduled Operations (a) :
 
 

 
 

 
 
 
 
 
 
 
 
Revenue passengers flown
 
3,000

 
2,916

 
2.9
%
 
8,588

 
8,317

 
3.3
%
Revenue passenger miles (RPM)
 
4,290,499

 
4,166,487

 
3.0
%
 
12,187,344

 
11,554,522

 
5.5
%
Available seat miles (ASM)
 
4,946,678

 
4,887,608

 
1.2
%
 
14,203,112

 
13,805,563

 
2.9
%
Passenger revenue per RPM (Yield)
 

14.79
¢
 

14.20
¢
 
4.2
%
 

14.48
¢
 

13.78
¢
 
5.1
%
Passenger load factor (RPM/ASM)
 
86.7
%
 
85.2
%
 
1.5
 pt.
 
85.8
%
 
83.7
%
 
2.1
 pt.
Passenger revenue per ASM (PRASM)
 

12.83
¢
 

12.10
¢
 
6.0
%
 

12.43
¢
 

11.53
¢
 
7.8
%
Total Operations (a) :
 
 

 
 

 
 
 
 
 
 
 
 
Revenue passengers flown
 
3,001

 
2,918

 
2.9
%
 
8,592

 
8,321

 
3.3
%
Revenue passenger miles (RPM)
 
4,293,095

 
4,170,671

 
2.9
%
 
12,190,846

 
11,559,795

 
5.5
%
Available seat miles (ASM)
 
4,950,800

 
4,894,768

 
1.1
%
 
14,208,642

 
13,813,955

 
2.9
%
Operating revenue per ASM (RASM)
 

14.53
¢
 

13.73
¢
 
5.8
%
 

14.14
¢
 

13.16
¢
 
7.4
%
Operating cost per ASM (CASM)
 

11.02
¢
 

10.07
¢
 
9.4
%
 

11.44
¢
 

10.26
¢
 
11.5
%
CASM excluding aircraft fuel and special items (b)
 

8.80
¢
 

8.13
¢
 
8.2
%
 

9.04
¢
 

8.46
¢
 
6.9
%
Aircraft fuel expense per ASM (c)
 

2.22
¢
 

1.94
¢
 
14.4
%
 

2.23
¢
 

1.80
¢
 
23.9
%
Revenue block hours operated
 
49,384

 
47,534

 
3.9
%
 
141,955

 
134,627

 
5.4
%
Gallons of jet fuel consumed
 
67,160

 
64,918

 
3.5
%
 
193,404

 
182,471

 
6.0
%
Average cost per gallon of jet fuel (actual) (c)
 
$
1.64

 
$
1.46

 
12.3
%
 
$
1.64

 
$
1.36

 
20.6
%
Economic fuel cost per gallon (c)(d)
 
$
1.68

 
$
1.50

 
12.0
%
 
$
1.65

 
$
1.53

 
7.8
%
 
(a)
Includes the operations of the Company's contract carrier under a capacity purchase agreement.
(b)
See Table 4 for a reconciliation of GAAP operating expenses to operating expenses excluding aircraft fuel and special items.
(c)
Includes applicable taxes and fees.
(d)
See Table 3 for a reconciliation of GAAP fuel costs to economic fuel costs.




Table 3.
Hawaiian Holdings, Inc.
Economic Fuel Expense
(in thousands, except per-gallon amounts) (unaudited)
 
The Company believes that economic fuel expense is a good 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 losses/(gains) 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,
 
Nine months ended September 30,
 
 
2017
 
2016
 
% Change
 
2017
 
2016
 
% Change
 
 
(in thousands, except per-gallon amounts)
 
 
 
(in thousands, except per-gallon amounts)
 
