<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8836
HAWAIIAN AIRLINES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Hawaii 99-0042880
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3375 Koapaka Street, Suite G-350
Honolulu, Hawaii 96819
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (808) 835-3700
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
(X) Yes ( ) No
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
(X) Yes ( ) No
As of October 20, 1997, 40,624,586 shares of Common Stock were outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Hawaiian Airlines, Inc.
Condensed Balance Sheets (in thousands) (Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................................... $ 32,772 $ 37,237
Accounts receivable, net................................................................ 35,493 28,022
Inventories, net........................................................................ 9,347 7,050
Assets held for sale.................................................................... 1,344 1,344
Prepaid expenses........................................................................ 5,176 4,845
---------- ----------
Total current assets.................................................................. 84,132 78,498
---------- ----------
Property and equipment, less accumulated depreciation and
amortization of $15,251 and $10,161 in 1997 and 1996,
respectively............................................................................ 57,646 45,794
Assets held for sale...................................................................... 4,195 5,083
Other assets.............................................................................. 10,584 4,362
Reorganization value in excess of amounts
allocable to identifiable assets, net ("Excess Reorganization
Value")................................................................................. 58,629 62,552
---------- ----------
Total Assets.......................................................................... $ 215,186 $ 196,289
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt....................................................... $ 2,244 $ 2,247
Current portion of capital lease obligations............................................ 4,157 2,912
Accounts payable........................................................................ 26,763 26,799
Air traffic liability................................................................... 32,384 25,524
Accrued liabilities..................................................................... 16,418 12,623
---------- ----------
Total current liabilities............................................................. 81,966 70,105
---------- ----------
Long-Term Debt............................................................................ 4,200 6,353
Capital Lease Obligations................................................................. 11,632 7,387
Other Liabilities and Deferred Credits.................................................... 29,929 29,571
Shareholders' Equity:
Common and Special Preferred Stock...................................................... 405 393
Capital in excess of par value.......................................................... 98,332 95,827
Warrants................................................................................ 3,380 1,557
Notes receivable from Common Stock sales................................................ (1,714) (1,714)
Accumulated deficit..................................................................... (12,944) (13,190)
Shareholders' equity.................................................................. 87,459 82,873
---------- ----------
Total Liabilities and Shareholders' Equity............................................ $ 215,186 $ 196,289
---------- ----------
---------- ----------
</TABLE>
2
<PAGE>
Hawaiian Airlines, Inc.
Condensed Statements of Operations (in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ----------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
--------- --------- ---------- ----------
Operating Revenues:
Passenger........................................................ $ 88,799 $ 86,343 $ 254,316 $ 247,552
Charter.......................................................... 8,054 7,252 28,723 21,189
Cargo............................................................ 5,014 4,842 15,563 14,716
Other............................................................ 3,490 2,776 10,383 7,827
--------- --------- ---------- ----------
Total.......................................................... 105,357 101,213 308,985 291,284
--------- --------- ---------- ----------
Operating Expenses:
Wages and benefits............................................... 28,589 26,663 86,179 82,708
Aircraft fuel, including taxes and oil........................... 18,166 19,400 59,257 54,311
Maintenance materials and repairs................................ 19,912 18,216 58,099 49,148
Rentals and landing fees......................................... 8,125 8,882 25,856 25,960
Sales commissions................................................ 3,469 3,485 10,392 10,436
Depreciation and amortization.................................... 2,584 2,054 7,848 6,169
Other............................................................ 19,259 17,921 58,606 54,460
--------- --------- ---------- ----------
Total.......................................................... 100,104 96,621 306,237 283,192
--------- --------- ---------- ----------
