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Strong Improvements Offset By High Cost Of Fuel

Fuel and taxes clip Hawaiian Airlines profits nearly 70 percent  Oct 30, 2008

Earnings at Hawaiian Airlines' parent company fell nearly 70 percent during the third quarter due in part to expenses related to fuel hedging contracts and an increase in the company's tax provision.

Hawaiian Holdings, Inc. reported net income of $6 million, or 12 cents a share, for the three months ending September 30, down from $19.6 million, or 41 cents a share, during the same quarter a year earlier. But the company's operating income increased 6.9 percent, to $27.3 million. Shares of Hawaiian dropped 15 cents yesterday to close at $6.24 on the Nasdaq market.

"The extent of the rise in fuel prices was evident in our third quarter results as extremely strong improvements in both interisland and trans-Pacific revenue were offset by the high cost of fuel," said Mark Dunkerley, Hawaiian's president and CEO. "Our results, nonetheless, bettered the sizable losses posted by many of our principal competitors."

Hawaiian said its revenue increased 24.7 percent, to $339.9 million. The revenue growth is due largely to higher passenger traffic as a result of the twin shutdowns of ATA Airlines and Aloha Airlines earlier this year. Operating expenses increased 26.6 percent, to $312.6 million, as the company added flights to fill the void left by the departures of ATA and Aloha. Fuel costs rose 70.8 percent, to $131.2 million. During the quarter, the cost for a gallon of aviation fuel rose by more than two-thirds to $3.83. The company's tax expenses, meanwhile, increased to $8.6 million during the third quarter, which compared with $2.2 million in the previous third quarter.

Hawaiian also reported a $9.2 million nonoperating expense relating to the company's fuel-hedging activities. The fuel-hedging expenses include $500,000 in realized losses on derivatives contracts that settled during the quarter and $3.8 million in unrealized losses on derivatives contracts that are set to settle in the future.

"Despite these charges, we were obviously very pleased with the direction in fuel prices since July given the volatility ... in the markets," Hawaiian chief financial officer Peter Ingram said during a conference call with investors.

Fuel and taxes clip Hawaiian Airlines profits nearly 70 percent
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