Hawaiian Airlines Results

Hawaiian Holdings Reports 2017 Fourth Quarter and Full Year Financial Results

Carried a record 11.5 million passengers in 2017, a 4.1% increase over the previous year.

Hawaiian Airlines

Hawaiian Holdings, Inc. (NASDAQ:  HA), parent company of Hawaiian Airlines, Inc., today reported its financial results for the fourth quarter and full year 2017.

 

Fourth Quarter 2017 - Key Financial Metrics

GAAP

YoY Change

Adjusted

YoY Change

Net Income

$172.1M

+$170.2M

$57.5M

$(11.3)M

Diluted EPS

$3.29

+$3.25

$1.10

$(0.18)

Pre-tax Margin

16.0%

+15.4 pts.

13.6%

(4.0) pts.

 

Full Year 2017 - Key Financial Metrics

GAAP

YoY Change

Adjusted

YoY Change

Net Income

$364.0M

+$128.6M

$301.1M

+$21.1M

Diluted EPS

$6.82

+$2.46

$5.64

+$0.45

Pre-tax Margin

15.2%

(0.3) pts.

17.6%

(0.8) pts.

"We're delighted to report record earnings for 2017 after our fourth quarter results cap an extremely strong year for Hawaiian" said Mark Dunkerley, Hawaiian Airlines president and CEO.  "Robust demand in all of our major geographies and moderate industry capacity growth offset the rising price of fuel.  We carried more guests this year than ever before and set new records for fourth quarter and full year revenue.  These results are the product of the tireless efforts of the 6,600 employees who deliver authentic Hawaiian hospitality on the ground and in the air every single day.

Looking ahead, 2018 stands to be a year that Hawaiian enters into the last phase of a strategy mapped out over a decade ago.  With new aircraft, new markets, and product enhancements tailored to the needs of the Hawai'i traveler, we are better equipped to compete today than at any time in our past.  We look forward to the year ahead and all that it has in store."

Statistical data, as well as a reconciliation of the reported non-GAAP financial measures, can be found in the accompanying tables.

Liquidity and Capital Resources

On October 12, 2017, the Company announced the initiation of a quarterly cash dividend of 12 cents per share, the first of which was paid on November 30, 2017 to all stockholders of record as of November 17, 2017.

In addition, the Company repurchased approximately 2.5 million shares of common stock for approximately $100 million in 2017.  The Company also announced a new $100 million stock repurchase program in effect through December 31, 2019.

As of December 31, 2017 the Company had:

  • Unrestricted cash, cash equivalents and short-term investments of $460 million. 
  • Outstanding debt and capital lease obligations of $571 million.

2017 Highlights

Operational

  • Carried a record 11.5 million passengers in 2017, a 4.1% increase over the previous year. 
  • Completed new hangar facility which will provide significant efficiencies moving forward. 
  • Introduced new uniforms which complements brand refresh that was unveiled earlier in the year.

New routes and increased frequencies

  • North America
    • Started operating new daily non-stop service between Portland International Airport (PDX) and Maui'sKahului Airport (OGG) in January 2018. 
    • Announced new daily non-stop service between San Diego International Airport (SAN) and Kahului (OGG) as well as between Long Beach Airport (LGB) and Honolulu's Daniel K. Inouye International Airport (HNL) with both expected to start in May 2018. 
    • Extended seasonal non-stop service to year-round non-stop service between Los Angeles International Airport (LAX) and Kaua'i's Līhu'e Airport (LIH). 
    • Commenced summer seasonal service with daily non-stop flights between Oakland International Airport (OAK) and Līhu'e (LIH) and thrice weekly flights between Los Angeles (LAX) and Kona International Airport (KOA). 
    • Announced extended service between Los Angeles (LAX) and both Kona (KOA) and Kahului (OGG), between Oakland (OAK) and both Līhu'e (LIH) and Kona (KOA), and between San Francisco International Airport (SFO) and Honolulu (HNL). 
  • International
    • Announced expansion of non-stop service between New Zealand's Auckland Airport (AKL) and Honolulu(HNL) starting in March 2018. 
    • Announced expanded seasonal summer flights to include daily non-stop service between Narita International Airport (NRT) and Honolulu (HNL).
  • Neighbor Islands
    • Launched daily round trip service between Maui's Kapalua Airport (JHM) and both Honolulu (HNL) and Kahului (OGG), and between Līhu'e (LIH) and Kona (KOA).

Partnerships

  • Announced a new partnership with Japan Airlines (JAL) that provides for extensive code sharing, lounge access and frequent flyer program reciprocity, taking effect on March 25, 2018 (subject to government approval). Also announced the intention to establish a joint venture with JAL designed to provide even more choices, convenience and enhancements to the traveling public to/from Japan and beyond to multiple Asian markets.

Fleet and financing

  • Completed a sale-leaseback transaction covering three Boeing 767-300 aircraft as part of the planned exit from its Boeing 767-300 fleet. 
  • Took delivery of its first two Airbus 321neo aircraft, its 24th Airbus 330-200 aircraft, and its first ATR-72 turboprop aircraft in an all-cargo configuration. 
  • Entered into an agreement in January 2018 to purchase three Boeing 767-300s which it previously leased and will subsequently sell later this year in line with plans to retire its Boeing 767-300 fleet by the end of 2018.