Operating Income................................................... 5,253 4,592 2,748 8,092
--------- --------- ---------- ----------
Nonoperating Expense:
Interest expense, net............................................ (61) (543) (240) (2,462)
Loss on disposition of equipment................................. (53) (111) (53) (439)
Other, net....................................................... (231) (80) (816) (102)
--------- --------- ---------- ----------
Total.......................................................... (345) (734) (1,109) (3,003)
--------- --------- ---------- ----------
Income Before Income Taxes and Extraordinary Gain.................. 4,908 3,858 1,639 5,089
Income Tax Provision............................................... (3,469) (2,489) (1,394) (3,104)
--------- --------- ---------- ----------
Net Income Before Extraordinary Gain............................... 1,439 1,369 245 1,985
Extraordinary Gain, Net of Income Taxes............................ -- -- -- 340
--------- --------- ---------- ----------
Net Income......................................................... $ 1,439 $ 1,369 $ 245 $ 2,325
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Net Income Per Common Stock Share:
Before extraordinary gain........................................ $ 0.03 $ 0.04 $ 0.01 $ 0.07
Extraordinary gain, net of income taxes.......................... -- -- -- 0.01
--------- --------- ---------- ----------
Net Income Per Common Stock Share.................................. $ 0.03 $ 0.04 $ 0.01 $ 0.08
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Weighted Average Number of Common Stock
Shares Outstanding............................................... 41,436 30,337 41,436 27,464
--------- --------- ---------- ----------
--------- --------- ---------- ----------
</TABLE>
3
<PAGE>
HAWAIIAN AIRLINES, INC.
CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1997 1996
--------- ---------
Cash Flows From Operating Activities:
Net income............................................ $ 245 $ 2,325
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 7,848 6,169
Net periodic postretirement benefit cost........... 963 1,701
Stock option compensation.......................... -- 964
Loss on disposition of equipment................... 53 439
Extraordinary gain, net of income taxes currently
payable......................................... -- (666)
Income tax benefit recognized as a reduction to
Excess Reorganization Value..................... 1,289 3,289
Increase in accounts receivable.................... (7,471) (5,174)
Decrease (increase) in inventories................. (2,297) 238
Decrease (increase) in prepaid expenses............ (331) 1,947
Increase (decrease) in accounts payable............ (36) 1,679
Increase air traffic liability..................... 6,860 4,318
Increase (decrease) in accrued liabilities......... 3,795 (4,845)
Other, net......................................... (875) 5,650
--------- ---------
Net cash provided by operating activities....... 10,043 18,034
--------- ---------
Cash Flows From Investing Activities:
Purchase of property and equipment................. (11,499) (6,019)
Net proceeds from disposition of equipment......... 985 1,800
--------- ---------
Net cash used in investing activities........... (10,514) (4,219)
--------- ---------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock............. 2,013 51,862
Repurchase of common stock......................... -- (909)
Issuance of long-term debt......................... 651 7,393
Repayment of long-term debt........................ (2,807) (9,156)
Repayment of capital lease obligations............. (3,851) (2,001)
--------- ---------
Net cash provided by (used in) financing
activities................................... (3,994) 47,189
--------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. (4,465) 61,004
Cash and cash equivalents--Beginning of Period........ 37,237 5,389
--------- ---------
Cash and cash equivalents--End of Period.............. $32,772 $66,393
--------- ---------
--------- ---------
4
<PAGE>
HAWAIIAN AIRLINES, INC.
STATISTICAL DATA (IN THOUSANDS, EXCEPT AS OTHERWISE INDICATED) (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- --------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
SCHEDULED OPERATIONS:
Revenue passengers flown............................. 1,307 1,267 3,791 3,785
Revenue passenger miles ("RPM")...................... 950,239 856,422 2,689,046 2,514,581
Available seat miles ("ASM")......................... 1,206,390 1,176,425 3,556,389 3,421,991
Passenger load factor................................ 78.8% 72.8% 75.6% 73.5%
Revenue ton miles.................................... 110,821 99,549 317,757 294,311
Revenue plane miles.................................. 4,826 4,789 14,261 14,289
Passenger revenue per passenger mile ("Yield")....... 9.3 CENTS 10.1 CENTS 9.5 CENTS 9.8 CENTS
OVERSEAS CHARTER OPERATIONS:
Revenue passengers flown............................. 54 48 195 141
RPM.................................................. 147,042 130,086 523,578 385,558
ASM.................................................. 154,474 133,399 570,594 396,160
</TABLE>
<PAGE>
Hawaiian Airlines, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of management, the unaudited condensed financial statements
included in this report contain all adjustments necessary for a fair
presentation of the results of operations and cash flows for the interim
periods covered and the financial condition of Hawaiian Airlines, Inc.
