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Company Profile of Hawaiian Airlines -
May 7th, 2011
Hawaiian Airlines, Inc. is a major airline of the United States. It is the largest airline based in the State of Hawai'i, and is the 11th largest commercial airline in the country. Based in Honolulu CDP, City and County of Honolulu, the airline operates its main hub at Honolulu International Airport and also operates a secondary hub out of Kahului Airport on the island of Maui. Hawaiian Airlines is owned by Hawaiian Holdings, Inc. (NASDAQ: HA). Mark Dunkerley is the President and Chief Executive Officer of Hawaiian Holdings.
Hawaiian has never had a fatal accident in its entire history and is the oldest US carrier with such a distinction.Hawaiian Airlines was the number one on-time carrier in the United States from November 2003 until November 2006, when rival Aloha Airlines took the number one spot, pushing Hawaiian to a close second. The airline has also frequently been number one in fewest cancellations, baggage handling, and fewest oversales. Hawaiian Airlines has been rated the best carrier serving Hawaii by Travel + Leisure, Zagat, and Condé Nast Traveler.
Hawaiian Holdings, Inc. is a holding company whose primary asset is the sole ownership of all issued and outstanding shares of common stock of Hawaiian Airlines, Inc. (Hawaiian). Hawaiian is engaged in the scheduled air transportation of passengers and cargo amongst the Hawaiian Islands (the interisland routes), between the Hawaiian Islands and certain cities in the Western United States (the transpacific routes), and between the Hawaiian Islands and the South Pacific, Australia and Asia (the Pacific routes). Hawaiian also operates various charter flights. At December 31, 2010, Hawaiian's fleet consisted of fifteen Boeing 717-200 aircraft for its interisland routes and eighteen Boeing 767-300 and three Airbus A330-200 aircraft for its transpacific, Pacific and charter routes. Its flight operations are based in Honolulu, Hawaii. At December 31, 2010, it operated approximately 185 scheduled flights per day.
Hawaii offers daily service on the transpacific routes between Hawaii and Los Angeles, Oakland, Sacramento, San Diego, San Francisco and San Jose, California; Las Vegas, Nevada; Phoenix, Arizona; Portland, Oregon and Seattle, Washington; daily service on the Company’s interisland routes among the four major islands of the State of Hawaii; Scheduled service on the Pacific routes between Hawaii and Pago Pago, American Samoa; Papeete, Tahiti; Sydney, Australia; Manila, Philippines; Tokyo, Japan and Seoul, South Korea, and Other ad hoc charters.
The Company’s aircraft maintenance programs consist of a series of phased or continuous checks for each aircraft type. These checks are performed at specified intervals measured by calendar months, time flown or by the number of takeoffs and landings, or cycles operated. In addition, inspections, repairs and modifications of aircraft are performed in response to Federal Aviation Administration (FAA) directives. The service lives of certain airframe and engine parts and components are time or cycle controlled, and such parts and components are replaced or refurbished prior to the expiration of their time or cycle limits. It has contracts with third-parties to provide certain maintenance on its aircraft and aircraft engines.
The Company provides Internet check-in and self-service kiosks. Its Website offers its customers information on its flight schedules. The Company also publishes fares with Web-based travel services, such as Orbitz, Travelocity, Expedia, Hotwire and Priceline. The HawaiianMiles frequent flyer program allows passengers to earn mileage credits by flying with the Company and its partner carriers. In addition, members earn mileage credits for patronage with its other program partners, including credit card issuers, hotels, car rental firms and general merchants, pursuant to exchange partnership agreements. It also sells mileage credits to other companies participating in the program.
The Company has marketing alliances with other airlines that provide reciprocal frequent flyer mileage accrual and redemption privileges and code sharing on certain flights (one carrier placing its name and flight numbers, or code, on flights operated by the other carrier). As of December 31, 2010, it had marketing alliances with other airlines, which included American Airlines, American Eagle, Continental Airlines, Delta Air Lines, Island Air, Korean Air, United Airlines, US Airways, Virgin Atlantic Airways and Virgin Blue.
The Company competes with Alaska Airlines, American, Continental, Delta, United, US Airways, Qantas Airways, Philippine Airlines, Japan Airlines, All Nippon Airways and Korean Airlines.
A group of investors led by Jet America founder J. Thomas Talbot bought a 46.5 percent stake in HAL for $37 million in 1989. Talbot assumed the positions of CEO and chairman. Former baseball commissioner Peter Ueberroth was also an investor in the Talbot group.
Although there were some minor incidents, HAL had built an impressive safety record while transporting more than 100 million passengers. In 1990, Condé Nast Traveler pronounced the airline one of the world's safest after a 20-year survey. The magazine's readers also consistently ranked it one of their favorites in the U.S. The carrier was recognized by the trade magazine Onboard Services and the World Airline Entertainment Association for its superior in-flight cuisine and audio programs.
Challenges against the airline mounted in 1991. After 45 years, Aloha Airlines finally succeeded in capturing the dominant share (61 percent) of inter-island traffic. HAL also lost three South Pacific routes to Northwest Airlines in a deal which gave Northwest a minority share (25 percent) in exchange for $20 million. Peter Ueberroth's younger brother John, who had previously led the Carlson Travel Group, succeeded Talbot as HAL chairman. Losses for 1991 amounted to $99 million (including a one-time accounting charge of $36.7 million).
