Hawaiian Airlines has been aggressively expanding flights to Asia and will cut back on less-profitable routes in the U.S.; a surprising example that highlights shifting travel trends.
Hawaiian Airlines, the state’s largest carrier, lost $17.1 million in the first quarter amid an increase in competition on mainland-to-Hawaii routes.
President and CEO Mark Dunkerley, who Tuesday called the quarter “disappointing but unsurprising,” said the airline’s financial picture should improve in the third and fourth quarters as Hawaiian and other carriers cut back on flights.
“The first quarter is the weakest seasonally, the weakest period of the year, and the increase in capacity (number of airline seats flown to Hawaii from the mainland) over the winter period has proven to be excessive,” Dunkerley said. “That capacity is beginning to be taken out of the market by several airlines, and we anticipate a more normal environment for the second half of this year.”
Increased capacity without an equal increase in demand has meant airlines are flying to Hawaii with more empty seats or having to offer discounts to fill those seats.
Dunkerley said the increase in capacity will continue in the second quarter but decline in the third and fourth quarters, which should help improve Hawaiian’s financial performance.
Hawaiian will cut back its nonstop daily service to John F. Kennedy International Airport in New York that began in June and was hailed for being the airline’s first nonstop flight to the East Coast. The New York route will be reduced to five days a week from mid-September through mid-December but will be daily for the Thanksgiving and Christmas holiday periods.
The carrier also is reducing service between Honolulu and Las Vegas to 14 round trips a week, from 17, in May and June, and suspended its three-days-a-week service between San Jose, Calif., and Honolulu this month while maintaining daily San Jose-Kahului service.
Hawaiian, which has now lost money for two consecutive quarters, has been aggressively expanding internationally to avoid being too dependent on the West Coast-Hawaii routes. The airline plans to begin three-days-a-week service to Sendai, Japan, next month; to Taipei in July; and to Beijing in April. It also plans to add 31 seasonal flights in September and October to its service from Sydney and Brisbane, Australia, and Auckland, New Zealand.
Dunkerley said Hawaiian’s announcement earlier this month that it will stop four-days-a-week service to Manila on July 31 wasn’t a tough one.
“We have always maintained that every part of our business has to contribute to our overall financial picture, and when one route or one set of routes, or one region, is letting the overall results down, then it really isn’t a difficult decision to decide to cancel the route,” he said. “Of course, we’re always disappointed that we can no longer provide the service to many customers who have been very loyal to us, but even they understand that we can’t lose money on the route.”
On a positive note, though, Dunkerley said Hawaiian’s neighbor island segment improved by moves the company made to adjust flight times.
“We had a very poor performance from neighbor island operations in 2012, and we have since made some adjustments to improve the situation, and today our neighbor island business has significantly recovered from where it was for much of 2012,” he said.
Hawaiian missed estimates last quarter with a loss per share of 33 cents that was considerably larger than the 23 cents a share loss forecast by analysts. In the first quarter of 2012, Hawaiian had a profit of $7.3 million, or 14 cents a share.
Revenue rose 12.7 percent last quarter to $490.8 million from $435.5 million but was shy of analysts’ estimates of $494.2 million.
Hawaiian’s stock rose 22 cents, or 4 percent, to $5.76 during the regular trading session Tuesday but fell 11 cents, or 1.9 percent, to $5.65 in after-hours trading, following its release of the financial results.
(c)2013 The Honolulu Star-Advertiser. Distributed by MCT Information Services.
Photo credit: A Hawaiian Airlines Boeing 717 sits at Kahului Airport. Daniel Betts / Flickr