Hawaiian Holdings Reports 2018 Fourth Quarter and Full Year Financial Results

Hawaiian Holdings, Inc. (NASDAQ: HA), parent company of Hawaiian Airlines, Inc., yesterday reported its financial results for the fourth quarter and full year 2018.

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.

“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.

The Company expects its effective tax rate for the full year ending December 31, 2019 to be in the range of 25 percent to 27 percent.

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.

Table 1.

Hawaiian Holdings, Inc.

Consolidated Statements of Operations

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

Three Months Ended December 31,

Twelve Months Ended December 31,

2018

2017 (a)

% Change

2018

2017 (a)

% Change

(in thousands, except per share data)

Operating Revenue:

Passenger

$

638,799

$

630,426

1.3

%

$

2,602,793

$

2,486,827

4.7

%

Other

58,666

52,178

12.4

%

234,618

188,318

24.6

%

Total

697,465

682,604

2.2

%

2,837,411

2,675,145

6.1

%

Operating Expenses:

Wages and benefits

167,813

166,225

1.0

%

684,719

632,997

8.2

%

Aircraft fuel, including taxes and delivery

150,140

123,960

21.1

%

599,544

440,383

36.1

%

Aircraft rent

32,428

34,881

(7.0)

%

125,961

137,764

(8.6)%

Maintenance materials and repairs

63,530

58,187

9.2

%

239,759

219,553

9.2

%

Aircraft and passenger servicing

40,589

37,394

8.5

%

157,796

144,853

8.9

%

Commissions and other selling

32,833

31,783

3.3

%

129,315

126,750

2.0

%

Depreciation and amortization

38,329

29,490

30.0

%

139,866

113,277

23.5

%

Other rentals and landing fees

31,677

30,000

5.6

%

126,903

116,763

8.7

%

Purchased services

36,547

31,359

16.5

%

131,651

110,787

18.8

%

Contract terminations expense

%

35,322

NM

Special items

%

23,450

NM

Other

34,230

43,159

(20.7)

%

152,207

144,530

5.3

%

Total

628,116

586,438

7.1

%

2,523,043

2,211,107

14.1

%

Operating Income

69,349

96,166

(27.9)

%

314,368

464,038

(32.3)

%

Nonoperating Income (Expense):

Interest expense and amortization of debt discounts and issuance costs

(8,373)

(7,609)

(33,001)

(30,901)

Interest income

2,713

1,652

9,242

6,132

Capitalized interest

1,473

2,179

7,887

8,437

Gains (losses) on fuel derivatives

(21,474)

13,540

5,590

3,312

Other components of net periodic benefit cost

(282)

(3,420)

(825)

(16,713)

Other nonoperating special items

4,617

(45,585)

Other, net

(1,887)

(1,060)

(2,103)

2,101

Total

(27,830)

9,899

(13,210)

(73,217)

Income Before Income Taxes

41,519

106,065

301,158

390,821

Income tax expense (benefit)

9,883

(42,383)

67,958

60,211

Net Income

$

31,636

$

148,448

$

233,200

$

330,610

Net Income Per Common Stock Share:

Basic

$

0.65

$

2.86

$

4.63

$

6.23

Diluted

$

0.64

$

2.84

$

4.62

$

6.19

Weighted Average Number of Common Stock Shares Outstanding:

Basic

48,946

51,939

50,338

53,074

Diluted

49,163

52,263

50,488

53,413

Cash Dividends Declared Per Common Share

$

0.12

$

0.12

$

0.48

0.12

(a)

Amounts adjusted for the adoption of Accounting Standards Codification (ASC) No. 606, Revenue from Contracts with Customers.

Table 2.

Hawaiian Holdings, Inc.

