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Hawaiian Holdings Reports 2014 Second Quarter Financial Results

July 22, 2014

HONOLULU, July 22, 2014 /PRNewswire/ — Hawaiian Holdings, Inc. (NASDAQ: HA) (“Holdings” or the “Company”), parent company of Hawaiian Airlines, Inc. (“Hawaiian”), today reported its financial results for the second quarter of 2014.

    --  GAAP net income in the second quarter of $27.3 million or $0.43 per
        diluted share.
    --  Adjusted net income, reflecting economic fuel expense, in the second
        quarter of $22.4 million or $0.35 per diluted share, an increase of $9.7
        million or $0.11 cents per diluted share year-over-year.
    --  Passenger revenue per available seat mile (PRASM) increase of 4.1% and
        operating revenue per available seat mile (RASM) increase of 6.7%.
    --  Unrestricted cash, cash equivalents and short-term investments of $564
        million.

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“The same trajectory of substantially improving financial performance was evident in the second quarter as it has been over the last few quarters,” said Mark Dunkerley, Hawaiian Airlines president and chief executive officer. “Strong demand across our geographies, good macro-economic conditions, stable fuel prices and good cost control inside the business all played their part. Absent changes to the environment or competitor behavior, our prospects in the back half of the year look similar. As ever, we continue to build the business with new routes, this summer featuring our first flights from North America to Kaua’i and the island of Hawai’i, and a host of customer improvements including the roll out of our extra comfort economy section of the aircraft. Our wonderful employees continue to deliver the level of service on the ground and in the air that set the standard for others to aspire to. Without their dedication, none of this would be possible.”

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 June 30, 2014 the Company had:

    --  Unrestricted cash, cash equivalents and short-term investments of $564
        million.
    --  Available borrowing capacity of $69.4 million under Hawaiian's Revolving
        Credit Facility.
    --  Outstanding debt and capital lease obligations of approximately $1,071
        million consisting of the following:
        --  $708 million outstanding under secured loan agreements to finance a
            portion of the purchase price for eleven Airbus A330-200 aircraft.
        --  $146 million outstanding under secured loan agreements to finance a
            portion of the purchase price for 15 Boeing 717-200 aircraft.
        --  $106 million in capital lease obligations to finance the acquisition
            of an Airbus A330-200, two Boeing 717-200 aircraft and
            aircraft-related equipment.
        --  $32 million outstanding under floating rate notes for two Boeing
            767-300 ER aircraft.
        --  $79 million of outstanding Convertible Senior Notes.

Second Quarter 2014 Highlights

Operational

    --  Ranked #1 nationally for on-time performance for the months of March,
        April and May 2014.
    --  Ranked the #1 domestic carrier for travel to Hawai'i by Travel + Leisure
        for 2014.

Fleet and financing

    --  Added two new A330-200 aircraft that were financed through Enhanced
        Equipment Trust Certificates (EETCs) at a fixed blended rate of 4.13%
        and retired one Boeing 767-300 aircraft.

New routes and increased frequencies

    --  Los Angeles to Kona, three-times-weekly, and Los Angeles to Lihu'e,
        four-times-weekly, summer seasonal service launched in June.
    --  Oakland to Kona, three-times-weekly and Oakland to Lihu'e,
        four-times-weekly, summer seasonal service launched in June.
    --  Los Angeles to Maui daily service launched in May and a second daily
        summer seasonal service reintroduced in June.
    --  San Jose to Honolulu daily service reintroduced in May.
    --  'Ohana by Hawaiian expanded its network with new flights between Maui
        and Moloka'i, Kona and Hilo launched in July.
    --  Announced additional seasonal service from Los Angeles to Honolulu and
        Maui for the winter months.

Third Quarter and Full Year 2014 Outlook

The table below summarizes the Company’s expectations for the third quarter ending September 30, 2014 and the full year ending December 31, 2014, expressed as an expected percentage change compared to the results for the quarter ended September 30, 2013 or the year ended December 31, 2013, as applicable (the results for which are presented for reference).


