An abundance of air seats between the mainland and the islands squeezed Hawaiian Airlines’ financial results during the first half of 2013.
But a subsequent reduction in seat capacity by several of its competitors enabled the state’s largest carrier to finish with its sixth consecutive profitable year.
Parent company Hawaiian Holdings Inc. said Tuesday that less competition from the mainland and the maturation of its international routes helped the airline swing to a profit of $17.1 million, or 31 cents a share, in the fourth quarter after losing $3.4 million, or 7 cents a share, in the year-earlier period. Revenue rose 7.9 percent to $531.9 million from $493 million.
Hawaiian finished the year with net income of $51.9 million, or 98 cents a share. That was down 2.6 percent from $53.2 million, or $1.01 a share, in 2012.
"During the first half of the year, there were a lot of extra seats in the U.S. mainland-to-Hawaii market," said Mark Dunkerley, president and chief executive officer of Hawaiian. "It turns out there were more seats than there was demand, and that hurt the financial results for all airlines participating in the market."
Hawaiian had a loss of $5.8 million through the first six months of the year, but its financial outlook brightened after Alaska Airlines, Allegiant Air and USAirways reduced mainland service to Hawaii over the final six months.
"What happened in the second half of the year is that those airlines that put extra seats in took some of those out, and that helped the finances of all the airlines in the market," Dunkerley said.
Domestic seat capacity to Hawaii was up 8.4 percent in the first half of 2013 compared with the year-earlier period, but that narrowed to minus 2.2 percent in the second half of the year and minus 3.2 percent in the fourth quarter, according to the Hawaii Tourism Authority.
The HTA is forecasting the slowdown to continue and calculates that domestic air seats will slip 0.5 percent during the first quarter of this year and end 2014 up just 2.8 percent.
Dunkerley said Hawaiian also reaped the benefits last quarter of several new international routes that it started in the last 12 months.
Hawaiian went on an expansion tear beginning in November 2010 when it began flying between Honolulu and Haneda International Airport in Tokyo. Counting that route, Hawaiian added nine international routes in less than three years, including service to Auckland, New Zealand; Sendai, Japan; and Taipei in 2013. Hawaiian also inaugurated service to New York City during that three-year period.
Dunkerley said2014 will be a year of slow growth for Hawaiian. Its three-day-a-week service to Beijing starting in April is the only new international route the airline has announced.
"Our capacity is going to be up between 4 and 7 percent year over year, which is much slower than the 14.5 percent capacity in the year that we just finished," he said.
Dunkerley said Hawaiian is still waiting to hear from the U.S. Department of Transportation to make a decision on an application that the airline filed in October for a Haneda-Kona route. He said the airline is also closing in on a start date for its new interisland turboprop operation with ‘Ohana by Hawaiian, which will use 48-seat ATR-42 aircraft to fly from Honolulu to both Lanai and Molokai.
Hawaiian’s stock closed off 4 cents Tuesday at $10.29 on the Nasdaq Stock Market before the results were announced. Shares in the company, which languished for years, jumped 46.6 percent in 2013 and are up another 6.9 percent this year.
John Reardon, managing director of sales for San Francisco-based investment bank Merriman Capital Inc., questioned how much more profitable Hawaiian can become with an influx of new aircraft deliveries coming in over the next several years.
"They’ve got more aircraft deliveries to finance, and it will be a heavily leveraged company," he said. "I wouldn’t be surprised if they contemplate doing some kind of stock offering to unburden themselves of some of the debt they have coming."