 
Aircraft fuel expense, including taxes and delivery
 
$
110,111

 
$
94,818

 
16.1
%
 
$
316,423

 
$
248,516

 
27.3
 %
Realized losses on settlement of fuel derivative contracts
 
2,787

 
2,525

 
10.4
%
 
2,100

 
30,349

 
(93.1
)%
Economic fuel expense
 
$
112,898

 
$
97,343

 
16.0
%
 
$
318,523

 
$
278,865

 
14.2
 %
Fuel gallons consumed
 
67,160

 
64,918

 
3.5
%
 
193,404

 
182,471

 
6.0
 %
Economic fuel costs per gallon
 
$
1.68

 
$
1.50

 
12.0
%
 
$
1.65

 
$
1.53

 
7.8
 %


 
 
Estimated three months ending
December 31, 2017
 
 Estimated full year ending
December 31, 2017
 
 
(in thousands, except per-gallon amounts)
 
(in thousands, except per-gallon amounts)
Aircraft fuel expense, including taxes and delivery
 
$
111,576

to
$
121,471

 
$
421,148

to
$
451,175

Realized losses on settlement of fuel derivative contracts
 
1,700

 
1,700

 
3,800

 
3,800

Economic fuel expense
 
$
113,276

to
$
123,171

 
$
424,948

to
$
454,975

Fuel gallons consumed
 
64,729

to
66,579

 
257,544

to
259,986

Economic fuel costs per gallon
 
$
1.75

to
$
1.85

 
$
1.65

to
$
1.75


Table 4.
Hawaiian Holdings, Inc.
Non-GAAP Financial Reconciliation
(in thousands, except per share and CASM data) (unaudited)
 
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, Passenger Revenue per RPM and EBITDAR. 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 adjustments are described below:

Changes in fair value of derivative contracts, net of tax, are based on market prices for open contracts as of the end of the reporting period. This line item includes the unrealized amounts of fuel and interest rate derivatives (not designated as hedges) that will settle in future periods and the reversal of prior period unrealized amounts. The Company believes that excluding the impact of these derivative adjustments helps investors analyze the Company's operational performance and compare its results to other airlines in the periods presented below.

Loss on extinguishment of debt, net of tax, is excluded to help investors analyze the Company's operational performance and compare its results to other airlines in the periods presented below.




The collective bargaining charge related to (1) a one-time payment to reduce the future 401K employer contribution for certain pilot groups, and (2) a one-time true up of the pilot vacation accrual at the new negotiated contract rates. The loss on sale of aircraft was a result of a sale-leaseback transaction covering three Boeing 767 aircraft as part of the planned exit from its 767 fleet. 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. In August 2017, the Company terminated the Merged Plan and recorded a one-time nonoperating special charge of $35.2 million. The Company also settled a portion of its pilots' other post-retirement medical plan liability and recorded a one-time nonoperating special charge of $15.0 million. These one-time charges are considered special items by the Company and are not expected to represent ongoing expenses. The Company believes that excluding such special items helps investors analyze the Company's operational performance and compare its results to other airlines in the periods presented below.

 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
Total
 
Diluted Per Share
 
Total
 
Diluted Per Share
 
Total
 
Diluted Per Share
 
Total
 
Diluted Per Share
GAAP net income, as reported
 
$
74,566

 
$
1.39

 
$
102,454

 
$
1.91

 
$
191,911

 
$
3.57

 
$
233,490

 
$
4.35

Add (deduct): changes in fair value of derivative contracts
 
(6,069
)
 
(0.11
)
 
1,076

 
0.02

 
8,128

 
0.15

 
(45,770
)
 
(0.85
)
Add: loss on extinguishment of debt
 

 

 

 

 

 

 
9,993

 
0.19

Add: special items
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on sale of aircraft
 

 

 

 

 
4,771

 
0.09

 

 

Collective bargaining charge
 

 

 

 

 
18,679

 
0.35

 

 

Nonoperating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partial settlement and curtailment loss
 
15,001

 
0.28

 

 

 
15,001

 
0.28

 

 

Loss on plan termination
 
35,201

 
0.66

 

 

 
35,201

 
0.65

 

