Hawaiian Holdings reports fourth quarter and record earnings in 2017

Hawaiian Airlines Boeing 767-3CB ER WL N592HA (msn 33468) SEA (Michael B. Ing). Image: 921922.

Hawaiian Holdings, Inc., parent company of Hawaiian Airlines, Inc., reported its financial results for the fourth quarter and full year 2017.

Fourth Quarter 2017 – Key Financial Metrics

GAAP

YoY Change

Adjusted

YoY Change

Net Income

$172.1M

+$170.2M

$57.5M

$(11.3)M

Diluted EPS

$3.29

+$3.25

$1.10

$(0.18)

Pre-tax Margin

16.0%

+15.4 pts.

13.6%

(4.0) pts.

 

Full Year 2017 – Key Financial Metrics

GAAP

YoY Change

Adjusted

YoY Change

Net Income

$364.0M

+$128.6M

$301.1M

+$21.1M

Diluted EPS

$6.82

+$2.46

$5.64

+$0.45

Pre-tax Margin

15.2%

(0.3) pts.

17.6%

(0.8) pts.

“We’re delighted to report record earnings for 2017 after our fourth quarter results cap an extremely strong year for Hawaiian” said Mark Dunkerley, Hawaiian Airlines president and CEO.  “Robust demand in all of our major geographies and moderate industry capacity growth offset the rising price of fuel.  We carried more guests this year than ever before and set new records for fourth quarter and full year revenue.  These results are the product of the tireless efforts of the 6,600 employees who deliver authentic Hawaiian hospitality on the ground and in the air every single day.

Looking ahead, 2018 stands to be a year that Hawaiian enters into the last phase of a strategy mapped out over a decade ago.  With new aircraft, new markets, and product enhancements tailored to the needs of the Hawai’i traveler, we are better equipped to compete today than at any time in our past.  We look forward to the year ahead and all that it has in store.”

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

Liquidity and Capital Resources

On October 12, 2017, the Company announced the initiation of a quarterly cash dividend of 12 cents per share, the first of which was paid on November 30, 2017 to all stockholders of record as of November 17, 2017.

In addition, the Company repurchased approximately 2.5 million shares of common stock for approximately $100 million in 2017.  The Company also announced a new $100 million stock repurchase program in effect through December 31, 2019.

As of December 31, 2017 the Company had:

  • Unrestricted cash, cash equivalents and short-term investments of $460 million.
  • Outstanding debt and capital lease obligations of $571 million.

2017 Highlights

Operational

  • Carried a record 11.5 million passengers in 2017, a 4.1% increase over the previous year.
  • Completed new hangar facility which will provide significant efficiencies moving forward.
  • Introduced new uniforms which complements brand refresh that was unveiled earlier in the year.

New routes and increased frequencies

  • North America
    • Started operating new daily non-stop service between Portland International Airport (PDX) and Maui’s Kahului Airport (OGG) in January 2018.
    • Announced new daily non-stop service between San Diego International Airport (SAN) and Kahului (OGG) as well as between Long Beach Airport (LGB) and Honolulu’s Daniel K. Inouye International Airport (HNL) with both expected to start in May 2018.
    • Extended seasonal non-stop service to year-round non-stop service between Los Angeles International Airport (LAX) and Kaua’i’s Līhu’e Airport (LIH).
    • Commenced summer seasonal service with daily non-stop flights between OaklandInternational Airport (OAK) and Līhu’e (LIH) and thrice weekly flights between Los Angeles (LAX) and Kona International Airport (KOA).
    • Announced extended service between Los Angeles (LAX) and both Kona (KOA) and Kahului (OGG), between Oakland (OAK) and both Līhu’e (LIH) and Kona (KOA), and between San Francisco International Airport (SFO) and Honolulu (HNL).
  • International
    • Announced expansion of non-stop service between New Zealand’s Auckland Airport (AKL) and Honolulu (HNL) starting in March 2018.
    • Announced expanded seasonal summer flights to include daily non-stop service between Narita International Airport (NRT) and Honolulu (HNL).
  • Neighbor Islands
    • Launched daily round trip service between Maui’s Kapalua Airport (JHM) and both Honolulu (HNL) and Kahului (OGG), and between Līhu’e (LIH) and Kona (KOA).

Partnerships

  • Announced a new partnership with Japan Airlines (JAL) that provides for extensive code sharing, lounge access and frequent flyer program reciprocity, taking effect on March 25, 2018 (subject to government approval). Also announced the intention to establish a joint venture with JAL designed to provide even more choices, convenience and enhancements to the traveling public to/from Japan and beyond to multiple Asian markets.

Fleet and financing

  • Completed a sale-leaseback transaction covering three Boeing 767-300 aircraft as part of the planned exit from its Boeing 767-300 fleet.
  • Took delivery of its first two Airbus 321neo aircraft, its 24th Airbus 330-200 aircraft, and its first ATR 72 turboprop aircraft in an all-cargo configuration.
  • Entered into an agreement in January 2018 to purchase three Boeing 767-300s which it previously leased and will subsequently sell later this year in line with plans to retire its Boeing 767-300 fleet by the end of 2018.

People

  • Ratified a 63-month contract with its pilots represented by the Airline Pilots Association (ALPA).
  • Contributed $150.6 million during the year to employee benefit plans, comprised of a one-time payment of $18.5 million to fully fund and terminate the Hawaiian Airlines, Inc. Salaried & IAM Merged Pension Plan, a one-time payment of $101.9 million to settle a portion of the post-65 medical plan obligation in connection with the ratification of a contract amendment with the Air Line Pilots Association, representing its pilots, and a contribution of approximately $30.2 million, $25.5 million above the minimum required, to further reduce pension obligations.

Product and loyalty

  • Unveiled brand refresh in May 2017 which included an updated logo and aircraft livery.
  • Announced the introduction of remodeled Airbus 330-200 aircraft to its non-stop service between Sapporo’s New Chitose Airport (CTS) and Honolulu (HNL) starting in February 2018.

First Quarter and Full Year 2018 Outlook

The table below summarizes the Company’s expectations for the first quarter ending March 31, 2018 and the full year ending December 31, 2018, expressed as an expected percentage change compared to the pro forma results for the quarter ended March 31, 2017 or the year ended December 31, 2017, as applicable.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, and created a new topic (ASC 606), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASC 606 will replace most existing revenue recognition guidance in GAAP when it becomes effective.  ASC 606 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017.  The Company has elected to adopt the full retrospective transition method as of January 1, 2018, resulting in the restatement of all prior periods on the date of adoption. Metrics in the guidance tables below that have been impacted by ASC 606 are shown as both originally stated and on an unaudited pro forma basis.

Copyright Photo: Hawaiian Airlines is preparing to retire its last Boeing 767-300 by the end of this year. Hawaiian Airlines Boeing 767-3CB ER WL N592HA (msn 33468) SEA (Michael B. Ing). Image: 921922.

Hawaiian Airlines aircraft slide show:

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