Fuel Costs Cut June Profits for Hawaiian Airlines

Despite a whopping 42 percent increase in additional fuel costs for June, Hawaiian Airlines had $8.9 million in operating profits on revenue of $70.0 million for the first month of its peak summer season. These figures compare with operating profits of $10.7 million on revenue of $63.1 million for June 2003.

"All things considered, June was a good month. We had more customers and higher loads, but the high cost of fuel worries us," said Joshua Gotbaum, Trustee for Hawaiian Airlines.

Gotbaum said it was significant that Hawaiian had raised its revenues from the previous June, but that costs had risen more ­ leading to a decrease in operating profits. Compared to June 2003, Hawaiian paid an additional $3.3 million for fuel, an increase of about 36 cents per gallon.

Along with the added fuel costs, Hawaiian had increases in wage and benefit costs for June, largely from the second quarter employee profit-sharing bonus and the recently court-approved management bonus for 2003.

Overall operating expenses for June increased by $8.7 million, or 17 percent. Capacity, as measured by Available Seat Miles (ASMs), rose by just 1 percent, with Revenue Per Available Seat Mile (RASM) increasing by 13 percent. Cost Per Available Seat Mile (CASM) jumped by 18 percent, but when adjusted for fuel, the increase was 14 percent.

After including a provision of $3.4 million for income tax, Hawaiian recorded net income of $4.7 million in June, less than half of the $9.6 million in net income for June 2003 for which no tax expense was included.

Year-to-Date

Through the first six months of the year, Hawaiian produced $35.4 million in operating profits on revenue of $376.9 million. In contrast, the company recorded $13.8 million in operating profits on revenue of $324.7 million for the same period in 2003.

However, the 2003 profits include a one-time special credit of $17.5 million received by Hawaiian as a result of the federal government¹s Emergency Wartime Act in May 2003.

When adjusted for the special credit, Hawaiian has actually generated a year-over-year improvement of $39.1 million in operating profits for 2004.

"Although the first half of 2004 was stronger than the first half of 2003, the effects of the Iraq War last year make it a particularly easy comparison," said Gotbaum. Year-to-date operating expenses climbed by $30.6 million, of which $29.2 million was comprised of the special credit and higher fuel costs of $11.7 million, or 24 percent, for 2004.

RASM increased by 17 percent, with CASM rising by 10 percent. When adjusted for fuel and the special credit, CASM was up by only 1 percent.

Despite an income tax provision of $12.7 million, Hawaiian recorded year-to-date net income of $15.5 million for 2004, compared to a net loss of $11.2 million for the previous year, excluding the special credit.