("Hawaiian Airlines" or the "Company") as of September 30, 1997 and
December 31, 1996. The operating results for the interim period are not
necessarily indicative of the results to be expected for the full fiscal
year.
The accompanying financial statements should be read in conjunction with
the financial statements and the notes thereto contained in Hawaiian
Airlines' Annual Report on Form 10-K for the year ended December 31, 1996,
which are incorporated herein by reference.
Certain reclassifications have been made to conform the prior year's data
to the current year's presentation.
2. AIRCRAFT FUEL HEDGE CONTRACTS
The Company utilizes various types of derivative and commodity contracts
to manage its aircraft fuel costs. These contracts qualify for hedge
accounting treatment as they reduce risk, identify firm commitments for
set time periods and meet correlation criteria for effectiveness. The
Company accounts for its various types of derivative and commodity
contracts on a deferral basis. Initial and subsequent margin deposit
requirements are reflected in prepaid expenses. Realized and unrealized
gains and losses and fees and commissions are deferred and included in the
measurement of the subsequent transaction.
3. INCOME TAXES
The Company's reorganization and the associated implementation of fresh
start reporting in September 1994 gave rise to significant items of
expense for financial reporting purposes that are not deductible for
income tax purposes. In large measure, it is these nondeductible expenses
that result in an effective tax rate (for financial reporting purposes)
significantly greater than the current United States corporate statutory
rate of 35.0%. For the three and nine month periods ended September 30,
1997, estimated interperiod tax provisions of $3.5 million and $1.4
million, respectively, have been reflected in the accompanying condensed
statements of operations. As the Company presently expects that its full
year 1997 results will require a provision for income taxes, the estimated
tax provisions recorded for the three and nine month periods
ended September 30, 1997, respectively, reflect management's estimate of
the annual effective tax rate.
4. WARRANTS
In January 1996, AMR Corporation ("AMR"), the parent company of American
Airlines, Inc. ("American"), participated in certain recapitalization
efforts of the Company. As a part of its participation, AMR received,
among other things, warrants which, subject to certain conditions,
entitled AMR to purchase up to 1,897,946 shares of the Company's Common
Stock (adjusted to 1,949,338 shares pursuant to applicable anti-dilution
provisions). One-half of the warrants were to become exercisable only if
American and the Company entered into a code sharing arrangement which
would allow American to place its two letter flight designator code ("AA")
on selected Interisland flights of the Company. On July, 15, 1997, the
Company consummated the code share marketing agreement with American. The
code share agreement will be implemented in first quarter 1998. As a
result, all of the warrants will become exercisable upon implementation of
the code share marketing agreement,
6
<PAGE>
and AMR may purchase an additional 974,669 of the Company's Common Stock
Shares at $1.07 per share. If not exercised, the warrants expire on
September 11, 2001. The estimated fair value of the warrants approximated
$2.3 million and has been reflected in the Company's condensed balance
sheet as of September 30, 1997 as warrants and other assets. The amount
included in other assets will be amortized on a straight-line basis over
five years upon effective implementation of the code share agreement in
first quarter 1998.
5. NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share." SFAS No. 128 is effective for both interim and
annual periods ending after December 15, 1997. SFAS No. 128 requires the
presentation of "Basic" earnings per share, representing income available
to common shareholders divided by the weighted average number of Common
Stock shares outstanding for the period, and "Diluted" earnings per share,
which is similar to the current presentation of fully diluted earnings per
share. SFAS No. 128 requires restatement of all prior period earnings per
share data presented. Management does not expect adoption of SFAS No. 128
to have a material impact on the Company's previously reported earnings
per share.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure," which lists required disclosures about capital
structure that had been included in a number of previously existing
statements and opinions. SFAS No. 129 is effective for periods ending
after December 15, 1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for the reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. SFAS requires reclassification of financial
statements for earlier periods provided for comparative purposes. SFAS No.
