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Hawaiian reports net income of $55.6 million for 2012, up almost 29%

Hawaiian Holdings, Inc. (Honolulu), parent company of Hawaiian Airlines, Inc. (Honolulu), reported its financial results for the full year 2012 and the fourth quarter of 2012.

2012 Full Year Financial Highlights

Adjusted net income, reflecting economic fuel expense and excluding lease termination costs, of $55.6 million or $1.06 per diluted share, an increase of 28.7% year-over-year.
GAAP net income of $53.2 million or $1.01 per diluted share.
Operating cost per available seat mile (CASM), excluding fuel and lease termination costs, decrease of 6.0% year-over-year.
Adjusted operating margin of 7.0%, reflecting economic fuel expense and excluding lease termination costs.
Unrestricted cash and cash equivalents increase of 33.5% year-over-year.
Return on invested capital, pre-tax, of 14.9%.

Fourth Quarter 2012 Financial Highlights

Available seat mile (ASM) for scheduled operations increase of 29.2% year-over-year.
Adjusted net income, reflecting economic fuel expense, of $0.1 million or $0.00 per diluted share.
GAAP net loss of $3.4 million or $0.07 cents per diluted share.
CASM, excluding fuel, decrease of 11.3% year-over-year.
Unrestricted cash and cash equivalents of $405.9 million.

Mark Dunkerley, the Company’s President and Chief Executive Officer, commented that “A good year of growth and improving financial performance was finished off by a disappointing break-even result in the fourth quarter. The sharp weakening of the Yen, continued excess capacity in certain markets and an accounting charge all worked to depress our earnings for the period despite many other things going right for the business.

The year as a whole was every bit as busy and exciting as we had forecast. We added four new long haul destinations, eight long haul and short haul aircraft, opened a hub on Maui and added approximately 600 employees to our rolls, all in 2012. Throughout it all, the employees of Hawaiian Airlines continued to deliver the very highest quality travel and shipping experience to our customers. Our employees’ tireless dedication to our customers and to our business is a distinguishing strength of Hawaiian Airlines. 2013 promises to be an equally exciting year for the company with new destinations, new aircraft and more employees being planned.”

The fourth quarter 2012 results reflect an out-of-period frequent flyer adjustment related to the timing of revenue recognized for mileage credits sold to participating companies in previous years. This adjustment resulted in a net decrease to pre-tax income of $7.3 million in the quarter, or $0.08 per diluted share ($7.9 million decrease to passenger revenue and $0.6 million decrease to other operating expense). See Table 2 for the impact of this adjustment on selected statistical data.

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
As of December 31, 2012, the Company had:

Unrestricted cash and cash equivalents of $405.9 million.
Available borrowing capacity of $68.9 million under Hawaiian’s Revolving Credit Facility.
Outstanding debt and capital lease obligations of approximately $661 million consisting of the following:
- $246.4 million outstanding under secured loan agreements to finance a portion of the purchase price for four Airbus A330-200 aircraft.
- $170.7 million in secured loan agreements for a portion of the purchase price for 15 previously leased Boeing 717-200 aircraft.
- $106.3 million in capital lease obligations for an Airbus A330-200 and two Boeing 717-200 aircraft.
- $64.7 million outstanding under floating rate notes issued in conjunction with the acquisition of three Boeing 767-300 ER aircraft.
- $72.7 million outstanding of Convertible Senior Notes.

The Company expects to take delivery of five Airbus A330-200 aircraft in 2013, and has entered into debt and lease financing commitments for the first four deliveries in the first half of the year. The increase in Hawaiian’s fleet resulting from the delivery of these five Airbus A330-200 aircraft in 2013 will be partially offset by a decrease of four Boeing 767-300ER aircraft during the year, with three aircraft returned at the end of their lease terms and one planned retirement.

