Hawaiian Holdings Reports 2016 Second Quarter Financial Results

News provided by

Hawaiian Holdings, Inc.

Jul 21, 2016, 04:01 ET

HONOLULU, July 21, 2016 /PRNewswire/ -- Hawaiian Holdings, Inc. (NASDAQ: HA) ("Holdings" or the "Company"), parent company of Hawaiian Airlines, Inc. ("Hawaiian"), today reported its financial results for the second quarter of 2016.

Second Quarter 2016 - Key Financial Metrics


GAAP

YoY Change

Adjusted

YoY Change

Net Income

$79.6M

+$30.7M

$65.2M

+$27.7M

Diluted EPS

$1.48

+$0.69

$1.21

+$0.60

Pre-tax Margin

21.6%

+7.7 pts.

17.7%

+7 pts.

"These outstanding second quarter results distinguish us from the rest of the industry and reinforce our confidence in 2016," said Mark Dunkerley, Hawaiian Airlines president and CEO. "Robust demand for a Hawai'i vacation, moderate industry capacity through the majority of our network, lower fuel costs, and our commitment to operational excellence drove the record-breaking second quarter results.  My thanks go to all of Hawaiian's employees who contributed to our terrific financial and operational performance."

Statistical data, as well as a reconciliation of the adjusted non-GAAP financial measures to the equivalent GAAP financial measures, can be found in the accompanying tables.

Liquidity and Capital Resources

As of June 30, 2016 the Company had:

  • Unrestricted cash, cash equivalents and short-term investments of $622 million.
  • Outstanding debt and capital lease obligations of $586 million.

The Company early retired $89 million of existing debt in the second quarter and contributed $11 million to its pension plans doubling the minimum funding requirement for 2016.

In addition, the Company repurchased 208,660 common shares for approximately $8 million in the second quarter.

Second Quarter 2016 Highlights

Operational

  • Ranked #1 nationally for on-time performance in the months of March, April, and May 2016 as reported in the U.S. Department of Transportation Air Travel Consumer Report.

New routes and increased frequencies

  • Awarded three times weekly non-stop service between Kona International Airport and Tokyo's Haneda International Airport and additional non-stop frequencies four times weekly between Honolulu International Airport and Haneda International Airport beginning December 2016.

Product and loyalty

  • Won the 2016 Skytrax World Airline Award for 'Best Airline Staff' in North America.
  • Announced new uniforms for front line employees to debut in 2017.
  • Launched Bid Up, a new first class upgrade auction offering North America guests the chance to name their price for first class seats.
  • Welcomed the first retrofitted A330 aircraft with the new 278 passenger seat configuration featuring 18 fully lie-flat Premium Cabin seats, 68 Extra Comfort seats, and 192 Main Cabin seats.

Fleet and financing

  • Took delivery of its 23rd A330 under a six-year lease.

Third Quarter and Full Year 2016 Outlook

The table below summarizes the Company's expectations for the third quarter ending September 30, 2016 and full year ending December 31, 2016, expressed as an expected percentage change compared to the results for the quarter ended September 30, 2015 and full year ended December 31, 2015, as applicable (the historical results for which are presented for reference).

Third Quarter

Item

2015

Third Quarter 2016 Guidance

Cost per ASM Excluding Fuel (cents)(a)

7.97

Up 2% to up 5%

Operating Revenue Per ASM (cents)

13.55

Down 1% to up 2%

ASMs (millions)

4,663.2

Up 4.5% to up 6.5%

Gallons of jet fuel consumed (millions)

61.2

Up 4% to 6%

Economic fuel cost per gallon (a)(b)

$

1.95

$1.50 to $1.60























Full Year

Item

2015

Full Year 2016 Guidance

Cost per ASM Excluding Fuel (cents)(a)

8.31

Up 2.5% to up 4.5%

ASMs (millions)

17,726.3

Up 3% to up 5%

Gallons of jet fuel consumed (millions)

234.2

Up 2.5% to up 4.5%

Economic fuel cost per gallon (a)(b)

$

2.04

$1.50 to $1.60







(a)

The Company does not reconcile these forward looking non-GAAP financial measures because fuel derivative settlements will not be known until the end of the period and could be significant.

