Tuesday, 29 January 2019

Hawaiian reports its financial results for the fourth quarter and full year 2018.

Photo Hawaiian Airlines
Hawaiian Airlines today reported its financial results for the fourth quarter and full year 2018, which shows the carrier performed well in the face of higher fuel costs, delays in aircraft delivery, bad weather and increased competition.

"Hawaiian delivered another year of strong financial results in 2018, with an adjusted pre-tax margin in the top tier of industry performance," said Peter Ingram, Hawaiian Airlines president and CEO.  "Undaunted by higher fuel prices, elevated competitive capacity, aircraft delivery delays and severe weather events, our employees once again demonstrated why Hawaiian is the carrier of choice to Hawai'i.  2019 will be an important year for Hawaiian.  Successfully dealing with all of 2018's twists and turns gives me tremendous confidence in our ability to sustain and build upon our achievements in the years ahead."



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

The Company returned $126.7 million to shareholders in 2018 through $102.5 million in share repurchases and $24.2 million in dividends.  In December 2018, the Company also announced a new $100 million share repurchase program in effect through December 31, 2020.

On January 25, 2019 the Company's Board of Directors declared a quarterly cash dividend of 12 cents per share to be paid on February 22, 2019 to all shareholders of record as of February 8, 2019.

As of December 31, 2018 the Company had:

Unrestricted cash, cash equivalents and short-term investments of $501 million.
Outstanding debt and capital lease obligations of $710 million.
2018 Highlights

Operational

Carried a record 11.8 million passengers in 2018, a 2.9 percent increase over the previous year.
Announced it will open a technology center in Phoenix, Arizona, in the first quarter of 2019 to strengthen its IT capabilities.
New routes and increased frequencies

North America
Expanded its routes to the Pacific Northwest with the launch of new daily non-stop service between Portland International Airport (PDX) and Maui's Kahului Airport (OGG).
Expanded its routes to Southern California with the launch of new daily non-stop flights between Long Beach Airport (LGB) and Honolulu's Daniel K. Inouye International Airport (HNL), and new daily non-stop flights between San Diego International Airport (SAN) and Maui (OGG).
Extended seasonal non-stop service to year-round non-stop service between Los Angeles International Airport (LAX) and Ellison Onizuka Kona International Airport (KOA).
Announced expanded service to Northern California with new daily non-stop flights between Sacramento International Airport (SMF) and Maui (OGG) beginning April 2019.
Announced its second East Coast route with new five-times-a-week non-stop service between Boston's Logan International Airport (BOS) and Honolulu (HNL) beginning April 2019.
International
Expanded seasonal winter service to international destinations, including:
increasing non-stop service between Seoul's Incheon International Airport (ICN) and Honolulu (HNL) to daily flights between mid-January and early-February 2019; and
increasing non-stop service between Sapporo's New Chitose Airport (CTS) and Honolulu (HNL) with five weekly flights during the first half of February 2019.
Commercial

Expanded its cargo services with the launch of All-Cargo Neighbor Island service between Honolulu (HNL), Lihu'e Airport (LIH) and Hilo International Airport (ITO).  The All-Cargo Neighbor Island service, which currently consists of two ATR-72 aircraft, is expected to expand in 2019 with the addition of flights between Honolulu (HNL) and both Maui (OGG) and Kona (KOA).
Product and loyalty

Announced the expansion of its Business Class auction upgrade service, Bid Up by Hawaiian Airlines, to include flights operating between Hawai'i and Japan and South Korea, in addition to flights operating between Hawai'i and North America.
Extended its partnership with Barclaycard US, Hawaiian's co-branded credit card partner, under a new agreement through 2024 that includes improved economics for Hawaiian and a refreshed rewards structure for the Hawaiian Airlines World Elite Mastercard and the Hawaiian Airlines Business Mastercard to enable cardmembers to earn more miles faster.
Partnerships

Together with Japan Airlines, filed an application with the U.S. Department of Transportation (DOT) and Japan's Ministry of Land, Infrastructure, Transport and Tourism (MLIT) seeking antitrust immunity to create a joint venture that promises significant consumer benefits and the opportunity for service expansion.
Enhanced its comprehensive partnership with Japan Airlines with the implementation of reciprocal frequent flyer benefits for HawaiianMiles and JAL Mileage Bank members effective October 2018.  The enhanced program is the second phase of the comprehensive partnership launched in March 2018 with codeshare flights.
Announced an expansion of the codeshare agreement with JetBlue that allows travelers from dozens of cities, most of them in the eastern U.S., to easily connect to the Hawaiian Islands via Boston's Logan International Airport (BOS) starting in April 2019.
Fleet and financing