130 is effective for fiscal years beginning after December 15, 1997.
In June 1997, the FASB also issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which establishes
standards for the way that public business enterprises report information
about operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. SFAS No. 131 requires
restatement of comparative information presented for earlier periods. SFAS
No. 131 is effective for periods beginning after December 31, 1997.
Management does not expect adoption of SFAS No. 129, 130 or 131 to have a
material impact on the Company's financial condition or results of
operations.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements contained in this report that are not related to
historical results, including, without limitation, statements regarding the
Company's business strategy and objectives, future financial position and
estimated cost savings, are forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act and involve risks and uncertainties. Although the Company believes that
the assumptions on which any forward-looking statements are based are
reasonable, there can be no assurance that such assumptions will prove to be
accurate and actual results could differ materially from those discussed in
the forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed under Part I,
Item I, Business of the Company's Form 10-K Annual Report for the year ended
December 31, 1996 and heretofore, as well as those discussed elsewhere in this
Form 10-Q. All forward-looking statements contained in this Form 10-Q are
qualified in their entirety by this cautionary statement.
RESULTS OF OPERATIONS
During third quarter 1997, the Company generated operating income of
$5.3 million versus $4.6 million in third quarter 1996. Net income for third
quarter 1997 and 1996 was $1.4 million. For the nine months ended
September 30, 1997, the Company generated operating and net income of
$2.7 million and $245,000, respectively. This compares to $8.1 million and
$2.3 million of operating and net income for the nine months ended
September 30, 1996.
8
<PAGE>
Three Month Period Ended September 30, 1997
The following table compares operating passenger revenues and statistics, in
thousands, except as otherwise indicated, for the three month periods ended
September 30, 1997 and 1996:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
---------------------- INCREASE
1997 1996 (DECREASE) %
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Interisland:
Passenger revenues..................................................... $ 33,897 $ 33,963 $ (66) (0.2)
Revenue passengers flown............................................... 968 973 (5) (0.5)
RPM.................................................................... 129,150 129,730 (580) (0.4)
ASM.................................................................... 220,029 234,895 (14,866) (6.3)
Passenger load factor.................................................. 58.7% 55.2% 3.5 6.3
Yield.................................................................. 26.2CENTS 26.2CENTS 0.0CENTS 0.0
Transpacific (Transpac):
Passenger revenues..................................................... $ 48,989 $ 46,136 $ 2,853 6.2
Revenue passengers flown............................................... 320 274 46 16.8
RPM.................................................................... 770,504 673,594 96,910 14.4
ASM.................................................................... 907,531 864,551 42,980 5.0
Passenger load factor.................................................. 84.9% 77.9% 7.0 9.0
Yield.................................................................. 6.4CENTS 6.8CENTS (0.4)CENTS (5.9)
SouthPacific (Southpac):
Passenger revenues..................................................... $ 5,913 $ 6,244 $ (331) (5.3)
Revenue passengers flown............................................... 19 20 (1) (5.0)
RPM.................................................................... 50,585 53,098 (2,513) (4.7)
ASM.................................................................... 78,830 76,979 1,851 2.4
Passenger load factor.................................................. 64.2% 69.0% (4.8) (7.0)
Yield.................................................................. 11.7CENTS 11.8CENTS (0.1)CENTS (0.8)
Overseas Charter:
Charter revenues....................................................... $ 8,054 $ 7,252 $ 802 11.1
Revenue passengers flown............................................... 54 48 6 12.5
RPM.................................................................... 147,042 130,086 16,956 13.0
ASM.................................................................... 154,474 133,399 21,075 15.8
</TABLE>
Significant quarter to quarter variances were as follows:
Third quarter 1997 passenger revenues totaled $88.8 million, an increase
of $2.5 million or 2.8% over 1996 third quarter passenger revenues of $86.3
million. The majority of the increase was due to, quarter over quarter,
approximately $2.9 million more in third quarter 1997 Transpac passenger
revenues. More aggressive pricing actions by the Company to stimulate travel
demand and be competitive were used to stimulate Transpac markets. These pricing
strategies, combined with cooperative advertising and promotions, were targeted
at Transpac markets in which the Company had increased its level of service and
those in which the Company maintained code share alliances.