(b)

Economic fuel cost per gallon estimates are based on the July 12, 2016 fuel forward curve.

Investor Conference Call

Hawaiian Holdings' quarterly earnings conference call is scheduled to begin today (July 21, 2016) 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® has led all U.S. carriers in on-time performance for each of the past 12 years (2004-2015) as reported by the U.S. Department of Transportation. Consumer surveys by Condé Nast Traveler, Travel + Leisure and Zagat have all ranked Hawaiian the highest of all domestic airlines serving Hawai'i.

Now in its 87th year of continuous service, Hawaiian is Hawai'i's biggest and longest-serving airline, as well as the largest provider of passenger air service from its primary visitor markets on the U.S. Mainland. 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 160 jet flights daily between the Hawaiian Islands, with a total of more than 200 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), on its LinkedIn page (Hawaiian Airlines), and become a fan on its Facebook page (Hawaiian Airlines).

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 excluding fuel, available seat miles, gallons of jet fuel consumed, and economic fuel cost per gallon, each for the quarter ending September 30, 2016; and full year ending December 31, 2016; the Company's expectations regarding operating revenue per available seat mile for the quarter ending September 30, 2016; the statement of the Company's CEO regarding expectations for 2016; 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; 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; currency exchange rate fluctuations; and the Company's ability to implement its growth strategy and related cost reduction goals.

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 and the Company's 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 June 30,

Six Months Ended June 30,


2016

2015

%
Change

2016

2015

%
Change

Operating Revenue:











Passenger

$

518,572

$

499,387

3.8

%

$

1,000,599

$

968,532

3.3

%

Other

76,018

71,908

5.7

%

145,171

143,043

1.5

%

Total

594,590

571,295

4.1

%

1,145,770

1,111,575

3.1

%

Operating Expenses:











Aircraft fuel, including taxes and delivery

83,798

112,519

(25.5)

%

153,698

223,846

(31.3)

%

Wages and benefits

135,883

123,977

9.6

%

269,526

243,991

10.5

%

Aircraft rent

30,066

28,817

4.3

%

59,454

57,188

4.0

%

Maintenance, materials and repairs

54,585

57,071

(4.4)

%

115,089

112,316

2.5

%

Aircraft and passenger servicing

30,723

29,348

4.7

%

59,274

57,664

2.8

%

Commissions and other selling

31,425

30,484

3.1

%

64,456

60,912

5.8

%

Depreciation and amortization

26,988

27,537

(2.0)

%

54,134

52,716

2.7

%

Other rentals and landing fees

24,978

23,248

7.4

%

49,412

46,079

7.2

%

Purchased services

24,543

19,842

23.7

%

47,275

41,081

15.1

%

Other

32,731

27,036

21.1

%

62,714

53,202

17.9

%

Total

475,720

479,879

(0.9)

%

935,032

948,995

(1.5)

%

Operating Income

118,870

91,416

30.0

%

210,738

162,580

29.6

%

Nonoperating Income (Expense):











Interest expense and amortization of debt discounts and issuance costs

(8,910)

(13,718)



(19,914)

(29,236)


Interest income

1,087

725



1,931

1,361


Capitalized interest

463

975



688

2,268


Gains on fuel derivatives

21,087

2,026



19,022

(3,661)


Loss on extinguishment of debt

(6,643)

(287)



(9,993)

(7,242)


Other, net

2,686

(1,876)



9,272

(4,810)


Total

9,770

(12,155)



1,006

(41,320)


Income Before Income Taxes

128,640

79,261



211,744

121,260


Income tax expense

49,070

30,427



80,708

46,543


Net Income

$

79,570

$

48,834



$

131,036

$

74,717


Net Income Per Share











Basic

$

1.48

$

0.89



$

2.45

$

1.37


Diluted

$

1.48

$

0.79



$

2.43

$

1.18


Weighted Average Number of Common Stock Shares Outstanding:











Basic

53,634

54,619



53,574

54,617


Diluted

53,853

61,855



53,821

63,390


Table 2.

