Mixed performance on routes, says Hawaiian Airlines

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Hawaiian Airlines attributes a decline in passenger unit revenue during the third quarter to the mixed results on routes throughout its networks.

"Our third quarter revenue results were mixed in every sense of the word," says Mark Dunkerley, president and chief executive of Hawaiian, during the airline's third quarter earnings call on 23 October.

Capacity at the Honolulu-based carrier increased by 28% and traffic rose by 25.2% in the third quarter, compared with a year earlier. Passenger revenue per available seat mile (PRASM) fell by 5.7% to 12.3 cents in the period.

Significant increases in industry capacity at some of the airline's North American and Asian markets led to depressed PRASM values, says Dunkerley. In addition, the decline in September's demand was "deeper" than what Hawaiian initially expected, he adds.

The Bay Area and southern California were the North American markets that were impacted by the capacity glut and this resulted in competitive pricing environment, says Dunkerley. Industry capacity rose by 25% and by 15% in these respective markets during the third quarter.

Alaska Airlines and Allegiant Airlines have increased their capacities on services between the West Coast and Hawaii this year.

Dunkerley says the demand environment remains "good" for the Bay Area and southern California through the fourth quarter but adds that the competitive pricing environment is expected to continue.

In Asia, Fukuoka and Seoul performed poorer than expected, says Dunkerley. An incremental increase in capacity to daily from five times weekly on the Honolulu-Fukuoka service by Delta Air Lines, shortly after Hawaiian launched its daily service in April, resulted in the traffic and revenue ramping up slower than expected, he says.

Revenue on the carrier's Seoul route were similarly impacted by competition with Asiana Airlines, says Dunkerley. However, he notes that demand on the route is increasing rapidly and that Hawaiian is benefitting from connections with its interline partner, Air China.

The Korean carrier launched its Honolulu service a few months after Hawaiian in 2011.

Dunkerley says that Hawaiian's performance on interisland routes were also mixed, though he notes that this was partially because of the competitive environment in North America.

"We like our position in the overall market and we are comfortable that this will continue to be a segment of the business that will contribute to our overall results," he says. Hawaiian will focus on fine tuning the capacity in individual markets based on the time of the year to improve performance.

Scott Topping, chief financial officer of Hawaiian, says that the airline expects a 5% to 8% decrease in passenger unit revenue during the fourth quarter.