9
<PAGE>
Overseas charter revenues totaled $8.1 million for the three month period
ended September 30, 1997, an increase of $802,000 or 11.1% over the same period
in 1996. The increase was principally due to the Company operating effective
February 1997 to April 1997 and from May 1997, on average, two and one charter
rotations per week, respectively, to Anchorage, Alaska. The Anchorage charters
were not operated in 1996.
The following table compares operating expenses per ASM by major category
for the three month periods ended September 30, 1997 and 1996:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------- INCREASE
1997 1996 (DECREASE) %
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Wages and benefits............................................................. 2.10CENTS 2.04CENTS 0.06CENTS 2.9
Aircraft fuel, including taxes and oil......................................... 1.33 1.48 (0.15) (10.1)
Maintenance materials and repairs.............................................. 1.46 1.39 0.07 5.0
Rentals and landing fees....................................................... 0.60 0.68 (0.08) (11.8)
Sales commissions.............................................................. 0.25 0.27 (0.02) (7.4)
Depreciation and amortization.................................................. 0.19 0.16 0.03 18.8
Other.......................................................................... 1.42 1.37 0.05 3.6
----- ----- ----- ---------
Total........................................................................ 7.35CENTS 7.39CENTS (0.04)CENTS (0.5)
------ ----- ----- ---------
------ ----- ----- ---------
</TABLE>
All fluctuations in operating expenses were affected by an overall
increase in ASM of approximately 3.9% for the three month period ended
September 30, 1997. Significant quarter to quarter variances were as follows:
Wages and benefits per ASM increased by 0.06 cents or 2.9% quarter over
quarter. For the three months ended September 30, 1997, the Company incurred
approximately $1.9 million or 7.2% in additional wages and benefits due to
additional employees associated with increased flying over its long-haul
routes.
Aircraft fuel cost, including taxes and oil ("Aircraft Fuel") per ASM
decreased in third quarter 1997 versus third quarter 1996 by 0.15 cents or
10.1%. As in previous 1997 quarters, the average cost of Aircraft Fuel
continued to stabilize and decline. For the three months ended September 30,
1997, average cost of Aircraft Fuel per gallon approximated 62.0 cents
compared to 70.1 cents for the same period in 1996. Decreased average per
gallon costs were offset by the Company utilizing approximately 4.9 million
more gallons of fuel in third quarter 1997 due to its increased long-haul
flying. On net, the Company incurred approximately $1.2 million or 6.4% less
in Aircraft Fuel quarter over quarter.
Maintenance materials and repairs per ASM increased by 0.07 cents or
5.0%. For the three months ended September 30, 1997, the Company experienced
$1.7 million or 9.3% more in maintenance materials and repair costs than for
the three months ended September 30, 1996. A majority of this increase for
the three months ended September 30, 1997 was attributable to (1)
approximately $1.3 million more in DC-10 maintenance expense as the Company
utilized ten DC-10 aircraft during 1997 versus nine in 1996 and (2) $700,000
in additional DC-9 maintenance, primarily for airframe repairs and overhauls.
Rentals and landing fees per ASM decreased by 0.08 cents or 11.8%. The
Company experienced $757,000 or 8.5% less in rentals and landing fees quarter
over quarter, primarily due to $422,000 in decreased landing fees. As
discussed below, commencing September 1, 1997, a two-year moratorium was
placed on landing fees at the Honolulu International Airport.