People

  • Ratified a 63-month contract with its pilots represented by the Airline Pilots Association (ALPA). 
  • Contributed $150.6 million during the year to employee benefit plans, comprised of a one-time payment of $18.5 million to fully fund and terminate the Hawaiian Airlines, Inc. Salaried & IAM Merged Pension Plan, a one-time payment of $101.9 million to settle a portion of the post-65 medical plan obligation in connection with the ratification of a contract amendment with the Air Line Pilots Association, representing its pilots, and a contribution of approximately $30.2 million, $25.5 million above the minimum required, to further reduce pension obligations.

Product and loyalty

  • Unveiled brand refresh in May 2017 which included an updated logo and aircraft livery. 
  • Announced the introduction of remodeled Airbus 330-200 aircraft to its non-stop service between Sapporo's New Chitose Airport (CTS) and Honolulu (HNL) starting in February 2018. 

First Quarter and Full Year 2018 Outlook

The table below summarizes the Company's expectations for the first quarter ending March 31, 2018 and the full year ending December 31, 2018, expressed as an expected percentage change compared to the pro forma results for the quarter ended March 31, 2017 or the year ended December 31, 2017, as applicable.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, and created a new topic (ASC 606), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASC 606 will replace most existing revenue recognition guidance in GAAP when it becomes effective.  ASC 606 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017.  The Company has elected to adopt the full retrospective transition method as of January 1, 2018, resulting in the restatement of all prior periods on the date of adoption. Metrics in the guidance tables below that have been impacted by ASC 606 are shown as both originally stated and on an unaudited pro forma basis.

 

First Quarter

First Quarter

First Quarter

First Quarter

Item

2017 Original

2017 Restated

2018 Guidance

GAAP Equivalent

2018 Guidance

Cost per ASM excluding Fuel (a)

9.39¢

9.29¢

Up 3.5% to up 6.5%

Cost per ASM (a)

Up 3.3% to up 6.7%

Operating Revenue Per ASM

13.58¢

13.40¢

Down 0.5% to up 2.5%

ASMs

Up 3.0% to up 5.0%

Gallons of jet fuel consumed

Up 4.0% to up 6.0%

Economic fuel cost per gallon (b)(c)

$1.90 to $2.00

Fuel cost per gallon (b)

$2.01 to $2.11

 

Full Year

Full Year

Full Year

Full Year

Item

2017 Original

2017 Restated

2018 Guidance

GAAP Equivalent

2018 Guidance

Cost per ASM excluding Fuel (a)

9.20¢

9.19¢

Down 0.5% to up 2.5%

Cost per ASM (a)

Up 1.9% to up 5.4%

ASMs

Up 5.0% to up 8.0%

Gallons of jet fuel consumed

Up 3.0% to up 6.0%

Economic fuel cost per gallon (b)(c)

$1.97 to $2.07

Fuel cost per gallon (b)

$2.02 to $2.12

 

(a) 

See Table 4 for a reconciliation of GAAP operating expenses to operating expenses excluding aircraft fuel.

(b) 

Economic fuel cost per gallon estimates are based on the January 16, 2018 fuel forward curve.

(c) 

See Table 3 for a reconciliation of GAAP fuel costs to economic fuel costs.

 

 

Table 1.

Hawaiian Holdings, Inc.

Consolidated Statements of Operations

(in thousands, except for per share data) (unaudited)

Three Months Ended December 31,

Twelve Months Ended December 31,

2017

2016 (a)

% Change

2017

2016 (a)

% Change

Operating Revenue:

Passenger

$

596,801

$

553,647

7.8

%

$

2,362,076

$

2,145,742

10.1

%

Other

89,748

79,326

13.1

%

333,552

304,838

9.4

%

Total

686,549

632,973

8.5

%

2,695,628

2,450,580

10.0

%

Operating Expenses:

Wages and benefits

166,225

139,545

19.1

%

632,997

535,264

18.3

%

Aircraft fuel, including taxes and delivery

123,960

95,806

29.4

%

440,383

344,322

27.9

%

Aircraft rent

34,881

32,220

8.3

%

137,764

124,565

10.6

%

Maintenance materials and repairs

58,187

62,069

(6.3)

%

219,553

228,970

(4.1)

%

Aircraft and passenger servicing

35,997

33,631

7.0

%

140,566

126,876

10.8

%

Commissions and other selling

33,115

31,795

4.2

%

131,783

125,731

4.8

%

Depreciation and amortization

29,490

26,499

11.3

%

113,277

108,128

4.8

%

Other rentals and landing fees

30,000

29,749

0.8

%

116,763

108,087

8.0

%

Purchased services

31,359

23,385

34.1

%

110,787

96,274

15.1

%

Other

43,157

33,210

30.0

%

144,533

127,489

13.4

%

Special items

109,142

(100.0)

%

23,450

109,142

(78.5)

%

Total

586,371

617,051

(5.0)

