Reflecting economic fuel expense, the Company reported an adjusted net income of $30.0 million, or $0.59 per diluted share, compared to adjusted net income of $28.5 million, or $0.55 per diluted share, in the prior year period.
Mark Dunkerley, the Company's president and chief executive officer, commented that "the third quarter marked a return to some better results for our business. Strong demand in each of the major geographies we serve, continued cost control and some small but welcome easing of fuel prices all played a part. Particularly noteworthy has been the return of traffic on our services to Japan. Our results on these routes would qualify as good in any year, let alone the year in which an earthquake and tsunami took such a large human and economic toll."
"Our employees continue to do an outstanding job of taking care of our guests and cargo customers. Their efforts make all of our successes possible."
"Despite the drumbeat of depressing news about consumer confidence, we have not seen a waning in forward bookings. If these bookings continue to hold and if the price of oil does not rise in the remaining months of 2011, we expect the second half of the year to look considerably better than the first half."
Third Quarter Financial Results
The Company reported a 55.2% increase in operating income to $60.9 million in the third quarter of 2011, compared with operating income of $39.3 million in the prior year period.
Third quarter 2011 operating revenue was $455.9 million, a 29.5% increase compared with the third quarter of 2010. Capacity for the quarter increased 16.1% year-over-year to 3.2 billion available seat miles (ASMs), resulting in operating revenue per ASM (RASM) of 14.40 cents, up 11.7% from the third quarter a year ago. Passenger yield (passenger revenue per revenue passenger mile) increased 16.9% to 15.32 cents while load factor declined 1.7 percentage points to 85.2%, resulting in an increase in passenger revenue per ASM (PRASM) of 14.6% to 13.05 cents. Selected Statistical Data is included in Table 2.
Total operating expenses for the third quarter of 2011 increased 26.3% year-over-year to $394.9 million, resulting in an operating cost per available seat mile (CASM) of 12.47 cents, up 8.8% versus the same period a year ago. Third quarter CASM excluding fuel decreased to 8.18 cents, down 2.3% compared to the same period a year ago. A reconciliation of GAAP and non-GAAP financial measures is included in Tables 3, 4 and 6.
Aircraft fuel costs in the third quarter increased 61.1% year-over-year to $136.0 million and represented 34.4% of operating expenses. Hawaiian's average cost per gallon of jet fuel increased 40.9% year-over-year to $3.17 (including taxes and delivery). The financial impact of hedging activities is included in nonoperating income/expenses, and as such is not reflected in fuel expense. Nonoperating expense in the third quarter of 2011 reflects $9.7 million in net losses from Hawaiian's fuel hedging activity.
The Company believes that economic fuel expense is the best 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 (gains)/losses realized through actual cash (receipts)/payments received from or paid to hedge counterparties for fuel hedge derivative contracts settled during the period. For the three months ended September 30, 2011, economic fuel expense was $138.3 million ($3.22 per gallon), compared with $85.6 million ($2.28 per gallon) in the prior year period. An analysis of economic fuel expense for the three months ended September 30, 2011 and 2010 and pro-forma net income and diluted net income per share reflecting economic fuel expense is included in Tables 3 and 4.
Third quarter 2011 nonoperating expense totaled $13.6 million, compared with nonoperating income of $2.9 million in the third quarter of 2010. During the third quarter of 2011, the Company recognized a nonoperating loss totaling $9.7 million related to fuel hedging activities compared with a nonoperating gain of $2.1 million during the prior year period. During the third quarter of 2011, fuel hedging losses reflect $2.3 million of realized losses on derivative contracts settling in the quarter, the reversal of $1.0 million of previously recorded losses on these same contracts, and $8.4 million in unrealized losses related to fuel derivative contracts settling in future periods.
(Hawaiian Airlines - Press Release)
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