Hawaiian Holdings, Inc.

Selected Statistical Data (unaudited)



Three months ended June 30,

Six months ended June 30,


2016

2015

% Change

2016

2015

% Change


(in thousands, except as otherwise indicated)

Scheduled Operations (a) :











Revenue passengers flown

2,755

2,659

3.5

%

5,401

5,180

4.3

%

Revenue passenger miles (RPM)

3,846,966

3,588,246

7.2

%

7,388,033

6,933,627

6.6

%

Available seat miles (ASM)

4,550,964

4,439,349

2.5

%

8,917,956

8,666,390

2.9

%

Passenger revenue per RPM (Yield)

13.48

¢

13.92

¢

(3.2)

%

13.54

¢

13.97

¢

(3.1)

%

Passenger load factor (RPM/ASM)

84.5

%

80.8

%

3.7

pt.

82.8

%

80.0

%

2.8

pt.

Passenger revenue per ASM (PRASM)

11.39

¢

11.25

¢

1.2

%

11.22

¢

11.18

¢

0.4

%

Total Operations (a) :











Revenue passengers flown

2,756

2,660

3.6

%

5,403

5,182

4.3

%

Revenue passenger miles (RPM)

3,847,065

3,590,510

7.1

%

7,389,122

6,938,120

6.5

%

Available seat miles (ASM)

4,551,094

4,441,648

2.5

%

8,919,188

8,671,330

2.9

%

Operating revenue per ASM (RASM)

13.06

¢

12.86

¢

1.6

%

12.85

¢

12.82

¢

0.2

%

Operating cost per ASM (CASM)

10.45

¢

10.80

¢

(3.2)

%

10.48

¢

10.94

¢

(4.2)

%

CASM excluding aircraft fuel (b)

8.61

¢

8.27

¢

4.1

%

8.76

¢

8.36

¢

4.8

%

Aircraft fuel expense per ASM (c)

1.84

¢

2.53

¢

(27.3)

%

1.72

¢

2.58

¢

(33.3)

%

Revenue block hours operated

44,367

43,418

2.2

%

87,093

85,653

1.7

%

Gallons of jet fuel consumed

59,697

57,998

2.9

%

117,553

114,996

2.2

%

Average cost per gallon of jet fuel (actual) (c)

$

1.40

$

1.94

(27.8)

%

$

1.31

$

1.95

(32.8)

%

Economic fuel cost per gallon (c)(d)

$

1.55

$

2.23

(30.5)

%

$

1.54

$

2.22

(30.6)

%























(a)

Includes the operations of the Company's contract carrier under a capacity purchase agreement.

(b)

See Table 4 for a reconciliation of operating expenses to operating expenses excluding aircraft fuel.

(c)

Includes applicable taxes and fees.

(d)

See Table 3 for a reconciliation of actual 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 the best 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 (gains)/losses 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 June 30,

 Six months ended June 30,


2016

2015

% Change

2016

2015

% Change


(in thousands, except per-gallon amounts)


(in thousands, except per-gallon amounts)

Aircraft fuel expense, including taxes and delivery

$

83,798

$

112,519

(25.5)

%

$

153,698

$

223,846

(31.3)

%

Realized losses on settlement of fuel derivative contracts

8,799

16,553

(46.8)

%

27,824

31,144

(10.7)

%

Economic fuel expense

$

92,597

$

129,072

(28.3)

%

$

181,522

$

254,990

(28.8)

%

Fuel gallons consumed

59,697

57,998

2.9

%

117,553

114,996

2.2

%

Economic fuel costs per gallon

$

1.55

$

2.23

(30.5)

%

$

1.54

$

2.22

(30.6)

%

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. Excluding the impact of these derivative adjustments allows investors to better analyze our operational performance and compare our results to other airlines in the periods presented below.
  • Loss on extinguishment of debt, net of tax, is excluded to allow investors to better analyze the Company's core operational performance and more readily compare its results to other airlines in the periods presented below.




