Hawaiian Airlines painted a positive picture for 2016 after doubling its first-quarter earnings and announcing it once again is making an attempt at landing an additional route between Haneda International Airport in Tokyo and Hawaii.
In a far-ranging earnings conference call, President and CEO Mark Dunkerley said Thursday that the continuation of low fuel prices, manageable industry capacity growth and the strengthening yen offer reason to be optimistic for this year.
“Our first quarter’s record-breaking financial results reflect the continuation of improving trends in our business,” Dunkerley said. “Contributing have been solid demand for travel to Hawaii, balanced industry capacity over the vast majority of our network, lower fuel prices and the lapping of a strengthening U.S. dollar against the Japanese yen.”
“We remain optimistic about our outlook for 2016,” he added.
Hawaiian Holdings Inc., the parent of the state’s largest carrier, reported net income of $51.5 million, or
95 cents a share, compared with $25.9 million, or 40 cents a share, in the first quarter of 2015. Hawaiian’s adjusted net income, which excludes the change in value of unsettled fuel hedges and the loss on early repayment of debt, jumped 74.1 percent to a record $43 million, or 80 cents a share. That was 4 cents better than analysts’ consensus estimate.
However, Hawaiian’s revenue rose just 2 percent to $551.2 million, missing analysts’ estimate of $558.2 million.
Hawaiian said its seating capacity increased 3.3 percent, led by a strong performance from North America. But a key airline industry figure — how much passengers pay for each mile they fly — fell 0.5 percent from the year-earlier quarter.
AMONG SOME of the other takeaways on the call:
>> Hawaiian saved
$37 million in the first quarter from lower fuel prices, and it expects savings of
$39 million in the second quarter and $120 million for the year.
>> The airline’s application to the U.S. Department of Transportation seeks confirmation that Hawaiian will continue to operate its existing Honolulu-Haneda service during the daytime hours (all U.S. airlines have to reapply) and seeks additional authority to operate a second daily route from Haneda serving Honolulu four days a week and Kona International Airport three days a week.
>> Hawaiian plans to launch an interisland dedicated cargo operation later this year with two aircraft purchased several months ago that are undergoing modification and final approvals from the Federal Aviation Administration. “Once we have those we will be able to launch neighbor island cargo service with dedicated freighters,” Dunkerley said. “The other thing that’s holding us up is the fact that the new Honolulu cargo facility has been stalled for the best part of the year. We’re looking forward to providing all cargo service for the needs of the neighbor island communities.”
>> Dunkerley said the company and the pilots union continue to try to iron out their differences in federal mediation. “That process is rumbling forward, and I think the dynamic is relatively straightforward,” he said. “Our pilots have hourly rates that are below those of their competitors, and that’s something we freely acknowledge, and they have benefits that are substantially better than those of competitors. I think the negotiation is really around how do we get to a competitive contract where the dollars make sense for the business, and the pilots have for them the right blend of pay work rules and benefits which does not leave us at a competitive disadvantage.”
>> Dunkerley acknowledged that Hawaiian has been the subject of consolidation speculation (he didn’t mention JetBlue by name) due to the pending acquisition of Virgin America by Alaska Airlines. JetBlue had been the runner-up for Virgin. “We compete with both companies (Virgin and Alaska) today on service between the western United States and Hawaii. Our competitive costs, outstanding operational performance and unparalleled Hawaiian hospitality have proven to be a winning combination against a wide variety of competitors over many years. And we expect to be successful regardless of the changing competitive landscape. Inevitably we have received questions regarding the prospects for future consolidation and its potential to include Hawaiian. So, let me reiterate our long-standing policy in addressing such questions by saying that management seeks the maximization of long-term shareholder value and that beyond this we don’t comment on hypothetical scenarios.”
HAWAIIAN HAS been operating a daily flight between Honolulu and Haneda since November 2010, when it was awarded one of four slots granted to U.S. carriers. The airline attempted to land a second Honolulu-Haneda slot that year but was unsuccessful. Since that time Hawaiian has applied with the DOT three times for Haneda-Kona slots when some U.S. airlines sought to reallocate the original routes awarded. But the DOT rejected Hawaiian’s Honolulu-Kona applications in 2012, 2014 and 2015.
Hawaii island has not had scheduled flights from Japan since Japan Airlines ended service Oct. 29, 2010, from Narita International Airport outside Tokyo.
In February the U.S. and Japanese governments finalized an aviation agreement for expanded access to Haneda that will make travel more convenient for passengers by allowing U.S. carriers to fly into and out of Haneda during daytime hours. Two more routes were allocated to the four already in existence with the stipulation that five of the six pairs of flights will be permitted to operate during the daytime. The DOT also said that carriers operating the four existing routes would have to reapply to retain those routes.
“Forty percent of all traffic between the United States and Japan is flying to and from Hawaii,” Dunkerley said. “We think that the case is very strong for Hawaii not just to enjoy one of the six available frequencies, but certainly two. We also think very strongly that the U.S. policy should reflect the fact that the mega-carriers against which we compete enjoy a playing field that has been tipped fairly decisively in their favor, and this is an opportunity for government policy to begin to readdress some of that reality. So we are pretty optimistic about the two services. I would say that when we look at Honolulu versus Kona, we are simply trying to gauge how best to meet the demand for people wishing to travel on those routes, and we think we fine-tuned it little bit more accurately in this application than we did in the last.”
Hawaiian’s stock closed Thursday down 70 cents at $49.64 after hitting an all-time high of $50.45 Tuesday. The results came out after the market closed.