 

Total special items
 
50,202

 
0.94

 

 

 
73,652

 
1.37

 

 

Add (deduct): tax effect of adjustments
 
(16,091
)
 
(0.30
)
 
(409
)
 
(0.01
)
 
(29,817
)
 
(0.55
)
 
13,595

 
0.25

Adjusted net income
 
$
102,608

 
$
1.92

 
$
103,121

 
$
1.92

 
$
243,874

 
$
4.54

 
$
211,308

 
$
3.94





 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2017
 
2016
 
2017
 
2016 (a)
Income Before Income Taxes, as reported
 
$
119,638

 
$
164,159

 
$
300,478

 
$
375,903

Add (deduct): changes in fair value of derivative contracts
 
(6,069
)
 
1,076

 
8,128

 
(45,770
)
Add: loss on extinguishment of debt
 

 

 

 
9,993

Add: special items
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
Loss on sale of aircraft
 

 

 
4,771

 

Collective bargaining charge
 

 

 
18,679

 

Nonoperating
 
 
 
 
 
 
 
 
Partial settlement and curtailment loss
 
15,001

 

 
15,001

 

Loss on plan termination
 
35,201

 

 
35,201

 

Total special items
 
50,202

 

 
73,652

 

Adjusted Income Before Income Taxes
 
163,771

 
165,235

 
382,258

 
340,126


Operating Costs per Available Seat Mile (CASM)
The Company has separately listed in the table below its fuel costs per ASM and non-GAAP unit costs, excluding fuel and special items. These amounts are included in CASM, but for internal purposes the Company consistently uses cost metrics that exclude fuel and special items (if applicable) to measure and monitor its costs.
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2017
 
2016 (a)
 
2017
 
2016 (a)
GAAP operating expenses
 
$
545,808

 
$
492,928

 
$
1,625,485

 
$
1,417,796

Less: aircraft fuel, including taxes and delivery
 
(110,111
)
 
(94,818
)
 
(316,423
)
 
(248,516
)
Less: special items
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
Loss on sale of aircraft
 
$

 
$

 
$
(4,771
)
 
$

Collective bargaining charge
 
$

 
$

 
$
(18,679
)
 
$

Total special items
 
$

 
$

 
$
(23,450
)
 
$

Adjusted operating expenses - excluding aircraft fuel and special items
 
$
435,697

 
$
398,110

 
$
1,285,612

 
$
1,169,280

Available Seat Miles
 
4,950,800

 
4,894,768

 
14,208,642

 
13,813,955

CASM - GAAP
 

11.02
¢
 

10.07
¢
 

11.44
¢
 

10.26
¢
Less: aircraft fuel
 
(2.22
)
 
(1.94
)
 
(2.23
)
 
(1.80
)
Less: special items
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
Loss on sale of aircraft
 

 

 
(0.04
)
 

Collective bargaining charge
 

 

 
(0.13
)
 

Total special items
 

 

 
(0.17
)
 

CASM - excluding aircraft fuel and special items
 

8.80
¢
 

8.13
¢
 

9.04
¢
 

8.46
¢

(a) 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. Accounting Standard Update 2017-07 (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 for the Company in the first quarter of 2017, provided all provisions of the ASU are adopted. 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 $15.2 million



from wages and benefits to other components of net periodic benefit cost on the Company's consolidated statement of operations for the three months and nine months ended September 30, 2016, respectively.