10
<PAGE>
Nine Month Period Ended September 30, 1997
The following table compares operating passenger revenues and statistics, in
thousands, except as otherwise indicated, for the nine month periods ended
September 30, 1997 and 1996:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------
SEPTEMBER 30,
---------------------------- INCREASE
1997 1996 (DECREASE) %
---------- ---------- ----------- ------
<S> <C> <C> <C> <C>
Interisland:
Passenger revenues.................................................. $ 100,132 $ 101,655 $ (1,523) (1.5)
Revenue passengers flown............................................ 2,837 2,920 (83) (2.8)
RPM................................................................. 377,913 387,508 (9,595) (2.5)
ASM................................................................. 653,944 697,105 (43,161) (6.2)
Passenger load factor............................................... 57.8% 55.6% 2.2 4.0
Yield............................................................... 26.5 CENTS 26.2 CENTS 0.3 CENTS 1.1
Transpac:
Passenger revenues.................................................. $ 139,428 $ 130,976 $ 8,452 6.5
Revenue passengers flown............................................ 908 817 91 11.1
RPM................................................................. 2,187,590 1,999,182 188,408 9.4
ASM................................................................. 2,699,398 2,513,029 186,369 7.4
Passenger load factor............................................... 81.0% 79.6% 1.4 1.8
Yield............................................................... 6.4 CENTS 6.6 CENTS (0.2)CENTS (3.0)
Southpac:
Passenger revenues.................................................. $ 14,756 $ 14,921 $ (165) (1.1)
Revenue passengers flown............................................ 46 48 (2) (4.2)
RPM................................................................. 123,543 127,891 (4,348) (3.4)
ASM................................................................. 203,047 211,857 (8,810) (4.2)
Passenger load factor............................................... 60.8% 60.4% 0.4 0.7
Yield............................................................... 11.9 CENTS 11.7 CENTS 0.2 CENTS 1.7
Overseas Charter:
Charter revenues.................................................... $ 28,723 $ 21,189 $ 7,534 35.6
Revenue passengers flown............................................ 195 141 54 38.3
RPM................................................................. 523,578 385,558 138,020 35.8
ASM................................................................. 570,594 396,160 174,434 44.0
</TABLE>
Significant period to period variances were as follows:
Passenger revenues totaled $254.3 million for the nine month period ended
September 30, 1997, an increase of $6.8 million or 2.7% over the same period
in 1996. The increase was primarily due to $8.5 million more in Transpac
passenger revenues being offset by a decrease in Interisland passenger revenues
of $1.5 million.
As previously discussed, the Company initiated various sales and marketing
strategies which resulted in increased Transpac passenger revenues for the
nine month period ended September 30, 1997. Interisland passenger revenues
were primarily impacted by softness in the visitor market throughout the State
of Hawaii in the first six months of 1997. Information from the Hawaii Visitors
and Convention Bureau showed a decline of 0.6% in the
11
<PAGE>
total number of visitors to Hawaii for the first six months of 1997, as compared
to the same periods in 1996. The total number of visitors to Hawaii in third
quarter 1997 remained relatively flat.
Overseas charter revenues totaled $28.7 million for the nine month period
ended September 30, 1997. This represents a $7.5 million increase above overseas
charter revenues for the nine month period ended September 30, 1996. The
increase is primarily attributable to increased charter activity in the first
half of 1997 versus the first half of 1996. During the first six months of 1997,
the Company operated eight charters per week to Las Vegas, Nevada and effective
February 1997 to April 1997 and from May 1997, on average, two and one charter
rotations per week, respectively, to Anchorage, Alaska. During the first six
months of 1996 the Company operated six charter rotations per week solely to
Las Vegas.
