Hawaiian Air Moving to Fill Void - TheStreet

Airline operator

Hawaiian Holdings

(HA) - Get Report

lost $20 million in the first quarter, but that now seems like ancient history to the carrier, which saw two of its principal rivals shut down in recent weeks.

Hawaiian has seized the opportunity, particularly this week, when it began Oakland to Honolulu service, raised interisland fares, added a fee for extra baggage on the trans-Pacific routes, and settled a lawsuit that brought it $52.5 million in cash.

Additionally, Hawaiian reported first-quarter results on Wednesday. The loss was equivalent to 42 cents a share, compared with a loss of 25 cents a year earlier, but on the positive side, revenue rose 16.7% to $251.2 million.

Hawaiian rival Aloha Airlines sought bankruptcy protection on March 20 and shut down March 31, while ATA closed down April 3. However, "none of this momentous news influenced our first-quarter results," said CEO Mark Dunkerley, on an earnings conference call with analysts.

He attributed the first-quarter loss to two problems, high fuel costs and excess capacity, the latter of which "was taken care of in a single week."

The two fallen rivals had accounted for 15% of capacity in the Hawaii-to-U.S. mainland markets and 19% in the Hawaii-to-West Coast markets that Hawaiian serves. About 40% of the two carriers' trans-Pacific capacity was in Oakland.

Excess capacity in the interisland markets, a result of the 2006 incursion of

Mesa Air

(MESA) - Get Report

, also depressed fares. Aloha had provided 40% of the interisland seats. Even with a recent ramp-up by Hawaiian, capacity has fallen 25% this month.

No doubt Hawaiian's response to the sudden shutdowns represents a bright spot in the airline's history. Dunkerley said the carrier's major fear was that photos showing people stranded by Aloha and ATA, and then forced to sleep in the airports, would hurt Hawaii's image.

That didn't occur, though, partially because Hawaiian added extra flights for stranded passengers, including three trans-Pacific flights. Also, many Hawaiian employees volunteered to work during the crisis, Dunkerley said.

"We felt that was important to improving the reputation of Hawaii as a great place to visit," he said. "We believe our reputation was enhanced in the weeks following the shutdown."

Subsequently, Hawaiian has increased its interisland service by 4,500 seats to 20,000 seats daily. It is seeking additional aircraft and an announcement is pending, but the aircraft would not enter service until the third quarter. Hawaiian also plans to lease additional Boeing 767s for mainline service.

There is a downside to the crisis, in that Hawaiian must use its spare aircraft to provide interisland service until new planes arrive. As a result, "we expect to see some of our operational metrics decline throughout the summer, said Dunkerley. "There is no free lunch."

Meanwhile, the carrier settled a case where a Honolulu bankruptcy court judge ordered Mesa to pay Hawaiian $80 million for misusing confidential information. Mesa had been required to post a bond. In the settlement, both carriers get quick access to the cash.

For Hawaiian's latest quarter, revenue rose 16.7% to $251.2 million. Revenue per available seat mile increased 10.6%. while load factor fell 2.5 points to 85%. Cost per available seat mile, excluding fuel, rose 0.4% to 7.99 cents.

United

( UAUA) remains the leading carrier in the Hawaii-mainland market, with a 25% share.

US Airways

(LCC)

has grown rapidly in the market, which also has service by

American

(AMR)

,

Continental

(CAL) - Get Report

,

Northwest

( NWA) and

Alaska

(ALK) - Get Report

.