Selected Statistical Data

(in thousands, except as otherwise indicated) (unaudited)

Three Months Ended December 31,

Twelve Months Ended December 31,

2018

2017 (a)

% Change

2018

2017 (a)

% Change

(in thousands, except as otherwise indicated)

Scheduled Operations (b) :

Revenue passengers flown

2,887

2,910

(0.8)

%

11,830

11,498

2.9

%

Revenue passenger miles (RPM)

4,280,809

4,120,002

3.9

%

17,198,985

16,307,344

5.5

%

Available seat miles (ASM)

5,059,708

4,788,457

5.7

%

20,158,139

18,991,566

6.1

%

Passenger revenue per RPM (Yield)

14.92

¢

15.30

¢

(2.5)

%

15.13

¢

15.25

¢

(0.8)

%

Passenger load factor (RPM/ASM)

84.6

%

86.0

%

(1.4)

pt.

85.3

%

85.9

%

(0.6)

pt.

Passenger revenue per ASM (PRASM)

12.63

¢

13.17

¢

(4.1)

%

12.91

¢

13.09

¢

(1.4)

%

Total Operations (b) :

Revenue passengers flown

2,891

2,914

(0.8)

%

11,840

11,505

2.9

%

RPM

4,285,036

4,125,894

3.9

%

17,206,703

16,316,739

5.5

%

ASM

5,067,412

4,798,039

5.6

%

20,171,911

19,006,682

6.1

%

Passenger load factor (RPM/ASM)

84.6

%

86.0

%

(1.4)

pt.

85.3

%

85.8

%

(0.5)

pt.

Operating revenue per ASM (RASM)

13.76

¢

14.23

¢

(3.3)

%

14.07

¢

14.07

¢

%

Operating cost per ASM (CASM)

12.40

¢

12.22

¢

1.5

pt.

12.51

¢

11.63

¢

7.6

%

CASM excluding aircraft fuel, loss on sale of aircraft, contract terminations expense, and special items (c)

9.46

¢

9.64

¢

(1.9)

%

9.36

¢

9.19

¢

1.8

%

Aircraft fuel expense per ASM (d)

2.97

¢

2.58

¢

15.1

%

2.97

¢

2.32

¢

28.0

%

Revenue block hours operated

53,440

47,926

11.5

%

208,809

189,881

10.0

%

Gallons of jet fuel consumed

67,751

66,511

1.9

%

273,783

259,915

5.3

%

Average cost per gallon of jet fuel (actual) (d)

$

2.22

$

1.86

19.4

%

$

2.19

$

1.69

29.6

%

Economic fuel cost per gallon (d)(e)

$

2.20

$

1.84

19.6

%

$

2.10

$

1.70

23.5

%

(a)

Amounts adjusted for the adoption of Accounting Standards Codification (ASC) No. 606, Revenue from Contracts with Customers.

(b) 

Includes the operations of the Company’s contract carrier under a capacity purchase agreement.

(c) 

See Table 4 for a reconciliation of GAAP operating expenses to operating expenses excluding aircraft fuel, loss on sale of aircraft, contract terminations expense, and special items.

(d) 

Includes applicable taxes and fees.

(e) 

See Table 3 for a reconciliation of GAAP fuel costs to economic fuel costs.

Table 3.

Hawaiian Holdings, Inc.

Economic Fuel Expense

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

The Company believes that economic fuel expense is a good 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 losses/(gains) 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 December 31,

Twelve Months Ended December 31,

2018

2017

% Change

2018

2017

% Change

(in thousands, except per-gallon amounts)

Aircraft fuel expense, including taxes and delivery

$

150,140

$

123,960

21.1

%

$

599,544

$

440,383

36.1

%

Realized (gains)/losses on settlement of fuel derivative contracts

(990)

(1,565)

(36.7)

%

(25,563)

534

NM

Economic fuel expense

$

149,150

$

122,395

21.9

%

$

573,981

$

440,917

30.2

%

Fuel gallons consumed

67,751

66,511

1.9

%

273,783

259,915

5.3

%

Economic fuel costs per gallon

$

2.20

$

1.84

19.6

%

$

2.10

$

1.70

23.5

%

Estimated three months ending

March 31, 2019

 Estimated full year ending

December 31, 2019

(in thousands, except per-gallon amounts)

