Hawaiian Holdings Reports Second Quarter 2008 Financial Results

  • Operating revenue increased 30.7% to $319.2 million
  • Revenue per available seat mile increased 26.4% to 13.35 cents
  • Passenger yield rose 29.7% to 14.51 cents
  • Excluding a litigation settlement of $52.5 million, second quarter pre-tax income totaled $1.8 million, compared to a pre-tax loss of $5.2 million a year ago
  • Including the litigation settlement, second quarter net income totaled $54.3 million, or $1.09 per diluted share, compared to a net loss of $3.9 million, or ($0.08) per share, in 2Q07

HONOLULU, July 30 /PRNewswire-FirstCall/ -- Hawaiian Holdings, Inc. (Nasdaq: HA) ("Holdings" or "the Company"), parent company of Hawaiian Airlines, Inc. ("Hawaiian"), today reported a consolidated net income for the three months ended June 30, 2008, of $54.3 million, or $1.09 per diluted share, on total operating revenue of $319.2 million. This compares to a net loss of $3.9 million, or $0.08 per diluted share, for the three months ended June 30, 2007. The 2008 net income includes a litigation settlement of $52.5 million before tax, related to the Company's settlement of its lawsuit with Mesa Air Group. Excluding this recovery, for the three months ended June 30, 2008, the Company would have reported a net income of $1.8 million, or $0.04 per diluted share.

For the six months ended June 30, 2008, the Company reported a consolidated net income of $34.4 million, or $0.71 per diluted share, on total operating revenue of $570.5 million. This compares to a net loss of $15.8 million, or $0.34 per diluted share, for the six months ended June 30, 2007. Excluding the litigation settlement mentioned above, the Company would have reported a net loss of $18.1 million, or $0.37 per diluted share, for the first half of 2008.

"Our second quarter results are the consequence of unprecedented changes in our business as well as the $52.5 million receipt of our settlement with Mesa. The collapse of both Aloha and ATA occurred in the first week of the quarter, so our financial results reflect the amalgam of increased revenue from carrying 21% more customers, the cost of the additional flying we have mounted to meet the demand for interisland travel and some substantial transition costs as we grow quickly to fill the void," commented Mark Dunkerley, the Company's president and chief executive officer. "All of this has occurred in an environment of rapidly rising oil prices making our second quarter an extremely complex period to assess our performance. Excluding the benefits of the proceeds from our settlement with Mesa, however, the net of the beneficial impact of our competitors' collapse and our raising of air fares offset by the costs of more expensive jet fuel was to leave us at roughly break even. This is a testament to the severity of the fuel price crisis facing our industry."

Mr. Dunkerley continued, "Our employees surpassed themselves in meeting the considerable challenge of coping with the sudden collapse of both Aloha and ATA in the same week early in April. We were able to meet the needs of interisland and transpacific travelers then and every week since and in doing so, have strengthened our franchise for the future.

"Looking ahead, the interisland market appears to have stabilized at a point where the capacity of seats is sufficient to meet demand. The transpacific picture is less settled with some indications late in the quarter of economy-related weakness in demand," concluded Mr. Dunkerley.

Second Quarter Operating Results

The Company reported an operating income of $48.5 million in the second quarter of 2008 including the litigation recovery compared to an operating loss of $0.6 million in the second quarter of 2007. Excluding the Mesa litigation recovery of $52.5 million, the Company would have reported an operating loss of $4.0 million for the second quarter of 2008.

During the quarter Hawaiian significantly expanded its short haul interisland operations, while long haul capacity increased by a much smaller proportion. Since shorter haul operations tend to have both higher revenue and costs per seat mile, this shift in mix of flying toward a higher percentage of shorter segment interisland operations tends to inflate both revenue per available seat mile (RASM) and cost per seat mile (CASM) relative to the prior year.

Second quarter 2008 operating revenue was $319.2 million, a 30.7% increase compared to the second quarter of 2007. Capacity for the quarter increased 3.4% year-over-year to 2.4 billion Available Seat Miles (ASMs), resulting in RASM of 13.35 cents, up 26.4% from 10.56 cents in the second quarter a year ago. Second quarter load factor decreased to 85.1% from 87.1% in the same period a year ago. Passenger yield (passenger revenue per revenue passenger mile) increased 29.7% to 14.51 cents from 11.19 cents in the second quarter of 2007.

