-- Third Quarter Operating Revenue Increases 17% --
-- Company Leases Two Additional DC-10-30s for Transpacific & Charter Service --
-- Additional San Francisco-Honolulu Service Announced --
HONOLULU, November 4, 1999 -- Hawaiian Airlines, Inc. (AMEX and PCX: HA) today announced financial results for the third quarter and nine months ended September 30, 1999.
Total operating revenues in the third quarter of 1999 increased 16.9 percent to $135.0 million as compared to $115.5 million in the same period last year. The company reported operating income of $7.1 million for the quarter, compared to operating income of $11.5 million in the same period last year, as a result of increased flight operations and investments in infrastructure to support the company's rapid growth. Net income for the third quarter was $3.5 million or $0.08 per diluted share, compared to $6.1 million or $0.15 per diluted share for the same quarter last year. The results represent the company's sixth consecutive quarter of operating and net profits.
Paul J. Casey, President and Chief Executive Officer, stated, "Our substantially higher passenger revenue in the third quarter is an indicator of the increasing demand for Hawaiian Airlines in our markets. To support that demand, as well as successfully attain our 1999 growth plan of a 20 percent increase in capacity, we have been making investments in our infrastructure. As a result, our third quarter results reflect significantly increased expenses related to hiring and training of additional flight crews, reservations and airport personnel, increased administrative costs, maintenance and other infrastructure expenses. Of course, our most substantial investment in the Company's future will be realized with the delivery in 2001 of our new Boeing 717 interisland fleet. The new 717s will reduce our cash operating expenses by $200 million over the first 10 years of operation, significantly improving margins."
Mr. Casey continued, "An even stronger indicator of our improving top line performance is the fact that sales commissions increased 38.8 percent quarter over quarter, reflecting significant growth in travel agency ticketing. In addition, we experienced increases in direct sales, credit card fees and sales commissions, along with strong bookings through our E-Ticketing function, all helping to drive advance ticket sales well ahead of last year's pace. As a result of these positive indicators, our air traffic liability (the value of outstanding tickets to be recorded as revenue when used) increased to $42.0 million at September 30, 1999, a balance $20 million greater than at September 30, 1998, or at December 31, 1998."
"Moreover, preliminary figures for the fourth quarter show strong performance in October and November in terms of passenger count. Market demand for travel in December, as appears to be the case industry-wide, is showing signs of softness during the Millennium holiday season. Meanwhile, there is healthy demand for our new Los Angeles-Maui-Kona service, which has been running at an average load factor of approximately 75 percent since the route's launch in March, and our recently inaugurated Los Angeles-Tahiti charter flights for Renaissance Cruises have been extremely well received," Casey said.
Cost per available seat mile (CASM) increased 8.3 percent in the third quarter to 7.8 cents compared to 7.2 cents per ASM during the 1998 quarter. Contributing to the increase was: aircraft maintenance expense, nearly half of which was related to the company's DC-9 fleet; a 35 percent increase in fuel expense; increased labor expense related to capacity growth; and the September 1, 1999, reinstatement of landing fees in Hawaii, which accounted for more than $600,000 during the quarter.
Third Quarter Highlights
During the third quarter of 1999, Hawaiian Airlines:
- announced a letter of intent to acquire up to 20 new Boeing 717-200 aircraft to replace the company's entire interisland fleet of DC-9-50s in 2001;
- implemented a new code share agreement with Continental Airlines to market the company's interisland flights under Continental's worldwide computerized reservations system code, CO. This agreement joins similar ones with Northwest and American airlines;
- put a 15th DC-9-50 aircraft into interisland service, increased its interisland flight schedule by 5.8 percent, and grew its interisland market share by 3.5 percent to 44.0 percent;
- expanded availability of E-Ticketing to West Coast flights in addition to interisland flights.
Expanding Transpacific Service
Separately, the company announced that it has signed lease agreements with Continental Airlines (NYSE: CAL and CAL.A) to acquire two additional long range DC-10-30 aircraft for use on the company's nonstop Los Angeles-Maui route and for charter operations. Hawaiian expects to take delivery of the first aircraft on November 15, 1999, and the second in April 2000. The new additions will bring the company's all-jet fleet to a total of 29 aircraft.
The company also announced it would add a second daily nonstop DC-10 flight between San Francisco and Honolulu in June 2000.