Secured its flagship widebody aircraft of the next decade with the signing of a definitive purchase agreement with Boeing for the purchase of 10 Boeing 787-9 aircraft, including purchase rights for an additional 10 aircraft, to be delivered starting in 2021.
Signed a definitive agreement with General Electric for the purchase of GEnx engines to power its Boeing 787-9 fleet.
Took delivery of nine Airbus A321neo aircraft, increasing the size of its Airbus A321neo fleet to eleven aircraft.
Entered into two Japanese Yen-denominated debt financings, each collateralized by an Airbus A321neo aircraft.
Took delivery of an ATR-42 turboprop aircraft in June, increasing the size of its 'Ohana by Hawaiian passenger turboprop fleet to four aircraft.
Increased the size of its secured revolving credit facility from $225 million to $235 million and extended the term through December 2022.
People

Contributed $50 million during the year to its pilots' pension plan. The plan's funded status improved from 69.6 percent funded at the end of 2017 to 77.4 percent at the end of 2018.
Celebrated the beginning of its 90th year of service in the Hawaiian Islands with a company-matched employee giving campaign that generated $187,000 in donations to non-profit agencies across the State of Hawai'i.  The 90th year fundraiser is in addition to sponsorships and grants the Company provides annually through its Team Kokua program and Hawaiian Airlines Foundation.
First Quarter and Full Year 2019 Outlook

The table below summarizes the Company's expectations for the first quarter ending March 31, 2019 and the full year ending December 31, 2019 expressed as an expected percentage change compared to the results for the quarter ended March 31, 2018 or the year ended December 31, 2018, as applicable.
--
Fourth Quarter 2018 - Key Financial Metrics
  
GAAP
 
YoY Change
 
Adjusted
 
YoY Change
Net Income
 
$31.6M
 
$(116.8)M
 
$49.2M
 
$(5.7)M
Diluted EPS
 
$0.64
 
(2.20)
 
$1.00
 
$(0.05)
Pre-tax Margin
 
6.0%
 
(9.5) pts.
 
9.3%
 
(3.8) pts.
         
         
         
Full Year 2018 - Key Financial Metrics
  
GAAP
 
YoY Change
 
Adjusted
 
YoY Change
Net Income
 
$233.2M
 
$(97.4)M
 
$274.8M
 
$(14.1)M
Diluted EPS
 
$4.62
 
$(1.57)
 
$5.44
 
+$0.03
Pre-tax Margin
 
10.6%
 
(4.0) pts.
 
12.6%
 
(4.4) pts.


Item
 
First Quarter
2019 Guidance
 
GAAP Equivalent
 
GAAP First Quarter
2019 Guidance
ASMs
 
Up 1.5 - 3.0%
    
Operating revenue per ASM
 
Down 3.0 - 6.0%
    
Cost per ASM excluding fuel (a)
 
Up 1.0 - 4.0%
 
Cost per ASM (a)
 
Down 3.8 - 7.1%
Gallons of jet fuel consumed
 
Down 0.5 - 2.5%
    
Economic fuel cost per gallon (b)(c)
 
$1.95 - $2.05
 
Fuel cost per gallon (b)
 
$1.91 - $2.01
       
       
Item
 
Full Year
2019 Guidance
 
GAAP Equivalent
 
GAAP Full Year
2019 Guidance
ASMs
 
Up 1.5 - 4.5%
    
Cost per ASM excluding fuel (a)
 
Flat - Up 3.0%
 
Cost per ASM (a)
 
Down 1.7 - 5.0%
Gallons of jet fuel consumed
 
Down 2.0% - Up 1.0%
    
Economic fuel cost per gallon (b)(c)
 
$1.95 - $2.05
 
Fuel cost per gallon (b)
 
$1.92 - $2.03
  
(a)
See Table 4 for a reconciliation of GAAP operating expenses to operating expenses excluding aircraft fuel.
(b)
Economic fuel cost per gallon estimates are based on the January 18, 2019 fuel forward curve.
(c)
See Table 3 for a reconciliation of GAAP fuel costs to economic fuel costs.
   .
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