Industry-wide air capacity growth between the US mainland and Hawaii in recent months helped push Hawaiian Airlines to a $17.1 million net loss during the first quarter of 2013, the airline says in an earnings call today.
The loss contrasts with the $7.3 million net income Hawaiian reported for the same period last year.
"There has been tremendous increase in supply. We would characterise the current situation not being one of fundamental demand weakness, but instead being very much one of excess supply," Mark Dunkerley, Hawaiian's president and chief executive, says during the call.
"It's been an extremely tough quarter in a tough environment, but we are heartened to see conditions starting to improve," Dunkerley adds, noting that weakness of the Japanese yen has also impacted Hawaiian's bottom line.
The Honolulu-based carrier's operating loss during the quarter was $11.9 million, compared to operating income of $12.9 million during the same period last year.
Cost per available seat mile (CASM) decreased 5.7% year-over-year to 12.7 cents, and the airline has $438 million in unrestricted cash and cash equivalents on hand.
Hawaiian reports operating revenue of $491 million during the quarter, up 13% year-over-year, and operating expenses of $503 million, a 19% gain. Fuel expenses increased 24% to $174 million and maintenance costs climbed 26% to $55 million.
Dunkerley says 44% percent of Hawaiian's passenger revenue comes from flights between Hawaii and the mainland, and that air capacity on those routes increased by double digits recently as United Airlines, Alaska Airlines and Allegiant Air all added seats.
Allegiant, which entered the Hawaiian market last year, has since announced it will cease the majority of its Hawaii flying by switching them to seasonal routes.
Dunkerley says Hawaiian is drawing down capacity to the mainland by a few percentage points in the second and third quarter of this year.
Those cuts should allow Hawaiian's financial performance on North American routes to improve, and let the airline add seasonal capacity to international destinations, Dunkerley says.
He notes that the airline's strategy in recent years has been largely focused on international flying.
"[Our] strategy away from relying on the US west coast is sound," Dunkerley says. "As market conditions improve in second half of this year we look forward to our results improving."
The airline has added flights to four Japan destinations since it pushed into Asia in 2010, and plans to add service in June to Sendai.
Though Dunkerley says Hawaiian's sales presence has not fully matured in Japan, he adds: "We have lowest unit costs of any operators in the Japan market and our service is held in high regard by the Japanese traveller."
The airline also launched flights to Auckland, New Zealand in March and intends to begin service to Taipei, Taiwan in July and to Beijing in April 2014.
In addition, Hawaiian intends to add seasonal capacity in September and October to Auckland and the Australian cities of Sydney and Brisbane.
Hawaiian's chief financial officer Scott Topping says international flying generates 32% of Hawaiian's passenger revenue, up from 27% percent during the same period last year, and inter-island flying generates 24% of passenger revenue.
Of the international revenue, Japan and Australia generate 80% and Korea generates 10%, Topping says.