The following table compares operating expenses per ASM by major category
for the nine month periods ended September 30, 1997 and 1996:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------
1997 1996 (DECREASE) %
---------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
Wages and benefits............................ 2.09 CENTS 2.17 CENTS (0.08) CENTS (3.7)
Aircraft fuel, including taxes and oil........ 1.44 1.42 0.02 1.4
Maintenance materials and repairs............. 1.41 1.29 0.12 9.3
Rentals and landing fees...................... 0.63 0.68 (0.05) (7.4)
Sales commissions............................. 0.25 0.27 (0.02) (7.4)
Depreciation and amortization................. 0.19 0.16 0.03 18.8
Other......................................... 1.42 1.43 (0.01) (0.7)
---- ---- ----- ----
Total..................................... 7.43 CENTS 7.42 CENTS 0.01 CENTS 0.1
---- ---- ----- ----
---- ---- ----- ----
</TABLE>
All fluctuations in operating expenses were affected by an overall increase
in ASM of approximately 8.1% for the nine month period ended September 30, 1997.
Significant period to period variances were as follows:
Wages and benefits per ASM decreased by 0.08 cents or 3.7%. The dilutive
effect of increased ASM was offset by increased wages and benefits of $3.5
million or 4.2% for the nine months ended September 30, 1997. As mentioned
above, the Company incurred additional wages and benefits primarily due to
additional headcounts associated with increased long-haul flying.
Maintenance materials and repairs per ASM increased by 0.12 cents or 9.3%
in the nine month period ended September 30, 1997 over the nine month period
ended September 30, 1996. For the nine months ended September 30, 1997, the
Company experienced $9.0 million or 18.2% in additional maintenance primarily
due to (1) $5.4 million more in DC-10 maintenance expense as the Company
utilized ten DC-10 aircraft during 1997 versus on average, eight to nine in
1996 and (2) $3.6 million more in DC-9 airframe and engine repairs.
Rentals and landing fees per ASM were primarily affected by decreased
landing fees as a result of a two-year moratorium placed on landing fees at
the Honolulu International Airport commencing September 1, 1997. The Company
had averaged approximately $500,000 per month in landing fees at the Honolulu
International Airport prior to the moratorium.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that it has various options available to meet its
capital, debt and operating commitments, including cash on hand at September
30, 1997 of $32.8 million, internally generated funds and a credit facility
with total availability of $12.5 million as of September 30, 1997, with
aggregate term loans and letters of credit outstanding in the amounts of $5.2
million and $100,000, respectively. The Company will continue to consider
various borrowing or leasing options to supplement its cash requirements.
As of September 30, 1997, the Company had working capital of $2.2
million, representing a $6.2 million decrease from $8.4 million of working
capital at December 31, 1996. Cash and cash equivalents for the nine month
period ended September 30, 1997 decreased by $4.5 million. Operating
activities for the nine month period ended September 30, 1997 provided $10.0
million in cash and cash equivalents. Through the nine month period ended
September 30, 1997, the Company expended $11.5 million of its $19.2 million
in planned capital expenditures for 1997, approximately $3.5 million of which
has been recorded in other assets. Capitalized portions of scheduled DC-9
checks and overhauls, consolidation of the Company's overseas passenger and
baggage processing operations into the Honolulu Interisland Terminal and
continued investments in improved software, related hardware and
implementation costs represent a majority of these capital expenditures.
Effective March 1, 1997, the Company entered into petroleum derivative
and commodity hedging contracts to provide some short-term protection against
the possible future increase in aircraft fuel costs. The Company employs a
strategy whereby petroleum derivative and commodity hedging contracts are
used to cover approximately 35% to 45% of the Company's anticipated aircraft
fuel needs for the next eight to twelve months. At September 30, 1997, the
Company had petroleum hedging contracts outstanding with an aggregate
notional value of $6.9 million.