    Hawaiian Holdings, Inc.
    Selected Statistical Data

                           Three Months Ended        Six Months Ended
                               June 30,                   June 30,
                      2008     2007    Change    2008      2007    Change

       (RPM)(a)     2,034.4   1,985.3   2.5%    3,964.5   3,842.2     3.2%
       (ASM)(a)     2,391.5   2,277.2   5.0%    4,662.3   4,400.6     5.9%
       per RPM        14.51    11.19   29.7%      13.26     10.79    22.8%
                      cents    cents              cents     cents

       load factor
       (RPM/ASM)       85.1%    87.2% (2.10) pt.   85.0%     87.3%  (2.30) pt.
       revenue per
       ASM (PRASM)    12.34     9.76   26.5%      11.27      9.42    19.6%
                      cents    cents              cents     cents

       (RPM)(a)     2,034.4  2,014.0    1.0%    3,973.3   3,904.7     1.8%
       seat miles
       (ASM) (a)    2,391.5  2,311.8    3.4%    4,672.8   4,472.9     4.5%
       (RPM/ASM)       85.1%    87.1% (2.00) pt.   85.0%     87.3%  (2.30) pt.
       per ASM
       (RASM)         13.35    10.56   26.4%      12.21     10.27    18.9%
                      cents    cents              cents     cents
       Cost per
       ASM (CASM)     11.32    10.59    6.9%      11.64     10.64     9.4%
                      cents    cents              cents     cents
      CASM -
       settlement     13.52    10.59   27.7%      12.77     10.64    20.0%
                      cents    cents              cents     cents
      CASM -
       and aircraft
       fuel            8.36     7.64    9.4%       8.18      7.80     4.9%
                      cents    cents              cents     cents

    (a) In millions.

Total operating expenses for the second quarter of 2008 increased 10.6% year-over-year to $270.7 million, resulting in an operating cost per available seat mile (CASM) of 11.32 cents, up 6.9% versus the same period a year ago. CASM excluding the litigation settlement related to the lawsuit settlement was 13.52 cents, a 27.7% increase versus last year's second quarter. CASM excluding the litigation settlement and aircraft fuel increased 9.4% to 8.36 cents year over year. Hawaiian's cost per seat mile increased relative to previous quarters as a result of several factors, including the disproportionate increase in shorter haul interisland flying, increases in sales related expenses associated with higher second quarter revenue, transition costs related to the expansion of operations and inflation in specific cost categories.

Aircraft fuel costs increased 81.0% year-over-year to $123.4 million and represented approximately 38.2% of operating expenses excluding the litigation gain. Hawaiian's average cost per gallon of jet fuel increased 72.0% year- over-year in the second quarter to $3.63 (including taxes, delivery and hedging impacts), while block hours increased 8.7% primarily reflecting increased 717 operations. During the current year period, benefits of hedging activities are included in non-operating income/expenses, and as such are not reflected in fuel expense. During the quarter, Hawaiian realized gains of $8.3 million on settled fuel derivative contracts, whereas non-operating income reflects the recognition of $8.9 million in gains from Hawaiian's fuel hedging activity which includes both realized gains and changes in mark-to- market value of fuel derivative contracts.

                         Economic Fuel Reconciliation

                                                            Three Months Ended
                                                              June 30, 2008

    GAAP fuel expense, including taxes and delivery               $123.4
    Less settlement on fuel derivative contracts
     in the current period                                          (8.3)
    Economic fuel expense in the current period                   $115.1

As a result of the rapid increase in operations following the withdrawal of service by two significant competitors, Hawaiian increased its staffing levels and training activity. Wages and benefits expenses increased by $5.0 million in the second quarter of 2008 from the comparable period in 2007 primarily as a result of increased operating activity that resulted in an increase of 8.7% in block hours operated and 17.2% more departures. Additionally, the Company paid a one time bonus payments totaling $2.5 million to its employees during the second quarter of 2008.

Maintenance, materials and repairs expense increased $6.7 million to $30.0 million. Engine power-by-the-hour charges increased as a result of increased aircraft utilization and higher contractual rates. Additionally, the Company experienced higher third party maintenance expenses as a result of additional airframe and landing gear maintenance activities.

Commissions and other selling expenses increased $5.2 million to $20.1 million due to increases in credit card fees, booking fees and commission expense as a result of an increase in sales and higher frequent flyer expense related to higher incremental costs of our frequent flyer liability resulting from rising fuel prices. Other rentals and landing fees increased $2.1 million primarily as a result of the higher level of flight activity and increased charges at airports in the state of Hawaii.

Second quarter 2008 non-operating income totaled $5.9 million, as compared to non-operating expense of $4.6 million in the second quarter of 2007. Lower interest expense in the second quarter of 2008 was partially offset by lower interest income, while gains related to Hawaiian's fuel hedging activities accounted for the majority of year-over-year improvement in non-operating income.
    Liquidity, Capital Resources and Fuel Hedging

    -- As of June 30, 2008, the Company had unrestricted cash and cash
       equivalents, and short-term investments of $190.9 million, and $56.1
       million in restricted cash.  The Company also held $41.6 million in
       Auction Rate Securities (at fair value) of which $6.1 million is
       classified as short-term investments (as it was liquidated in early
       July) and $35.5 million is recorded as long-term assets.