Aircraft fuel expense, including taxes and delivery

$

121,412

$

130,453

$

516,399

$

560,068

Realized (gains)/losses on settlement of fuel derivative contracts

2,700

2,700

6,800

6,800

Economic fuel expense

$

124,112

$

133,153

$

523,199

$

566,868

Fuel gallons consumed

63,647

64,953

268,307

276,521

Economic fuel costs per gallon

$

1.95

$

2.05

$

1.95

$

2.05

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, Passenger Revenue per RPM and EBITDAR.  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 adjustments are described below:

  • Changes in fair value of derivative contracts, net of tax, are based on market prices for open contracts as of the end of the reporting period.  This line item includes the unrealized amounts of fuel derivatives (not designated as hedges) that will settle in future periods and the reversal of prior period unrealized amounts.
  • Unrealized loss (gain) on foreign debt is based on fluctuations in foreign exchange rates related to foreign-denominated debt agreements the Company executed in May and June 2018.
  • Loss (gain) on sale of aircraft is the result of adjustments to the final purchase price of the Company’s Boeing 767-300 aircraft included in a forward sale agreement the Company entered into in January 2018.  During the three months ended September 30, 2018 the Company recorded a loss of $1.8 million on the sale of two Boeing 767-300 aircraft covered under the forward sale agreement.  During the three months ended December 31, 2018 the Company recorded a gain of $1.5 million on the sale of one Boeing 767-300 aircraft covered under the forward sale agreement.
  • On December 22, 2017 the Tax Cuts and Jobs Act of 2017 (Tax Reform Act) was enacted into law, which significantly changed existing U.S. tax law and reduces the U.S. federal corporate tax rate from 35 percent to 21 percent.  During the three months ended December 31, 2017 the Company recognized a one-time benefit of $83.0 million from the estimated impact of the revaluation of deferred tax assets and liabilities.  During the twelve months ended December 31, 2018 the Company completed its accounting for the effects of the Tax Reform Act and recorded a tax benefit of $9.3 million.

The Company believes that excluding the impact of these derivative adjustments, fluctuations in foreign exchange rates, the sale of aircraft and the Tax Reform Act helps investors better analyze the Company’s operational performance and compare its results to other airlines in the periods presented.

2017 special items

  • During the three months ended September 30, 2017 the Company terminated the Hawaiian Airlines, Inc. Salaried & IAM Merged Pension Plan (the Merged Plan) and settled a portion of its pilots’ other post-retirement medical plan liability (OPEB).  In connection with the reduction of these liabilities the Company recorded one-time other non-operating special items of $35.2 million related to the Merged Plan termination and $10.4 million related to the OPEB settlement.
  • During the three months ended June 30, 2017 the Company executed a sale leaseback transaction with an independent third party for three Boeing 767-300 aircraft as part of the Company’s planned exit from its 767 fleet.  During the three months ended June 30, 2017 the Company recorded a loss on sale of such aircraft of $4.8 million.
  • During the three months ended March 31, 2017 the Company accrued $18.7 million related to (1) a one-time payment to reduce the Company’s future 401K employer contribution for certain pilot groups, and (2) a one-time true up of the pilot vacation accrual at the new negotiated contract rates.

2018 contract terminations expense

  • During the three months ended March 31, 2018 the Company terminated two contracts which resulted in a $35.3 million contract terminations expense.  In February 2018 the Company exercised its right to terminate its purchase agreement with Airbus for six Airbus A330-800neo aircraft and the purchase rights for an additional six Airbus A330-800neo aircraft.  The Company recorded a contract terminations expense to reflect a portion of the termination penalty.  In January 2018 the Company entered into a transaction with its lessor to early terminate and purchase three Boeing 767-300 aircraft leases and concurrently entered into a forward sale agreement for the same three Boeing 767-300 aircraft, including two Pratt & Whitney 4060 engines for each aircraft.  These aircraft were previously accounted for as operating leases.  In order to exit the leases and purchase the aircraft, the Company agreed to pay a total of $67.1 million (net of all deposits) of which a portion was expensed immediately and recognized as a lease termination fee.  The expensed amount represents the total purchase price over fair value of the aircraft purchased as of the date of the transaction.