As if ferocious competition and high fuel costs were not enough to deflate the company's tentative comeback, Hurricane Iniki chased away an estimated $7 million of HAL's business in 1992. The next year, it opted for Chapter 11 bankruptcy protection and John Ueberroth stepped down as chairman.
In 1993, the company sold the DC-8s that it had used on South Pacific flights, resulting in more modest Polynesian coverage. The next year, it ceased flights to West Maui Airport, which could not service jets, as it sold its fleet of propeller-driven aircraft. (Jets could operate from Maui's Kahului Airport; eventually HAL would fly between Maui and the Mainland in direct competition with a United Airlines route.) Further competition landed in the fall of 1994 in the form of budget carrier Mahalo Air.
A New Lease on Life in the Mid-1990s
The company resumed its old name of Hawaiian Airlines as it emerged from bankruptcy protection in 1994, still able to fly but also susceptible to chronic cash shortages. AMR Corp., parent of American Airlines, began providing technical expertise to Hawaiian, which enrolled in American's frequent flyer program and replaced its L-1011s with DC-10s leased from AMR, which also assumed maintenance duties.
New York's Smith Management Co. provided $20 million of desperately needed cash in 1996. The Airline Investors Partnership it assembled bought two-thirds of the company, and Smith president John Adams assumed the role of chairman of the Hawaiian board. The group nevertheless displayed such confidence in Nobles that he retained the duties of CEO and president. The airline needed a $3 million loan from Smith to keep running until the deal could be approved. Later in the year, a Hawaiian stock offering raised $39 million.
Various players made concessions to keep Hawaiian in the sky. AMR Corp. extended the carrier credit and reduced its rates on Hawaiian's leased DC-10 jets by nearly 30 percent. Hawaiian's four unions approved less remunerative contracts.
Hawaiian was a very busy airline, operating over 150 flights per day, and its volume increased steadily into the late 1990s. Its new route to Las Vegas, the favorite holiday destination of Hawaii residents, proved highly popular. However, higher fuel costs for its longer flights gutted profits. The company lost $2.4 million in the first quarter of 1997 and $4.1 million for the previous year, thanks to a 20 percent increase in fuel prices.
Hawaiian Airlines served 14 destinations. Its 50 percent market share in inter-island flights (to the six major Hawaiian Islands) accounted for about 40 percent of revenues. Daily West Coast flights (to Los Angeles, San Francisco, Seattle, Las Vegas, and Portland) brought in another 50 percent, with about six percent coming from the company's air service to weekly flights to the South Pacific (American Samoa and Tahiti, where the company had a monopoly on air service to and from Honolulu). The company maintained limited cargo and mail operations. In the late-1990s, its fleet was comprised of about 13 DC-9s (all but two leased) for inter-island flights and 8 DC-10s (all leased) for long-range flights.
Flying into a New Century
In February 1997, Bruce Nobles stepped down as CEO to be replaced by travel executive Paul Casey. In spite of a slack tourist market in Hawaii (which prompted the state to suspend airport landing fees), a number of initiatives seemed likely to pay off for the airline. It began using the new AIRMAX computerized routing system, supplied by AMR subsidiary SABRE Decision Technologies, which promised more efficient scheduling of flights. The airline took part in the trials of a new satellite-based system designed to allow pilots greater control in selecting routes. And code-sharing agreements with American, Continental, Northwest, and Reno Air should ensure a steady flow of customers from the Mainland. These factors, and the backing of enthusiastic supporters, suggested a positive outlook for Hawaiian Airlines.
Market Cap (Mil.): $301.91
Shares Outstanding (Mil.): 50.40
Annual Dividend: --
Yield (%): --
HA.OQ Industry Sector
P/E (TTM): 2.81 19.96 16.87
EPS (TTM): 19.73 -- --
ROI: 16.80 2.35 3.27
ROE: 47.50 6.41 5.85
Incorporated: 1929 as Inter-Island Airways, Ltd.
Sales: $384.47 million (1996)
Stock Exchanges: American
SICs: 4512 Air Transportation, Scheduled
Name Age Since Current Position
Hershfield, Lawrence 54 2005 Independent Chairman of the Board
Dunkerley, Mark 47 2005 President, Chief Executive Officer, Director
Ingram, Peter 44 2005 Chief Financial Officer, Executive Vice President, Treasurer of the Holdings and Hawaiian
Zia, Hoyt 57 2007 Secretary; Senior Vice President, General Counsel and Corporate Secretary - Hawaiian
Taniguchi, Glenn 68 2006 Senior Vice President - Marketing and Sales of Hawaiian
Falvey, Barbara 52 2005 Senior Vice President - Human Resources of Hawaiian
Osborne, David 55 2006 Executive Vice President and Chief Information Officer of Hawaiian
Nardello, Charles 58 2007 Senior Vice President - Operations of Hawaiian
Poomaihealani, Samson 68 1990 Director
Anderson, Gregory 54 2004 Director
Carty, Donald 64 2008 Director
Kobayashi, Bert 71 2004 Director
Jenson, Randall 42 2005 Director
Budge, Todd 51 2006 Director
Rose, Crystal 53 2006 Director
Swelbar, William 52 2005 Director
Boyer, Brian 65 2010 Director
3375 Koapaka Street, Suite G-350
Honolulu, Hawaii 96819