                                  Third

                                 Quarter

    Item                                     2013  Guidance
    ----                                     ----  --------

    Cost per ASM Excluding Fuel
     (cents)                                 7.78     Up 1% to up 4%

    Operating Revenue Per ASM
     (cents)                                13.57     Up 3% to up 6%

    ASMs (millions)                       4,415.1     Up 1% to up 3%

    Gallons of jet fuel
     consumed (millions)                     59.3 Up 0.5% to up 2.5%

                                Full Year

    Item                                     2013  Guidance
    ----                                     ----  --------

    Cost per ASM Excluding Fuel
     (cents)                                 7.88     Up 3% to up 5%

    ASMs (millions)                      16,785.8     Up 1% to up 3%

Investor Conference Call

Hawaiian Holdings’ quarterly earnings conference call is scheduled to begin today (July 22, 2014) at 4:30 p.m. Eastern Time (USA). The conference call will be broadcast live over the Internet. Investors may listen to the live audio webcast on the investor relations section of the Company’s website at www.HawaiianAirlines.com. For those who are not available for the live webcast, the call will be archived for 90 days on Hawaiian’s investor website.

About Hawaiian Airlines

Hawaiian(®) has led all U.S. carriers in on-time performance for each of the past 10 years (2004-2013) as reported by the U.S. Department of Transportation. Consumer surveys by Condé Nast Traveler, Travel + Leisure and Zagat have all ranked Hawaiian the highest of all domestic airlines serving Hawai’i.

Now in its 85th year of continuous service, Hawaiian is Hawai’i's biggest and longest-serving airline, as well as the largest provider of passenger air service from its primary visitor markets on the U.S. mainland. Hawaiian offers nonstop service to Hawai’i from more U.S. gateway cities (11) than any other airline, along with service from Japan, South Korea, China, Australia, New Zealand, American Samoa and Tahiti. Hawaiian also provides approximately 160 jet flights daily between the Hawaiian Islands, with a total of more than 200 daily flights system-wide.

Hawaiian Airlines, Inc. is a subsidiary of Hawaiian Holdings, Inc. (NASDAQ: HA). Additional information is available at HawaiianAirlines.com. Follow updates on Twitter about Hawaiian (@HawaiianAir) and its special fare offers (@HawaiianFares), and become a fan on its Facebook page.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the Company’s current views with respect to certain current and future events and financial performance. Such forward-looking statements include, without limitation, statements regarding the Company’s prospects in the back half of the year; new routes; customer improvements; the Company’s expectations regarding cost per available seat mile excluding fuel, operating revenue per available seat mile, available seat miles and gallons of jet fuel consumed, each for the quarter ending September 30, 2014; the Company’s expectations regarding cost per available seat mile excluding fuel and available seat miles, each for the year ending December 31, 2014; and statements as to other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing. Words such as “expects,” “anticipates,” “projects,” “intends,” “plans,” “believes,” “estimates,” variations of such words, and similar expressions are also intended to identify such forward-looking statements. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and assumptions relating to the Company’s operations and business environment, all of which may cause the Company’s actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. These risks and uncertainties include, without limitation, the Company’s ability to accurately forecast quarter and year-end results; economic volatility; the price and availability of aircraft fuel; fluctuations in demand for transportation in the markets in which the Company operates; the Company’s dependence on tourist travel; foreign currency exchange rate fluctuations; and the Company’s ability to implement its growth strategy and related cost reduction goals.

The risks, uncertainties and assumptions referred to above that could cause the Company’s results to differ materially from the results expressed or implied by such forward-looking statements also include the risks, uncertainties and assumptions discussed from time to time in the Company’s other public filings and public announcements, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 and the Company’s subsequent Quarterly Reports on Form 10-Q, as well as other documents that may be filed by the Company from time to time with the Securities and Exchange Commission. All forward-looking statements included in this document are based on information available to the Company on the date hereof. The Company does not undertake to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date hereof even if experience or future changes make it clear that any projected results expressed or implied herein will not be realized.