In January 2013, the Company signed a Memorandum of Understanding for the purchase of 16 new Airbus A321neo aircraft for delivery between 2017 and 2020, with the rights to purchase an additional nine aircraft. The long-range, single-aisle aircraft will complement Hawaiian’s existing fleet of wide-body, twin-aisle aircraft used for long-haul flying between Hawai’i and the U.S. West Coast.

2012 Highlights

Operational Highlights

Ranked #1 nationally for on-time performance, for 10 out of the 11 months reported in 2012, by the U.S. Department of Transportation Air Travel Consumer Report.
Ranked second overall in the 2012 Airline Quality Rating Report.
Introduced a Maui hub offering improved connections between Maui and Neighbor Island destinations, as well as additional flights to and from the West Coast.
Provided chartered air transportation for the Oakland Raiders for the 13^th consecutive season.
Signed a new three-year contract with the Association of Flight Attendants.
Became the first airline to receive aviation carbon credits for reducing carbon dioxide emissions.

Fleet

Added four new Airbus A330-200 aircraft (see above) in March, April, May and June in 2012 for North America and International service.
Added two Boeing 717-200 aircraft in January and February 2012 for Neighbor Island service.
Took delivery of two ATR 42-500 twin-turboprop aircraft to inaugurate new service to Molokai and Lanai in 2013.

New routes and increased frequencies

Honolulu to Fukuoka, Japan daily service launched April 2012
Honolulu to New York City (JFK), New York, daily service launched June 2012
Honolulu to Sapporo, Japan three-times-weekly service launched October 2012
Honolulu to Brisbane, Australia three-times-weekly service launched November 2012
Honolulu to Seoul, South Korea increased from four times weekly to daily July 2012
Maui to San Jose and Oakland, California increased from three and four times weekly, respectively, to daily October 2012
Announced Honolulu to Auckland, New Zealand three-times-weekly service beginning March 2013
Announced Honolulu to Taipei, Taiwan with service daily beginning July 2013
Honolulu to Sydney, Australia from daily to ten weekly flights April to May 2013
Maui to Los Angeles, California increased from daily to twice daily service summer 2013

New Partnership, Code-Share and Frequent Flyer agreements

Partnered with Air China and China International Travel Service to offer connections and market Hawaii vacation packages in China.
Entered into new frequent flyer and code-share agreements with All Nippon Airways, JetBlue and Virgin America.

Hawaiian Airlines:

Hawaiian Airlines sets a new passenger record in 2012

Hawaiian Airlines, Inc. (Honolulu), a subsidiary of Hawaiian Holdings, Inc, today announced its systemwide traffic statistics for December, fourth quarter, and full year 2012.

Hawaiian carried 9,484,204 passengers in 2012, the most in the company’s history. Passenger statistics for December and the fourth quarter were also company records.

SYSTEMWIDE OPERATIONS

FULL YEAR	2012	2011	% Change
PAX	9,484,204	8,666,319	9.4%
RPMS (000)	12,217,635	10,151,216	20.4%
ASMS (000)	14,687,472	12,039,937	22.0%
LF	83.2%	84.3%	(1.1 pts.)

FOURTH QUARTER	2012	2011	% Change
PAX	2,413,629	2,155,310	12.0%
RPMS (000)	3,279,105	2,607,548	25.8%
ASMS (000)	4,006,840	3,104,833	29.1%
LF	81.8%	84.0%	(2.2 pts.)

DECEMBER	2012	2011	% Change
PAX	812,395	740,660	9.7%
RPMS (000)	1,095,269	892,269	22.8%
ASMS (000)	1,371,367	1,077,262	27.3%
LF	79.9%	82.8%	(2.9 pts.)

PAX: Passengers transported
RPM: One paying passenger transported one mile
ASM: One seat transported one mile
LF: Percentage of seating capacity utilized

Copyright Photo: Michael B. Ing. Airbus A330-243 N383HA (msn 1217) completes its final approach into Los Angeles International Airport.