The Company believes that excluding such special items helps investors better analyze the Company’s operational performance and compare its results to other airlines in the periods presented below.

Three Months Ended December 31,

Twelve Months Ended December 31,

2018

2017 (a)

2018

2017 (a)

Total

Diluted
Per Share

Total

Diluted
Per Share

Total

Diluted
Per Share

Total

Diluted
Per Share

(in thousands, except per share data)

GAAP net income, as reported

$

31,636

$

0.64

$

148,448

$

2.84

$

233,200

$

4.62

$

330,610

$

6.19

Add: impact of tax reform

(82,978)

(1.59)

(82,978)

(1.55)

Add (deduct): changes in fair value of derivative contracts

22,464

0.46

(11,974)

(0.23)

19,973

0.39

(3,845)

(0.07)

Add: unrealized loss (gain) on foreign debt

2,711

0.05

380

0.01

Add: loss (gain) on sale of aircraft

(1,535)

(0.03)

309

0.01

Operating

Add: contract terminations expense

35,322

0.70

Add: special items

23,450

0.44

Nonoperating

Add: partial settlement and curtailment loss

(4,617)

(0.09)

10,384

0.19

Add: loss on plan termination

35,201

0.66

Deduct: tax effect of adjustments

(6,066)

(0.12)

6,079

0.12

(14,365)

(0.29)

(23,886)

(0.45)

Adjusted Net Income

$

49,210

$

1.00

$

54,958

$

1.05

$

274,819

$

5.44

$

288,936

$

5.41

(a)

Amounts adjusted for the adoption of Accounting Standards Codification (ASC) No. 606, Revenue from Contracts with Customers.

Three months ended

December 31,

Twelve months ended

December 31,

2018

2017 (a)

2018

2017 (a)

(in thousands)

Income Before Income Taxes

$

41,519

$

106,065

$

301,158

$

390,821

Add (deduct): changes in fair value of derivative contracts

22,464

(11,974)

19,973

(3,845)

Add: unrealized loss (gain) on foreign debt

2,711

380

Add: loss (gain) on sale of aircraft

(1,535)

309

Operating

Add: contract terminations expense

35,322

Add: special items

23,450

Nonoperating

Add: partial settlement and curtailment loss

(4,617)

10,384

Add: loss on plan termination

35,201

Adjusted Income Before Income Taxes

$

65,159

$

89,474

$

357,142

$

456,011

(a)

Amounts adjusted for the adoption of Accounting Standards Codification (ASC) No. 606, Revenue from Contracts with Customers.

Operating Costs per Available Seat Mile (CASM)

The Company has separately listed in the table below its fuel costs per ASM and non-GAAP unit costs, excluding fuel and special items.  These amounts are included in CASM, but for internal purposes the Company consistently uses cost metrics that exclude fuel and special items (if applicable) to measure and monitor its costs.

Three Months Ended

December 31,

Twelve Months Ended

December 31,

2018

2017 (a)

2018

2017 (a)

(in thousands, except CASM data)

GAAP operating expenses

$

628,116

$

586,438

$

2,523,043

$

2,211,107

Less: aircraft fuel, including taxes and delivery

(150,140)

(123,960)

(599,544)

(440,383)

Less: gain (loss) on sale of aircraft

1,535

(309)

Less: contract terminations expense

(35,322)

Less: special items

(23,450)

Adjusted operating expenses—excluding aircraft fuel, loss on sale of aircraft, contract terminations expense, and special items