    Table 1

    Hawaiian Holdings, Inc

    Consolidated Statements of Operations

    (in thousands, except for per share data) (unaudited)

                                                          Three Months Ended            Six Months Ended

                                                             June 30,                  June 30,
                                                             --------                  --------

                                                                       2014       2013           % Change              2014        2013 % Change
                                                                       ----       ----           --------              ----        ---- --------

    Operating Revenue:

    Passenger                                                      $506,797   $481,461                      5.3%   $974,810    $921,400            5.8%

    Other                                                            68,923     52,467                     31.4%    125,768     103,282           21.8%

    Total                                                           575,720    533,928                      7.8%  1,100,578   1,024,682            7.4%
                                                                    -------    -------                            ---------   ---------

    Operating Expenses:

    Aircraft fuel, including taxes
     and delivery                                                   174,139    169,223                      2.9%    345,278     343,712            0.5%

    Wages and benefits                                              112,478    103,384                      8.8%    219,972     206,119            6.7%

    Aircraft rent                                                    26,095     28,285                    (7.7)%     52,374      54,304          (3.6)%

    Maintenance materials and
     repairs                                                         58,399     53,036                     10.1%    116,709     108,295            7.8%

    Aircraft and passenger
     servicing                                                       30,860     29,228                      5.6%     61,081      58,287            4.8%

    Commissions and other selling                                    30,773     32,186                    (4.4)%     62,108      65,997          (5.9)%

    Depreciation and amortization                                    23,765     19,788                     20.1%     46,576      38,901           19.7%

    Other rentals and landing fees                                   21,656     19,630                     10.3%     42,218      38,777            8.9%

    Other                                                            45,961     41,777                     10.0%     92,631      84,825            9.2%

    Total                                                           524,126    496,537                      5.6%  1,038,947     999,217            4.0%
                                                                    -------    -------                            ---------     -------

    Operating Income                                                 51,594     37,391                               61,631      25,465
                                                                     ------     ------                               ------      ------

    Nonoperating Income (Expense):
     Interest expense and amortization of debt
      discounts and issuance costs
                                                                   (15,997)  (12,163)                            (31,007)   (23,540)

    Interest income                                                     398        126                                  617         253

    Capitalized interest                                              1,974      2,891                                4,750       6,331

    Gains (Losses) on fuel
     derivatives                                                      6,285    (6,906)                               (614)   (13,467)

    Other, net                                                          725    (3,124)                               1,310     (4,206)

    Total                                                           (6,615)  (19,176)                            (24,944)   (34,629)
                                                                     ------    -------                              -------     -------

    Income (Loss) Before Income
     Taxes                                                           44,979     18,215                               36,687     (9,164)

    Income tax expense (benefit)                                     17,652      6,899                               14,435     (3,335)
                                                                     ------      -----                               ------      ------

    Net Income (Loss)                                               $27,327    $11,316                              $22,252    $(5,829)
                                                                    =======    =======                              =======     =======

    Net Income (Loss) Per Common
     Stock Share:

    Basic                                                             $0.51      $0.22                                $0.42     $(0.11)
                                                                      =====      =====                                =====      ======

    Diluted                                                           $0.43      $0.21                                $0.39     $(0.11)
                                                                      =====      =====                                =====      ======

    Weighted Average Number of

    Common Stock Shares
     Outstanding:

    Basic                                                            53,499     52,008                               53,095      51,837
                                                                     ======     ======                               ======      ======

    Diluted                                                          62,847     53,071                               57,046      51,837
                                                                     ======     ======                               ======      ======


    Table 2

    Hawaiian Holdings, Inc.

    Selected Statistical Data (unaudited)

                                                Three Months Ended             Six Months Ended

                                                     June 30,                      June 30,
                                                   --------                  --------

                                             2014                     2013   % Change                2014       2013   % Change
                                             ----                     ----   --------                ----       ----   --------

    Scheduled Operations:

    Revenue passenger
     miles (RPM) (a)                      3,393.2                  3,405.7             (0.4%)     6,621.8    6,611.1               0.2%

    Available seat
     miles (ASM) (a)                      4,260.6                  4,211.5               1.2%     8,296.2    8,171.8               1.5%

    Passenger revenue
     per RPM (Yield)                        14.94              ¢     14.14 ¢             5.7%       14.72 ¢    13.94 ¢             5.6%

    Passenger load
     factor (RPM/ASM)                       79.6%                   80.9%             (1.3)   pt. 79.8%     80.9%             (1.1)   pt.

    Passenger revenue
     per ASM (PRASM)                        11.90              ¢     11.43 ¢             4.1%       11.75 ¢    11.28 ¢             4.2%

    Total Operations (e):

    Revenue passenger
     miles (RPM) (a)                      3,395.2                  3,409.0             (0.4%)     6,626.9    6,619.6               0.1%

    Available seat
     miles (ASM) (a)                      4,262.8                  4,215.9               1.1%     8,301.7    8,181.7               1.5%

    Passenger load
     factor (RPM/ASM)                       79.6%                   80.9%             (1.3)   pt. 79.8%     80.9%             (1.1)   pt.

