Hawaiian Airlines Earnings Double in Fourth Quarter

Hawaiian Airlines earnings double
Nonrecurring items aid fourth-quarter profits

By Dave Segal

Hawaiian Airlines posts its 11th straight quarterly profit as nonrecurring items help earnings double to $70.6 million.
Hawaiian Airlines’ parent, which is targeting Asia for growth, doubled its earnings in the October-December quarter as increased seating capacity, nonrecurring tax adjustments and opportunistic fuel hedging helped the state’s largest carrier post its 11th straight profitable quarter.

In a quarter that featured profits by nearly all U.S. carriers, Hawaiian Holdings Inc. continued the trend with net income that surged 101.5 percent to $70.6 million, or $1.36 a share, from $35 million, or 66 cents a share, a year ago.

“These fourth-quarter results round out another good year for Hawaiian Airlines,” said President and CEO Mark Dunkerley of the carrier’s third straight profitable year. “In 2010 our strong financial performance enabled us to start service on two new international routes (to Japan and South Korea), take delivery of the first three of 16 new Airbus wide-body aircraft and replace our expiring credit facilities on favorable terms. At the start of 2011, we are well positioned to continue to grow into the rapidly developing travel market in Asia.”

Dunkerley said Hawaiian will add service to another yet-to-be-named city later this year. Chief Financial Officer Peter Ingram said last month that Hawaiian likely will announce another flight to Asia, most likely to Japan.

“These new services (to Tokyo and South Korea) are the beginning of what we anticipate will be a broader expansion of our business westward over the next several years,” he said. “Our focus on adding the service between Asia and Hawaii is simply explained: Asia is where the growth is. Our service to Tokyo positions us in Hawaii’s most significant international source of visitors and lays the foundation for further expansion in Japan.”

Hawaiian’s fourth-quarter earnings benefited from $56.9 million in nonrecurring tax benefits. Hawaiian had a similar benefit of $25 million in the fourth quarter of 2009. Hawaiian also benefited from $2.4 million in unrealized gains from fuel hedging or locking in oil prices before they rose higher. Hawaiian’s fuel-hedging benefit in the year-earlier quarter was $436,000.

Despite the hedging, aircraft fuel costs last quarter rose 27 percent to $89.7 million from $70.6 million in the year-earlier period and represented 29.7 percent of operating expenses.

Excluding the tax benefits and fuel hedging, Hawaiian’s net income increased 7.7 percent to $11.3 million, or 21 cents a share, versus $10.5 million, or 20 cents a share, from the year-ago period. Analysts were expecting 18 cents a share. Revenue jumped 15.7 percent to $343.8 million from $297 million as seating capacity increased 11.7 percent.

Hawaiian’s stock rose 24 cents yesterday, or 3.25 percent, to $7.63. The earnings were released after the market closed.

Analyst Bob McAdoo of Avondale Partners LLC said it was another solid quarter for Hawaiian.

“It’s a reflection on management that this is a company that continues to be profitable and make good money when they’re getting more and more competition from the mainland like from Alaska, Continental and other guys,” McAdoo said. “They’re making money not because Aloha and ATA disappeared (in the spring of 2008), but because they’re able to compete with the legacy carriers coming up from the mainland. … They’re making money because they’re running a good business.”