Hawaiian Airlines anticipates continuing improvements in both its revenues and costs in 2014, following some network tweaks and increased cost controls.
The Honolulu-based carrier anticipates continuing strength in its domestic business, both to the mainland USA and intra-Hawaii, and a steady maturing of its new markets during the year, says Mark Dunkerley, president and chief executive of Hawaiian, during an earnings call on 22 April.
“2014 continues to look like a year of better results,” he says.
Hawaiian swung a $10 million operating profit on $524.9 million in operating revenue during the first quarter. Revenues were up 6.9% compared to the same period in 2013.
Hawaiian ended service to Taipei on 7 April and plans to end service to Fukuoka on 29 June. Dunkerley says that both routes were “underperforming”.
Taipei was especially notable as the airline entered the market with significant fanfare only nine months prior, following the entry of Taiwan into the US visa waiver programme in late 2012.
“The level of recognition of Hawaii as a tourism destination in Taiwan was less significant than in other Asian markets,” says Dunkerley. “We just didn’t feel that the costs to flying to Taiwan in the interim justified the route.”
Origin and destination (O&D) traffic to Hawaii from Taiwan increased by only 20% after the country joined the visa waiver programme, he says. This compares to a 100% increase after South Korea joined the programme.
Hawaiian’s international passenger revenue per available seat mile (PRASM) fell 7.1% in the first quarter, says the carrier’s chief commercial officer Peter Ingram. He attributes this to new and underperforming routes, and to the continuing weakness of the Australian dollar and Japanese yen.
The airline will upgauge some of its Seoul Incheon flights to larger Airbus A330-200 aircraft, add a fourth weekly flight to Brisbane, and re-enter the Los Angeles-Kahului and San Jose-Honolulu markets with the aircraft freed up by the discontinued routes.
Ingram says that they expect demand strength between Hawaii and the US mainland to be able to absorb the capacity increase.
Available seat miles (ASMs) at Hawaiian will increase 0.5% to 2.5% in the second quarter, and 1% to 4% in 2014, says the airline’s chief financial officer Scott Topping.
“By replacing long-haul flying with shorter flying to the west coast, we’ve only marginally reduced our good widebody fleet utilisation,” he says during the call.
Hawaiian is also benefitting from a decrease in industry capacity within Hawaii following the shut down of Mesa Airlines-subsidiary go! on 1 April. Ingram says that they expect capacity to decrease 2% in the second quarter and 3% in the third quarter.
The airline saw its PRASM increase 8.5% on intra-Hawaii flights in the first quarter.
Hawaiian anticipates a 3% to 6% increase in network PRASM in the second quarter, says Ingram. Unit revenues rose 4.4% to 11.6 cents during the first quarter.
Hawaiian expects costs per available seat mile (CASM) excluding fuel to grow at their fastest clip of the year in the second quarter, when they are expected to rise by 4% to 7% compared to 2013.
A shift in one-time items to the second quarter from the first is driving the increase. These one-off costs include the Ohana launch, installation of a new premium economy cabin, painting some of its Boeing 717s and the implementation of new pilot training, and duty and rest regulations, says Topping.
These items will total roughly $9 million during the quarter, he says.
CASM growth will flatten out after the second quarter with only a 2% to 5% increase for the full year, says Ingram.
This is 0.5 percentage points lower than the guidance of a 2.5% to 5.5% increase that Hawaiian released in March.
“It’s still move around a little bit,” says Ingram. “We’ve lowered the full year guidance by 0.5%, so we have trimmed that and that reflects out increased confidence on getting there.”
The guidance is slightly higher than the 1.5% increase in the US consumer price index – a measure of inflation – for the 12 months ending in March, according to the US Bureau of Labor Statistics.
CASM excluding fuel rose 2.8% to 8.51 cents at Hawaiian in the first quarter.