    -- As of June 30, 2008, the Company's debt included $99.2 million in two
       term loans at the Hawaiian level, $113.6 million in floating rate notes
       issued in conjunction with the acquisition of three Boeing 767-300 ER
       aircraft in December 2006, and additional notes payable of $15.2

    -- As of June 30, 2008, Hawaiian had entered into heating oil futures
       contracts to hedge approximately 10% of its third quarter of 2008
       consumption.  The Company's oil futures are outlined in the table

                             Heating Oil Futures

    As of June 30, 2008:
                              Average Heating                   Percentage of
                               Oil Contract                       Quarterly
                                  Price        Gallons Hedged    Consumption
                                per Gallon       (thousands)       Hedged
    Third Quarter 2008            $2.407           3,192             10%

    Recent Business Highlights

    -- In early July, Hawaiian was ranked as the nation's #1 carrier for
       on-time performance as reported by the U.S. Department of
       Transportation's (DOT) Air Travel Consumer Report for the month of May.
       Hawaiian also ranked fourth nationally for fewest misplaced bags and
       fifth in the industry for fewest cancelled flights.
    -- At the end of June, Hawaiian was added to the Russell 3000(R) Index.
    -- In early June, Hawaiian has announced that it will expand its
       interisland fleet with the addition of four Boeing 717-200 aircraft to
       better meet the needs of Hawaii's interisland travelers in the wake of
       the shutdown of Aloha Airlines on April 1. The first of these aircraft
       is scheduled to enter service in September, with the remaining aircraft
       being added to the fleet in the fourth quarter.
    -- In early June, Hawaiian commenced trading on the NASDAQ Global Market
       under the symbol "HA."
    -- At the end of May, Hawaiian has received the 2008 Maggie Award for Best
       Travel/In-Transit Consumer magazine from the Western Publications
    -- In mid-May, Hawaiian signed a new codeshare agreement with United
       Airlines on interisland flights.
    -- At the end of April, Hawaiian reached a lawsuit settlement with Mesa
       Air Group and received a cash payment of $52.5 million in early May.
       Mesa withdrew its appeal of the $80 million judgment (plus interest,
       attorney's fees and costs) awarded against Mesa by the United States
       Bankruptcy Court in October 2007.
    -- In mid-April, Hawaiian launched an historic new chapter in its 79-year
       legacy of service for Hawaii with the start of nonstop flights between
       Honolulu and Manila, the Company's first gateway to Asia. The new
       service also makes Hawaiian the only U.S. carrier providing nonstop
       service between Manila and Honolulu, and will more than double capacity
       on the route.
    -- In early April, in response to the sudden closure of both Aloha
       Airlines and ATA Airlines, Hawaiian announced nonstop daily service
       between Honolulu and Oakland, California, starting May 1.
    -- In early April, in response to Aloha ceasing flight operations,
       Hawaiian took immediate steps to add capacity to its daily interisland
       schedule, substantially increased its customer service staffing at
       airports statewide, and established a dedicated website page and toll-
       free phone number providing updated information for displaced Aloha
       ticket holders. The Company also flew extra section flights to the West
       Coast to accommodate hundreds of visitors stranded in Hawaii by the
       closure of Aloha and ATA.

    Investor Conference Call

Hawaiian Holdings' quarterly earnings conference call is scheduled to begin later today (Wednesday, July 30, 2008) 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 http://www.HawaiianAirlines.com. For those who are not available for the live broadcast, the call will be archived on Hawaiian's investor website.

About Hawaiian Airlines

The nation's top-ranked airline for service in the 2007 Airline Quality Ratings, Hawaiian has led all U.S. carriers in on-time performance for each of the past four straight years (2004-2007) and in fewest misplaced bags for the past three years (2005-2007) as reported by the U.S. Department of Transportation. Consumer surveys by Conde Nast Traveler, Travel + Leisure and Zagat have all ranked Hawaiian as the top domestic airline serving Hawaii.

Now in its 79th year of continuous service in Hawaii, Hawaiian is the state's biggest and longest-serving airline, as well as the second largest provider of passenger air service between the U.S. mainland and Hawaii. Hawaiian offers nonstop service to Hawaii from more U.S. gateway cities than any other airline (10), as well as service to Australia, American Samoa, the Philippines and Tahiti. Hawaiian also provides approximately 150 daily jet flights among the Hawaiian Islands. Hawaiian Airlines, Inc. is a subsidiary of Hawaiian Holdings, Inc. (Nasdaq: HA).

Additional information is available at HawaiianAirlines.com.

