Hawaiian Holdings, the parent company of Hawaiian Airlines, says net adjusted income fell 16% to $81.5 million in the third quarter of 2019 compared to the same period a year ago as increased competition weighed on airline’s results.
Still, executives at the Honolulu-based carrier are optimistic the combination of its new “main cabin basic” fares, as well as international travel expansion, is a recipe for success. The company's leadership are banking on that strategy to entice more passengers to travel to the USA's 50th state.
“We are competing from a position of strength and have all the elements in place as the carrier of choice for guests traveling to, from and within the Hawaiian Islands,” says Hawaiian Airlines chief executive Peter Ingram on the company’s quarterly earnings call on 22 October. “These results are solid considering the capacity increases in the last two years.”
“In the face of heightened competition, we delivered strong financial results and made significant progress towards accomplishing the strategic priorities that we established at the beginning of the year,” he adds.
Passenger travel declined during the third quarter, causing operating revenue to fall slightly to $755 million, down from $759 million during the third quarter of 2018. Operating revenue per available seat mile (RASM) decreased by 3% year-on-year to 14.58cents from 15.31cents. Capacity also shrank 2.6% year-on-year during the quarter.
Cost per available seat mile (CASM) excluding fuel rose 4.9% to 9.38 cents from 8.94 cents. The company says that in the fourth quarter it expects CASM to rise between 0.5% and 3.5% compared to last year, and RASM to decline by that same range.
Some of the highlights of the third quarter included US Department of Transportation approval to operate one additional daily nonstop flight between Tokyo Haneda airport and Honolulu starting in March of 2020, as well as three new routes for its A321neo fleet: Four-times-weekly service between Maui and Las Vegas beginning 15 December; thrice-weekly nonstop service between Honolulu and Seattle starting 7 January; and seasonal winter service between Maui and Los Angeles from 14 December through 5 January, supplementing existing daily A330-200 service.
Cargo revenue declined 9% year-on-year in the second quarter as macroeconomic factors created uncertainty that also affected cargo operations, the airline says.
JAL JOINT VENTURE
Hawaiian experienced a setback when the Department of Transportation approved a joint venture with Japan Air Lines on 3 October, but denied antitrust immunity (ATI) for it.
US regulators said the proposed joint venture is not anti-competitive, but does not merit their request for antitrust immunity and issued a show cause order tentatively approving the agreement between both companies. Ingram says on Tuesday’s call that Hawaiian was disappointed in the ruling and that “we are now focused on preparing a response to the DOT and building our partnership with JAL.” That response is due on 12 November.
Expectation that the antitrust protection would be granted was a motivating factor to open a Honolulu-to-Fukuoka connection four times per week. Hawaiian announced the new route in May a day after Delta ceased operation on it. Ingram added that the lack of such antitrust protection will influence future decisions on international expansion. “What we can do with ATI in terms of growth is different from what we can do without ATI in terms of growth.”
Japan and Hawaiian have said their joint venture goals include expanding route networks, improving online services, optimizing flight schedules, increasing capacity and improving frequent flyer mile services. The agreement would impact flights between Hawaii and Japan, along with connecting flights from Hawaii via Japan to 10 other nations in Asia.
MAIN CABIN BASIC FARE
In late September, Hawaiian introduced its “main cabin basic” fare, which offers passengers no-frill tickets on three select routes within North America. Ingram told analysts on Tuesday that management is “encouraged by its performance to date” and the airline has in the meantime rolled the fare out across its North American network including in connecting markets.
Hawaiian expects to take delivery of three more A321neo aircraft in the next two quarters, its final deliveries of this aircraft type. Ingram said that all three aircraft are slated to come from Airbus’ Mobile, Alabama factory, and are thus not impacted by tariffs which went into effect last week.
Labor negotiations between the airline and its flight attendants over issues including wages and retirement security are ongoing. In July, Hawaiian flight attendants protested at Honolulu airport earlier this month, alleging their pay has fallen and not kept pace with the cost of living.