$

479,511

$

462,478

$

1,887,868

$

1,747,274

Available Seat Miles

5,067,412

4,798,039

20,171,911

19,006,682

CASM—GAAP

12.40

¢

12.22

¢

12.51

¢

11.63

¢

Less: aircraft fuel, including taxes and delivery

(2.97)

(2.58)

(2.97)

(2.32)

Less: gain (loss) on sale of aircraft

0.03

(0.00)

Less: contract terminations expense

(0.18)

Less: special items

(0.12)

CASM—excluding aircraft fuel, loss on sale of aircraft, contract terminations expense, and special items

9.46

¢

9.64

¢

9.36

¢

9.19

¢

(a)

Amounts adjusted for the adoption of Accounting Standards Codification (ASC) No. 606, Revenue from Contracts with Customers.

Estimated three months ending

March 31, 2019

Estimated full year ending

December 31, 2019

(in thousands, except CASM data)

GAAP operating expenses

$

593,365

$

623,606

$

2,432,811

$

2,592,314

Less: aircraft fuel, including taxes and delivery

(121,412)

(130,453)

(516,399)

(560,068)

Adjusted operating expenses – excluding aircraft fuel

$

471,953

$

493,153

$

1,916,412

$

2,032,246

Available Seat Miles

4,802,471

4,873,444

20,474,490

21,079,647

CASM – GAAP

12.36

¢

12.80

¢

11.88

¢

12.30

¢

Less: aircraft fuel

(2.53)

(2.68)

(2.52)

(2.66)

CASM – excluding aircraft fuel

9.83

¢

10.12

¢

9.36

¢

9.64

¢

Pre-tax margin

The Company excludes unrealized (gains) losses from fuel derivative contracts and foreign debt, losses on the sale of aircraft and special items from pre-tax margin for the same reasons as described above.

Three months ended

December 31,

Twelve months ended

December 31,

2018

2017 (a)

2018

2017 (a)

Pre-Tax Margin, as reported

6.0

%

15.5

%

10.6

%

14.6

%

Add: changes in fair value of derivative contracts

3.2

(1.8)

0.7

(0.1)

Add: unrealized loss (gain) on foreign debt

0.4

 

Add: loss on sale of aircraft

(0.3)

0.0

Operating

Add: contract terminations expense

1.3

Add: special items

0.9

Nonoperating

Add: partial settlement and curtailment loss

(0.6)

0.4

Add: loss on plan termination

1.2

Adjusted Pre-Tax Margin

9.3

%

13.1

%

12.6

%

17.0

%

(a)

 Amounts adjusted for the adoption of Accounting Standards Codification (ASC) No. 606, Revenue from Contracts with Customers.

Leverage ratio

The Company uses adjusted total debt, including aircraft rent, in addition to long-term adjusted debt and capital leases, to represent long-term financial obligations. The Company excludes unrealized (gains) losses from fuel derivative contracts, losses on extinguishment of debt, and special items from earnings before interest, taxes, depreciation, amortization and rent (EBITDAR) for the reasons as described above.  Management believes this metric is helpful to investors in assessing the Company’s overall debt.

Twelve months ended

December 31, 2018

(in thousands, except
Leverage Ratio)

Debt and capital lease obligations

$

709,781

Plus: Aircraft leases capitalized at 7x last twelve months’ aircraft rent

881,727

Adjusted debt and capital lease obligations

$

1,591,508

EBITDAR:

Income Before Income Taxes

$

301,158

Add back:

Interest and amortization of debt expense

33,001

Depreciation and amortization

139,866

Aircraft rent

125,961

EBITDAR

$

599,986

Adjustments:

Add: changes in fair value of derivative contracts

19,973

Add: unrealized loss on foreign debt

380

Add: loss on sale of aircraft

309

Add: contract terminations expense

35,322

Adjusted EBITDAR

$

655,970

Leverage Ratio

2.4

x

SOURCE Hawaiian Holdings, Inc.