Hawaiian Airlines:

Hawaiian reports a third quarter net profit of $40.6 million

Hawaiian Holdings, Inc. (Honolulu), parent company of Hawaiian Airlines, Inc. (Honolulu), reported third quarter 2012 adjusted net income of $40.6 million or $0.77 per diluted share, reflecting economic fuel expense, and GAAP net income for the third quarter of 2012 of $45.5 million, or $0.86 per diluted share.

Financial Highlights:

Adjusted net income, reflecting economic fuel expense, increase of 35.2% year-over-year and GAAP net income increase of 77.6% year-over-year.
Adjusted operating margin of 13.4%, reflecting economic fuel expense, and operating margin of 13.6%
Adjusted net income margin of 7.4%, reflecting economic fuel expense, and net income margin of 8.3%.
Operating cost per available seat mile (CASM) excluding fuel decrease of 6.8%.
Unrestricted cash and cash equivalents of $433.5 million.

The Company reported operating income of $74.9 million in the third quarter of 2012, compared with operating income of $60.9 million in the same period in 2011.

Operating revenue was $549.3 million, a 20.5% increase compared to the same period in 2011. Capacity for the third quarter of 2012 increased 28.0% year-over-year to 4.1 billion available seat miles, resulting in operating revenue per available seat mile (ASM) of 13.56 cents, down 5.8% from the same period in 2011. Passenger yield (passenger revenue per revenue passenger mile) decreased 3.6% year-over-year to 14.77 cents, resulting in a year-over-year decrease in passenger revenue per ASM of 5.7% to 12.30 cents. Selected Statistical Data is included in Table 2.

Total operating expenses increased 20.1% year-over-year to $474.4 million. CASM decreased 6.1% year-over-year to 11.71 cents. Excluding fuel, CASM decreased 6.8% year-over-year to 7.62 cents. Reconciliations of GAAP and non-GAAP financial measures are included in Tables 2 and 6.

Aircraft fuel costs increased 21.9% year-over-year to $165.8 million and represented 34.9% of total operating expenses. Hawaiian’s average cost per gallon of jet fuel decreased 4.1% year-over-year to $3.04 (including taxes and delivery). The financial impact of hedging activities is included in nonoperating income (expense), and as such is not reflected in fuel expense.

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. For the three months ended September 30, 2012, economic fuel expense was $167.4 million ($3.07 per gallon), compared with $138.3 million ($3.22 per gallon) in the prior-year period. Analyses of economic fuel expense for the third quarter 2012 and 2011 and pro-forma net income (loss) and diluted net income (loss) per share reflecting economic fuel expense are included in Tables 3 and 4.

Nonoperating income (expense) totaled ($1.1) million, compared with ($13.6) million in the same period in 2011. The Company recognized gains on its fuel hedging activities, reflected in nonoperating income (expense), totaling $6.5 million compared with losses of $9.7 millionduring the same period in 2011.

A summary of the Company’s fuel derivatives contracts as of October 17, 2012 is included as Table 5.

As of September 30, 2012, the Company had:

Unrestricted cash and cash equivalents of $433.5 million.
Available borrowing capacity of $67.4 million under Hawaiian’s Revolving Credit Facility.
Outstanding debt and capital lease obligations of approximately $674 million consisting of the following:
- $251.2 million outstanding under secured loan agreements to finance a portion of the purchase price for four Airbus A330-200 aircraft.
- $174.6 million in secured loan agreements for a portion of the purchase price for 15 previously leased Boeing 717-200 aircraft.
- $108.2 million in capital lease obligations for an Airbus A330-200 aircraft and two Boeing 717-200 aircraft.
- $68.0 million outstanding under floating rate notes issued in conjunction with the acquisition of three Boeing 767-300 ER aircraft.
- $71.8 million outstanding of Convertible Senior Notes.

Copyright Photo: Bruce Drum. Boeing 767-33A ER N589HA (msn 33422) taxies to the runway at Seattle/Tacoma bound for Honolulu.

Hawaiian Airlines: