Hawaiian Airlines says it's making 'good money' on the Hawaii-Akl route. Photo / Supplied
Hawaiian Airlines says it's making 'good money' on the Hawaii-Akl route. Photo / Supplied
Falling fuel prices are causing a headwind for Hawaiian Airlines as lower oil costs impact on carriers differently.
Not only is the Honolulu-based airline hedged and not yet taking full advantage of low prices, it has been hit by lost revenue from fuel surcharges it had imposed on flights to Japan and Korea.
The airline's share price has only partially recovered from its sharpest fall in over a decade when it announced declining surcharge revenue and the impact of the high US dollar with its annual result last month.
Last year, Hawaiian was one of the best performing airline stocks, up 174 per cent and, speaking in Auckland this week, president and chief executive Mark Dunkerley said the impact of the oil announcement was exacerbated by heavy selling by programme traders.
"Most of the analysts who cover us have strong buys," Dunkerley said.
Japan and Korea had strict rules on surcharges and the impact of these, combined with the strong US dollar could hit airline revenue by between 3.5 per cent and 6.5 per cent this quarter, Hawaiian told a results briefing last month.
We're not enjoying the market benefit of lower fuel prices today but will enjoy it for longer when fuel does spike up.
Dunkerley said the airline had a rigid policy of hedging for 18 months to two years, "rain or shine".
The airline paid the long-term spot price for fuel over time.
"We do that to reduce the amplitude of the swings to protect ourselves against the fuel spikes. Over time we pay the market rate for fuel, the impact is just delayed," he said.
Mark Dunkerley, chief executive Hawaiian Airlines
"We're not enjoying the market benefit of lower fuel prices today but will enjoy it for longer when fuel does spike up."
The airline has been flying to New Zealand for two years, operating three Auckland-Honolulu flights a week, a frequency the airline hopes to increase.
Hawaiian took the decision to expand throughout the Pacific Rim five years ago and international routes now accounted for 27 per cent of passenger revenue, which per seat mile was up 11.4 per cent in 2014 on load factors that also improved.
Dunkerley said load factors on the Auckland route were up to 90 per cent or more in the high season, the school holidays.
Hawaiian is revamping its fleet. It is adding three new Airbus A330s this year, replacing two Boeing 767s, giving it one extra widebody plane for its Pacific Rim network and more flexibility to expand.
In 2019, it will start adding six A330-800neo aircraft to its fleet, the same size as the existing A330, which carries 294 passengers.
Dunkerley said this year would be a good one for airlines. Fuel would help but most were likely to book the benefits rather than dropping fares.
"This feels much like a time to rebuild balance sheet strength, to buttress the business. It doesn't feel like a new world order with fuel prices staying down."