    Operating revenue
     per ASM (RASM)                         13.51              ¢     12.66 ¢             6.7%       13.26 ¢    12.52 ¢             5.9%

    Operating cost per
     ASM (CASM)                             12.30              ¢     11.78 ¢             4.4%       12.51 ¢    12.21 ¢             2.5%

    CASM excluding
     aircraft fuel (b)                       8.21              ¢      7.76 ¢             5.8%        8.36 ¢     8.01 ¢             4.4%

    Gallons of jet
     fuel consumed (a)                       56.9                     56.6               0.6%       112.1      110.6               1.4%

    Average cost per
     gallon of jet
     fuel (actual) (c)                      $3.06                    $2.99               2.3%       $3.08      $3.11             (1.0%)

    Economic fuel cost
     per gallon (c)(d)                      $3.09                    $3.07               0.7%       $3.10      $3.18             (2.5%)

    (a)                 In millions.

    (b)                  See Table 4 for reconciliations of
                         operating expenses excluding aircraft
                         fuel.

    (c)                 Includes applicable taxes and fees.

    (d)                  See Table 3 for a reconciliation of
                         economic fuel costs.

    (e)                  Includes the operations of our contract
                         carrier under a capacity purchase
                         agreement.


    Table 3.

    Hawaiian Holdings, Inc.

    Economic Fuel Expense

    (in thousands, except per-gallon amounts)
     (unaudited)

    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.

                      Three Months Ended June 30,        Six Months Ended June 30,
                      ---------------------------        -------------------------

                       2014                         2013    % Change                   2014      2013  % Change
                       ----                         ----    --------                   ----      ----  --------

    Aircraft fuel
     expense,
     including
     taxes and
     delivery      $174,139                     $169,223                2.9%       $345,278  $343,712              0.5%

    Realized
     losses on
     settlement of
     fuel
     derivative
     contracts        2,009                        4,740             (57.6%)          1,899     7,436           (74.5%)
                      -----                        -----              ------           -----     -----            ------

    Economic fuel
     expense       $176,148                     $173,963                1.3%       $347,177  $351,148            (1.1%)

    Fuel gallons
     consumed        56,937                       56,625                0.6%        112,101   110,560              1.4%
                     ------                       ------                 ---         -------   -------               ---

    Economic fuel
     cost per
     gallon           $3.09                        $3.07                0.7%          $3.10     $3.18            (2.5%)
                      =====                        =====                 ===           =====     =====             =====


    Table 4.

    Hawaiian Holdings, Inc.

    Non-GAAP Financial Reconciliation

    (in thousands, except per-share and CASM data) (unaudited)

    The Company evaluates its financial performance utilizing various GAAP and non-GAAP
     financial measures, including, net income, diluted net income per share, CASM, PRASM, RASM
     and Passenger Revenue per RPM. Pursuant to Regulation G, the Company has included the
     following reconciliation of reported non-GAAP financial measures to comparable financial
     measures reported on a GAAP basis. The Company believes that excluding fuel costs from
     certain measures is useful to investors because it provides an additional measure of
     management's performance excluding the effects of a significant cost item over which
     management has limited influence.

                 Three months ended June 30,                           Six months ended June 30,
                 ---------------------------                           -------------------------

                                    2014                          2013                         2014                      2013
                                    ----                          ----                         ----                      ----

                    Net income               Diluted net income              Net income             Diluted net income        Net income         Diluted net income           Net loss           Diluted net loss
                                                  per share                                              per share                                    per share                                     per share
                                                  ---------                                              ---------                                    ---------                                     ---------

    As reported
     -GAAP                       $27,327                         $0.43                      $11,316                     $0.21            $22,252                        $0.39           $(5,829)                  $(0.11)

                                 (4,976)                       (0.08)                       1,300                      0.03              (771)                      (0.01)             3,619                      0.07
     Add:
      unrealized
      losses
      (gains) on
      fuel
      derivative
      contracts,
      net of tax

    Reflecting
     economic
     fuel
     expense                     $22,351                         $0.35                      $12,616                     $0.24            $21,481                        $0.38           $(2,210)                  $(0.04)
                                 =======                         =====                      =======                     =====            =======                        =====            =======                    ======