Mr. Casey concluded, "Demand in our primary markets is solid, and our successful efforts to fulfill that demand are producing substantial revenue gains. In December, we'll add a second weekly round trip between Honolulu and Tahiti in scheduled service and double our Los Angeles-Tahiti charter service from nine to 18 round trips per month as Renaissance Cruises adds a second new cruise liner to the Tahiti market."
Pursuant to its signed letter of intent with The Boeing Company (NYSE: BA) to acquire up to 20 new B717-200 aircraft, the company made its initial deposit of approximately $1 million and is finalizing definitive agreements and integration plans for the new fleet. Announced September 22, 1999, the letter of intent calls for a firm order valued at more than $430 million for 13 B717-200 aircraft to replace Hawaiian's entire interisland fleet of DC-9-50 aircraft. Delivery of the 717s will commence in February 2001 and is expected to be complete by the end of 2001.
As the 717's projected cost per available seat mile including ownership is 1.5 cents per ASM better than the company's fleet of DC-9s, Hawaiian expects to achieve a $15 million improvement in pretax earnings for 2002, the first full year of 717 operations. In addition, the higher productivity of the state-of-the-art 717s will allow the company to significantly increase its interisland flight schedule.
Operating Results - Third Quarter
While total available seat miles (ASMs) systemwide increased 13.6 percent as the company added capacity in scheduled and charter service during the third quarter, passenger load factor remained stable and revenue per ASM increased 2.5 percent to 8.2 cents. Total passengers increased 10.0 percent quarter over quarter and revenue passenger miles (RPMs) were up 14.0 percent.
Scheduled passenger revenues increased 15.0 percent to $112.0 million during the third quarter. Increases of $2.5 million and $11.6 million in the company's Interisland and Transpacific revenues, respectively, were driven by an 8 percent increase in passengers carried and RPMs in Interisland operations and a 14 percent increase in passengers carried and RPMs in the Transpacific operations.
Overseas charter revenues increased 29.4 percent to $10.9 million, due principally to the commencement in August 1999 of the company's initial two-year, $70 million contract with Renaissance Cruises to provide nonstop flights between Los Angeles and Tahiti.
Operating Results - Nine Months
For the first nine months of 1999, total revenues increased 13.1 percent to $367.3 million, from $324.7 million in the same period last year, a result of the company's success in achieving higher average load factor on increased capacity with improved yields. Operating income was $13.0 million compared to $15.6 million for the 1998 nine month period, a reflection of increased flight activity and an overall increase in ASMs of 9.6 percent. Net income was $6.2 million or $0.15 per diluted share, compared to $8.0 million or $0.19 per diluted share for the same period in 1998.
Results for the first nine months of 1999 reflect earnings before interest, taxes, depreciation and amortization (EBITDA) of approximately $25.1 million, compared to $24.9 million for the same period in 1998. The Company reported cash, cash equivalents and cash held as collateral of $55.6 million as of September 30, 1999, compared to $37.4 million as of December 31, 1998.
Excluding the non-cash amortization of excess reorganization value (ERV), an intangible asset resulting from the company's financial restructuring in 1994, and the income tax provisions recorded as a reduction of ERV, earnings per share would have been $0.17 for the third quarter and $0.33 for the first nine months of 1999, versus the reported amounts of $0.08 and $0.15, respectively. For the three and nine months ended September 30, 1998, ERV adjusted earnings per share would have been $0.29 and $0.42, respectively, versus the reported amounts of $0.15 and $0.19 per share.
Hawaiian Airlines, Hawaii's first and largest airline, provides scheduled and charter air transportation of passengers, cargo and mail among the islands of Hawaii and between Hawaii and six West Coast gateway cities and two destinations in the South Pacific. The carrier has won numerous awards, including the prestigious President's Award for innovation in coach class service given by the International In-Flight Food Service Association, and has been consistently rated one of the "Top 10 U.S. Airlines" by the readers of Conde Nast Traveler and Travel & Leisure magazines for the past several years.
Except for historical information contained herein, the matters discussed in this news release contain forward-looking statements that involve risks and uncertainties. The company's actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, the effect of changing economic conditions, trends in the airline industry, the ability to control costs and expenses, and other risks detailed in the company's continuing reports filed with the Securities and Exchange Commission.