First Operating Loss in 18 Months
HONOLULU -- After 17 consecutive months of operating profits, Hawaiian Airlines recorded a $2.0 million operating loss in September 2004, due primarily to escalating fuel, maintenance and labor costs.
In September of 2003, by comparison, the airline reported $4.7 million in operating profit.
Though Hawaiian generated $4.3 million more in year-over-year revenue in September, the company spent $11 million more in operating expenses – including a $3.7 million, or 48 percent, increase in fuel costs, a $2.0 million, or 76 percent, increase in aircraft maintenance expense, and a $2.0 million, or 12 percent, increase in labor expenses.
Fuel expense increased because of higher fuel prices this year. Maintenance expense increased primarily because of the expiration of aircraft warranties this year. Labor costs were up due to higher wages, pension and other benefit costs.
Joshua Gotbaum, Trustee of Hawaiian Airlines, said, “Predictably, the combination of high fuel prices and increasing labor and maintenance costs finally tipped our monthly operating profit to an operating loss in September. Competition for travel to and within Hawaii continues, and so even though we increased both our overall revenue and load factor compared to last September, higher operating costs and low airfares nullified these gains.”
Hawaiian's year-over-year systemwide load factor in September increased 5.6 percentage points to 87.5 percent with capacity, as measured by Available Seat Miles (ASMs), also increasing by 2.6 percentage points.
Revenue Per Available Seat Mile (RASM) improved by 5.6 percent, while Cost Per Available Seat Mile (CASM) increased by 20.6 percent. Excluding fuel costs, the year-over-year CASM increase was 15.8 percent.
In addition to its ongoing operating expenses, in September Hawaiian also recorded for accounting purposes $113 million in reorganization expenses, of which $110.6 million reflected one-time non-cash claims to settle the company's aircraft leases with Boeing Capital Corporation for three B767-300 and 11 B717-200 aircraft, and with Ansett for a B767-300 that was rejected by Hawaiian in 2003.
Under generally accepted accounting principles, reorganization-related expenses are reported as a non-operating expense. The settlements converted ongoing cash obligations into unsecured claims.
As a result, Hawaiian recorded a net loss of $113.8 million for September.
For the first nine months of 2004, Hawaiian recorded year-to-date operating profits of $67.0 million on revenue of $580.5 million. This compares to $57.8 million in operating profits on revenue of $516.2 million for the same period in 2003 – including a one-time special credit of $17.5 million resulting from the federal government's Emergency Wartime Act.
Operating expenses for the first nine months grew by $55.1 million compared to the same period in 2003, of which 43 percent was higher fuel costs and 26 percent was increased labor costs.
Year-to-date, Hawaiian's RASM improved by 12.3 percent. At the same time, CASM increased by 11.8 percent, primarily due to increased fuel and labor costs.
Factoring in September's reorganization expenses, Hawaiian has recorded a year-to-date net loss of $80.0 million, which also includes an income tax expense of $24.7 million. This compares to net income of $46.2 million for the same period last year, which did not include a provision for income tax expense.
The complete financial report for September is available online at HawaiianAir.com.
About Hawaiian Airlines
Hawaiian Airlines, the nation's number one on-time carrier, is recognized as one of the best airlines in America. Business travelers recently surveyed by Condé Nast Traveler rated Hawaiian Airlines as having the best in-flight service and meals of any U.S. carrier. In addition, Hawaiian is ranked as the nation's fifth best airline overall by Travel + Leisure, ahead of every other carrier flying to Hawaii.
Celebrating its 75th year of continuous service, Hawaiian Airlines is Hawaii's biggest and longest-serving airline, and the second largest provider of passenger air service between Hawaii and the mainland U.S. Hawaiian offers nonstop service to Hawaii from more mainland U.S. gateways than any other airline. Hawaiian also provides approximately 117 daily jet flights among the Hawaiian Islands, as well as service to Australia, American Samoa and Tahiti.
Hawaiian Airlines, Inc., is a subsidiary of Hawaiian Holdings, Inc. (AMEX and PCX: HA). Since the appointment of a bankruptcy trustee in May 2003, Hawaiian Holdings has had no involvement in the management of Hawaiian Airlines and has had limited access to information concerning the airline. Additional information is available at www.HawaiianAir.com.