During third quarter 1997, various events occurred which could affect the
Company in the future. Management cannot currently estimate the impact, if
any, of these events on its results of operations, liquidity or capital
resources:
1) As mentioned in Note 4 to Condensed Financial Statements, effective July
15, 1997, the Company consummated a code share agreement with American
which will be implemented in first quarter 1998. Further, in July 1997,
the Company entered into a marketing alliance with Continental Airlines,
Inc. and Continental Micronesia, Inc. that will make the Company the
primary Interisland carrier for the two international airlines;
2) On July 25, 1997, a competitor in the Interisland market, Mahalo Air,
Inc. ("Mahalo") filed a voluntary petition for relief under Chapter 11,
Title 11 of the United States Code. On September 2, 1997, Mahalo
suspended its flight operations. On October 20, 1997, a continuance was
allowed in order to ascertain the effect of a liquidation on the possible
sale of Mahalo's operating license for recovery of monies for creditors. On
November 10, 1997, the Bankruptcy Court ruled that should Mahalo not
accumulate sufficient funds within 14 days, no financial reorganization
would occur under Chapter 11 and all of Mahalo's remaining assets will
be sold to pay creditors;
3) In an attempt to boost tourism, effective September 1, 1997, a two-year
moratorium was placed on aircraft landing fees at the Honolulu
International Airport by the Governor of the State of Hawaii. The
Governor has reserved the right, however to reinstate the landing fee
charges before the two-year period ends. Based on
13
<PAGE>
current flight schedules, the Company anticipates that it could save up to
$6.0 million per year as a result of the moratorium;
4) Effective October 1, 1997, a new law was enacted to replace the Federal
passenger excise tax which expired September 30, 1997. The new
legislation includes a gradual reduction in the 10% airline ticket tax to
7.5% by the year 2002, a phasing in of a $3 "head tax" per domestic
flight segment, an increase in round-trip international departure and
arrival taxes from $6 to $24 per passenger and a tax on the purchase of
frequent flier miles. The Company has and will adjust its fares
accordingly due to these enacted tax changes based upon prevailing market
conditions. Although not quantifiable, management believes a significant
portion of the activity in air traffic liability, cash and cash
equivalents and accounts receivable to be attributable to increased sales
activity made in advance of the effective date of the aforementioned
excise taxes.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No material developments in matters previously reported or reportable
events arising in the three or nine months ended September 30, 1997
were noted.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Material Contracts to be listed under Item 6(a).
None.
Exhibit 11 Statements regarding computation of per share earnings.
Exhibit 27 Financial Data Schedule.
Reports on Form 8-K
None.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HAWAIIAN AIRLINES, INC.
November 14, 1997 By /s/ John L. Garibaldi
---------------------
John L. Garibaldi
Executive Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
16
<PAGE>
Exhibit 11
Hawaiian Airlines, Inc.
Statements Regarding Computation of Per Share Earnings
for the Three and Nine Month Periods Ended September 30, 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
------------------ ------------------
<S> <C> <C>
Weighted average Common Stock shares outstanding..................................... 40,238* 40,238*
Incremental Common Stock shares issuable upon exercise
of outstanding warrants and stock options
(treasury stock method).............................................................. 1,198 1,198
------------------ ------------------
Weighted average Common Stock shares and
Common Stock share equivalents....................................................... 41,436 41,436
------------------ ------------------
------------------ ------------------
Net income for per share computations................................................ $ 1,439 $ 245
------------------ ------------------
------------------ ------------------
Net income per Common Stock share.................................................... $ 0.03 $ 0.01
------------------ ------------------
------------------ ------------------
</TABLE>
* Includes shares reserved for issuance under the consolidated Plan of
Reorganization dated September 21, 1993, as amended.
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 32,772
<SECURITIES> 0
<RECEIVABLES> 35,993
<ALLOWANCES> 500
<INVENTORY> 9,347
<CURRENT-ASSETS> 84,132
<PP&E> 72,897
<DEPRECIATION> 15,251
<TOTAL-ASSETS> 215,186
<CURRENT-LIABILITIES> 81,966
<BONDS> 15,832
0
0
<COMMON> 405
<OTHER-SE> 87,504
<TOTAL-LIABILITY-AND-EQUITY> 215,186
<SALES> 308,985
<TOTAL-REVENUES> 308,985
<CGS> 306,237
<TOTAL-COSTS> 306,237
<OTHER-EXPENSES> 816
<LOSS-PROVISION> 53
<INTEREST-EXPENSE> 240
<INCOME-PRETAX> 1,639
<INCOME-TAX> 1,394
<INCOME-CONTINUING> 245
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 245
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