Three months ended June 30,

Six months ended June 30,


2016

2015

2016

2015


Total

Diluted
Per
Share

Total

Diluted
Per
Share

Total

Diluted
Per
Share

Total

Diluted
Per
Share

GAAP net income

$

79,570

$

1.48

$

48,834

$

0.79

$

131,036

$

2.43

$

74,717

$

1.18

Changes in fair value of derivative contracts

(29,886)

(0.55)

(18,578)

(0.30)

(46,846)

(0.87)

(27,483)

(0.43)

Loss on extinguishment of debt

6,643

0.12

287

—

9,993

0.19

7,242

0.11

Tax effect of adjustments

8,832

0.16

6,950

0.12

14,004

0.26

7,730

0.12

Adjusted net income

$

65,159

$

1.21

$

37,493

$

0.61

$

108,187

$

2.01

$

62,206

$

0.98


Three months ended June 30,

Six months ended June 30,


2016

2015

2016

2015

Income Before Income Taxes, as reported

$

128,640

$

79,261

$

211,744

$

121,260

Changes in fair value of derivative contracts

(29,866)

(18,579)

(13,984)

(27,484)

Loss on extinguishment of debt

6,643

287

9,993

7,242

Adjusted Income Before Income Taxes

$

105,417

$

60,969

$

207,753

$

101,018

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.  These amounts are included in CASM, but for internal purposes the Company consistently uses cost metrics that exclude fuel and non-recurring items (if applicable) to measure and monitor its costs.

Three months ended June 30,

Six months ended June 30,


2016

2015

2016

2015

GAAP operating expenses

$

475,720

$

479,879

$

935,032

$

948,995

Less: aircraft fuel, including taxes and delivery

(83,798)

(112,519)

(153,698)

(223,846)

Adjusted operating expenses - excluding aircraft fuel

$

391,922

$

367,360

$

781,334

$

725,149

Available Seat Miles

4,551,094

4,441,648

8,919,188

8,671,330

CASM - GAAP

10.45

¢

10.80

¢

10.48

¢

10.94

¢

Less: aircraft fuel

(1.84)

(2.53)

(1.72)

(2.58)

CASM - excluding aircraft fuel

8.61

¢

8.27

¢

8.76

¢

8.36

¢

Pre-tax margin

The Company excludes unrealized gains from fuel derivative contracts and losses on extinguishment of debt from pre-tax margin for the same reasons as described above.

Three months ended June 30,

Six months ended June 30,


2016

2015

2016

2015

Pre-Tax Margin, as reported

21.6

%

13.9

%

18.5

%

10.9

%

Add: changes in fair value of derivative contracts

(5.0)

%

(3.3)

%

(4.1)

%

(2.5)

%

Add: loss on extinguishment of debt

1.1

%

0.1

%

0.9

%

0.7

%

Adjusted Pre-Tax Margin

17.7

%

10.7

%

15.3

%

9.1

%

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 and losses on extinguishment of debt 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


June 30, 2016

Debt and capital lease obligations

$

585,977

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

825,433

Adjusted debt and capital lease obligations

$

1,411,410



EBITDAR:

Income Before Income Taxes

$

386,172

Add back:

Interest and amortization of debt discounts and issuance costs

46,245

Depreciation and amortization

106,999

Aircraft Rent

117,918

EBITDAR

$

657,334



Adjustments:

Add: changes in fair value of derivative contracts

(20,378)

Add: loss on extinguishment of debt

14,809

Adjusted EBITDAR

$

651,765



Leverage Ratio

2.2

x

Logo - http://photos.prnewswire.com/prnh/20040827/LAF044LOGO

SOURCE Hawaiian Holdings, Inc.

Related Links

http://www.hawaiianair.com

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