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Hawaiian Airlines CEO Bets on the Yen

Stocks in this article: AMR DAL HA UAL

HONOLULU ( TheStreet) -- In November, Hawaiian (HA) began service between Honolulu and Tokyo's Haneda Airport, using a Boeing (BA) 767 seating 260 passengers. Eight months later, it upgraded to a bigger, newer airplane, an Airbus A330 with 294 seats.

While replacing an aircraft with a bigger aircraft generally denotes strong demand, Hawaiian's capacity increase has a second dimension: The vast majority of passengers between Tokyo and Honolulu are Japanese tourists who buy tickets with yen, while Hawaiian pays most bills in dollars. Hence, currency exchange is benefitting the carrier, not just on routes to Japan, but also to Australia and Korea, whose currencies are also strong.

Mark Dunkerley, CEO of Hawaiian Airlines

"The strong yen is spurring traffic to the U.S.," said Hawaiian CEO Mark Dunkerley, in an interview with TheStreet. "It's hard to quantify exactly, but you only have to visit Japan and buy things with dollars to appreciate how expensive it is, or to see how Japanese customers in Hawaii, to understand how affordable it is."

He said Asia flights account for about 10% to 12% of revenue -- and that's growing. Hawaiian began Honolulu-Osaka service in July. It is scheduled to take delivery of a new A330 in October and four more early in 2012, bringing the total to nine. Dunkerley indicated some of the new aircraft will fly to Asia, although he declined to specify destinations.

"We are seeing very strong demand for our services in Japan, and we are looking at Asia in general for further expansion in 2012, in large part due to the strength of the Asian currencies versus the dollar," he said. "As the fleet of A330s grows, you can expect to see A330s flying to Asia."

Lucrative Mainland Flights

At the moment, however, with just four A330s, it makes sense to use some on mainland U.S. routes, which are shorter and lend themselves to higher utilization of the aircraft, he said.

Hawaiian gets more than half of its revenue from flights to ten U.S. cities, with about a third derived from inter-Hawaii flying. The mainland market is intensely competitive, with all of the major U.S. carriers involved. United (UAL) and Hawaiian each have about 30% of the market, while Delta (DAL) has about 18%. Dunkerley said capacity is flat compared to a year ago.

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