Forward-Looking Statements

The foregoing information contains certain forward-looking statements that reflect the Company's current views with respect to certain current and future events and financial performance. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the Company's operations and business environment 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, aviation fuel costs, competition in the interisland markets, competitive pressure on pricing, ability to negotiate labor agreements, our ability to satisfy financial covenants and our new long term commitments for aircraft. Any forward-looking statements in this release are based upon information available to the Company on the date of this release. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. Additional information on risk factors that could potentially affect the Company's financial results may be found in the Company's filings with the Securities and Exchange Commission.

    Hawaiian Holdings, Inc.
    Consolidated Statements of Operations
    (in thousands, except for per share data) (unaudited)

                                       Three Months Ended   Six Months Ended
                                            June 30,            June 30,
                                         2008      2007      2008      2007

    Operating Revenue:
      Passenger                        $295,200  $222,167  $525,566  $414,724
      Cargo                               9,016     7,454    16,778    14,444
      Charter                                 -     2,213     1,144     4,616
      Other                              14,976    12,350    26,968    25,590
        Total                           319,192   244,184   570,456   459,374

    Operating Expenses:
      Aircraft fuel, including
       taxes and oil                    123,377    68,164   214,413   127,458
      Wages and benefits                 64,958    59,946   122,259   117,943
      Aircraft rent                      23,322    24,439    47,135    48,579
      Maintenance materials
       and repairs                       29,960    23,236    59,335    48,298
      Aircraft and passenger
       servicing                         14,314    13,847    27,986    27,937
      Commissions and other selling      20,148    14,996    36,319    28,380
      Depreciation and amortization      11,755    11,169    23,774    21,395
      Other rentals and landing fees      8,944     6,818    17,113    13,803
      Litigation settlement             (52,500)        -   (52,500)        -
      Other                              26,443    22,168    48,156    42,310
        Total                           270,721   244,783   543,990   476,103

    Operating Income (Loss)              48,471      (599)   26,466   (16,729)

    Nonoperating Income (Expense):
      Interest and amortization of
       debt discounts and issuance
        costs                            (4,847)   (6,414)  (10,480)  (12,956)
      Interest income                     1,867     2,374     3,857     5,195
      Capitalized interest                    -       400         -     1,309
      Gains (losses) on fuel hedging      8,877    (1,044)   14,451    (1,746)
      Other, net                            (23)       81       136       (65)
        Total                             5,874    (4,603)    7,964    (8,263)

    Income (Loss) Before Income Taxes    54,345    (5,202)   34,430   (24,992)
      Income tax expense (benefit)            -    (1,261)        -    (9,159)

    Net Income (Loss)                   $54,345   $(3,941)  $34,430  $(15,833)

    Net Income (Loss) Per Common
     Stock Share:
      Basic                               $1.14    $(0.08)    $0.73    $(0.34)
      Diluted                             $1.09    $(0.08)    $0.71    $(0.34)

    Weighted Average Number of Common
     Stock Shares Outstanding:
      Basic                              47,488    47,153    47,396    47,153
      Diluted                            49,796    47,153    48,739    47,153

    Hawaiian Holdings, Inc.
    Reconciliation of Non-GAAP Financial Measures
    (in millions, except for CASM data) (unaudited)

                         Three Months Ended           Six Months Ended
                              June 30,                    June 30,
                         2008          2007           2008        2007

    GAAP operating
     expenses           $270.7        $244.8        $544.0        $476.1
       settlement        (52.5)            -         (52.5)            -
     expenses, less
     settlement          323.2         244.8         596.5         476.1
      Aircraft fuel,
       taxes and oil     123.4          68.2         214.4         127.5
     expenses, less
     settlement and
     aircraft fuel      $199.8        $176.6        $382.1        $348.6

    Available Seat
     Miles             2,391.5       2,311.8       4,672.8       4,472.9

    CASM - GAAP          11.32 cents   10.59 cents   11.64 cents   10.64 cents
      Add back:
       settlement        (2.20)            -         (1.12)            -

    CASM -
     settlement          13.52 cents   10.59 cents   12.77 cents   10.64 cents
      fuel                5.16          2.95          4.58          2.84
    CASM -
     fuel                 8.36 cents    7.64 cents    8.18 cents    7.80 cents

    ASM's represents total operations

SOURCE Hawaiian Holdings, Inc.
CONTACT: Peter Ingram, CFO, +1-808-835-3030,
peter.ingram@hawaiianair.com, or media, Alan L. Hoffman, Sr. VP,
+1-808-838-6758, al.hoffman@hawaiianair.com, both of Hawaiian Airlines; or
investor relations, Lena Adams, ladams@icrinc.com, or Andrew Greenebaum,
agreenebaum@icrinc.com, both of ICR, Inc., +1-310-954-1100, for Hawaiian
Holdings, Inc.
Web site: http://www.hawaiianair.com