 
 
Estimated three months ending
December 31, 2017
 
Estimated full year ending
December 31, 2017
GAAP operating expenses
 
$
555,349

to
$
586,888

 
$
2,170,820

to
$
2,234,049

Less: aircraft fuel, including taxes and delivery
 
(111,576
)
to
(121,471
)
 
(421,148
)
to
(451,175
)
Less: special items
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
Loss on sale of aircraft
 

 

 
(4,771
)
 
(4,771
)
Collective bargaining charge
 

 

 
(18,679
)
 
(18,679
)
Total special items
 
$

 
$

 
$
(23,450
)
 
$
(23,450
)
Adjusted operating expenses - excluding aircraft fuel and special items
 
$
443,773

to
$
465,417

 
$
1,726,222

to
$
1,759,424

Available Seat Miles
 
4,753,506

to
4,844,920

 
18,936,175

to
19,120,021

CASM - GAAP
 

11.68
¢
to

12.11
¢
 

11.46
 ¢
to

11.68
 ¢
Less: aircraft fuel
 
(2.34
)
to
(2.50
)
 
(2.22
)
to
(2.36
)
Less: special items
 


 


 


 


Operating
 
 
 
 
 
 
 
 
Loss on sale of aircraft
 

to

 
(0.02
)
to
(0.02
)
Collective bargaining charge
 

to

 
(0.10
)
to
(0.10
)
Total special items
 

¢
 

¢
 

(0.12
 

(0.12
CASM - excluding aircraft fuel and special items
 

9.34
¢
to

9.61
¢
 

9.12
 ¢
to

9.20
 ¢
Pre-tax margin
The Company excludes unrealized gains from fuel derivative contracts, losses on extinguishment of debt, and special items from pre-tax margin for the same reasons as described above.
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2017
 
2016
 
2017
 
2016
Pre-Tax Margin, as reported
 
16.6
 %
 
24.4
%
 
15.0
%
 
20.7
 %
Add (deduct): changes in fair value of derivative contracts
 
(0.8
)%
 
0.2
%
 
0.4
%
 
(2.5
)%
Add: loss on extinguishment of debt
 
 %
 
%
 
%
 
0.5
 %
Add: special items
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
Loss on sale of aircraft
 
 %
 
%
 
0.2
%
 
 %
Collective bargaining charge
 
 %
 
%
 
0.9
%
 
 %
Nonoperating
 
 
 
 
 
 
 
 
     Post retirement benefits related
 
7.0
 %
 
%
 
2.5
%
 
 %
Total special items
 
7.0
 %
 
%
 
3.6
%
 
 %
Adjusted Pre-Tax Margin
 
22.8
 %
 
24.6
%
 
19.0
%
 
18.7
 %



Leverage ratio
The Company uses adjusted total debt, including aircraft rent, in addition to long-term adjusted debt and capital leases, to represent long-term financial obligations. The Company excludes unrealized (gains) losses from fuel derivative contracts, losses on extinguishment of debt, and special items from earnings before interest, taxes, depreciation, amortization and rent (EBITDAR) for the reasons as described above. Management believes this metric is helpful to investors in assessing the Company’s overall debt.

 
 
Twelve months ended
 
 
September 30, 2017
Debt and capital lease obligations
 
$
506,118

Plus: Aircraft leases capitalized at 7x last twelve months' aircraft rent
 
945,721

Adjusted debt and capital lease obligations
 
$
1,451,839

 
 
 
EBITDAR:
 
 
Income Before Income Taxes
 
$
304,039

Add back:
 
 
Interest and amortization of debt discounts and issuance costs
 
31,451

Depreciation and amortization
 
110,286

Aircraft rent
 
135,103

EBITDAR
 
$
580,879

 
 
 
Adjustments:
 
 
Add: changes in fair value of derivative contracts
 
6,221

Add: loss on extinguishment of debt
 
480

Add: special items
 
 
Operating
 
 
Impairment charge (a)
 
49,361

Termination charge (a)
 
21,000

Bonuses and a proposed collective bargaining agreement payment (a)
 
38,781

Loss on sale of aircraft
 
4,771

Collective bargaining charge
 
18,679

Nonoperating
 
 
Partial settlement and curtailment loss
 
15,001

Loss on plan termination
 
35,201

Total special items
 
182,794

Adjusted EBITDAR
 
$
770,374

 
 
 
Leverage Ratio
 
1.9
x

(a) For additional details, please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2016.