                      Three Months Ended              Six Months Ended

                       June 30,                           June 30,
                       --------                           --------

                     2014                      2013                     2014           2013
                     ----                      ----                     ----           ----

    GAAP
     operating
     expenses    $524,126                  $496,537               $1,038,947       $999,217

    Less:
     aircraft
     fuel,
     including
     taxes and
     delivery   (174,139)                (169,223)               (345,278)     (343,712)
                 --------                  --------                 --------       --------

    Adjusted
     operating
     expense -
     excluding
     aircraft
     fuel        $349,987                  $327,314                 $693,669       $655,505
                 ========                  ========                 ========       ========

    Available
     Seat Miles 4,262,774                 4,215,893                8,301,743      8,181,671

    CASM - GAAP     12.30     ¢               11.78 ¢                  12.51 ¢        12.21 ¢

    Less:
     aircraft
     fuel          (4.09)                   (4.02)                  (4.15)        (4.20)
                    -----                     -----                    -----          -----

    CASM -
     excluding
     aircraft
     fuel            8.21     ¢                7.76 ¢                   8.36 ¢         8.01 ¢
                     ====                      ====                     ====           ====


    Table 5.

    Hawaiian Holdings, Inc.

    Fuel Derivative Contract Summary
     (unaudited)

    As of July 15, 2014

    The Company utilizes heating oil
     swaps and purchased put options
     to hedge against price volatility
     of its future aircraft fuel
     consumption.  Swap positions are
     outlined below:

                       Weighted          Percentage of      Fuel Barrels
                       Average           Projected Fuel        Hedged
                    Contract Price        Requirements
                                             Hedged
                                             ------

    Third
     Quarter
     2014
    --------

         Heating
          Oil Swaps                $2.98                60%              868,000

    Fourth
     Quarter
     2014
    --------

         Heating
          Oil Swaps                $2.94                48%              676,000

    First
     Quarter
     2015
    --------

         Heating
          Oil Swaps                $2.90                34%              483,000

    Second
     Quarter
     2015
    --------

         Heating
          Oil Swaps                $2.89                19%              282,000

    Third
     Quarter
     2015
    --------

         Heating
          Oil Swaps                $2.89                13%               67,000


    Table 6.

    Hawaiian Holdings, Inc.

    Foreign Exchange Forward Contract Summary (unaudited)

    As of July 15, 2014

                                                           Japanese Yen               Australian Dollar
                                                           ------------               -----------------

               Quarter of Settlement                  Weighted Average Forward  Percentage of Projected Foreign    Weighted Average Forward  Percentage of Projected Foreign
                                                           Contract Price        Denominated JPY Sales Hedged           Contract Price        Denominated AUD Sales Hedged
               ---------------------                 ------------------------- --------------------------------   ------------------------- --------------------------------

                                                           (in USD|JPY)                                                 (in AUD|USD)

                 Third Quarter 2014                          YEN100.52                                        62%        AUD 0.9122                                        58%

                Fourth Quarter 2014                          YEN99.86                                         53%        AUD 0.9019                                        49%

                 First Quarter 2015                          YEN99.13                                         38%        AUD 0.9084                                        38%

                Second Quarter 2015                          YEN101.83                                        31%        AUD 0.8861                                        30%

                 Third Quarter 2015                          YEN101.49                                        25%        AUD 0.8795                                        23%

                Fourth Quarter 2015                          YEN101.28                                        18%        AUD 0.9005                                        17%

                 First Quarter 2016                          YEN100.99                                         9%

                Second Quarter 2016                          YEN100.58                                         8%

                                                            Korean Won                New Zealand Dollar
                                                            ----------                ------------------

               Quarter of Settlement                  Weighted Average Forward  Percentage of Projected Foreign    Weighted Average Forward  Percentage of Projected Foreign
                                                           Contract Price        Denominated KRW Sales Hedged           Contract Price        Denominated NZD Sales Hedged
               ---------------------                 ------------------------- --------------------------------   ------------------------- --------------------------------

                                                           (in USD|KRW)                                                 (in NZD|USD)

                 Third Quarter 2014                           ?1,108                                          23%        NZD 0.7762                                        18%

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SOURCE Hawaiian Holdings, Inc.


Source: PR Newswire



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