%

2,211,856

2,034,848

8.7

%

Operating Income

100,178

15,922

529.2

%

483,772

415,732

16.4

%

Nonoperating Income (Expense):

Other nonoperating special items

4,617

(45,585)

Interest expense and amortization of debt discounts and issuance costs

(7,609)

(8,159)

(30,901)

(36,612)

Interest income

1,652

963

6,132

4,007

Capitalized interest

2,179

1,244

8,437

2,651

Gains on fuel derivatives

13,540

4,685

3,312

20,106

Loss on extinguishment of debt

(480)

(10,473)

Other components of net periodic benefit cost

(3,420)

(5,053)

(16,713)

(20,270)

Other, net

(1,060)

(5,561)

2,101

4,323

Total

9,899

(12,361)

(73,217)

(36,268)

Income Before Income Taxes

110,077

3,561

410,555

379,464

Income tax expense (benefit)

(62,053)

1,619

46,514

144,032

Net Income

$

172,130

$

1,942

$

364,041

$

235,432

Net Income Per Common Stock Share:

Basic

$

3.31

$

0.04

$

6.86

$

4.40

Diluted

$

3.29

$

0.04

$

6.82

$

4.36

Weighted Average Number of Common Stock Shares Outstanding:

Basic

51,939

53,433

53,074

53,502

Diluted

52,263

53,910

53,413

53,958

Cash Dividends Declared Per Common Share

$

0.12

$

0.12

 

(a) 

The other components of net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented.  Accounting Standard Update 2017-07 (ASU 2017-07) is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption only permitted for the Company in the first quarter of 2017, provided all provisions of the ASU are adopted. The Company early adopted this standard during the first quarter of 2017. The adoption of ASU 2017-07 resulted in a reclassification of $5.1 million and $20.3 million from wages and benefits to other components of net periodic benefit cost on the Company's consolidated statement of operations for the three months and twelve months ended December 31, 2016, respectively.

 

Table 2

Hawaiian Holdings, Inc.

Selected Statistical Data

(in thousands, except as otherwise indicated) (unaudited)

Three Months Ended December 31,

Twelve Months Ended December 31,

2017

2016

% Change

2017

2016

% Change

Scheduled Operations (a) :

Revenue passengers flown

2,910

2,728

6.7

%

11,498

11,044

4.1

%

Revenue passenger miles (RPM)

4,120,002

3,929,846

4.8

%

16,307,344

15,484,369

5.3

%

Available seat miles (ASM)

4,788,457

4,565,978

4.9

%

18,991,566

18,371,544

3.4

%

Passenger revenue per RPM (Yield)

14.49

¢

14.09

¢

2.8

%

14.48

¢

13.86

¢

4.5

%

Passenger load factor (RPM/ASM)

86.0

%

86.1

%

(0.1)

 pt

85.9

%

84.3

%

1.6

pt

Passenger revenue per ASM (PRASM)

12.46

¢

12.13

¢

2.7

%

12.44

¢

11.68

¢

6.5

%

Total Operations (a) :

Revenue passengers flown

2,914

2,730

6.7

%

11,505

11,051

4.1

%

RPM

4,125,894

3,932,713

4.9

%

16,316,739

15,492,509

5.3

%

ASM

4,798,039

4,570,679

5.0

%

19,006,682

18,384,637

3.4

%

Passenger load factor (RPM/ASM)

86.0

%

86.0

%

pt

85.8

%

84.3

%

1.5

pt

Operating revenue per ASM (RASM)

14.31

¢

13.85

¢

3.3

%

14.18

¢

13.33

¢

6.4

%

Operating cost per ASM (CASM)

12.22

¢

13.50

¢

(9.5)

 pt

11.64

¢

11.07

¢

5.1

%

CASM excluding aircraft fuel and special items (b)

9.64

¢

9.02

¢

6.9

%

9.20

¢

8.61

¢

6.9

%

Aircraft fuel expense per ASM (c)

2.58

¢

2.10

¢

22.9

%

2.32

¢

1.87

¢

24.1

%

Revenue block hours operated

47,926

44,627

7.4

%

189,881

179,254

5.9

%

Gallons of jet fuel consumed

66,511

61,647

7.9

%

259,915

244,118

6.5

%

Average cost per gallon of jet fuel (actual) (c)

$

1.86

$

1.55

20.0

%

$

1.69

$

1.41

19.9

%

Economic fuel cost per gallon (c)(d)

$

1.84

$

1.51

21.9

%

$

1.70

$

1.52

11.8

%

 

(a)

Includes the operations of the Company's contract carrier under a capacity purchase agreement.

(b)

See Table 4 for a reconciliation of GAAP operating expenses to operating expenses excluding aircraft fuel.

(c)

Includes applicable taxes and fees.

(d)

See Table 3 for a reconciliation of GAAP fuel costs to economic fuel costs.

 

Table 3.

Hawaiian Holdings, Inc.

Economic Fuel Expense

(in thousands, except per-gallon amounts) (unaudited)

The Company believes that economic fuel expense is a good measure of the effect of fuel prices on its business as it most closely approximates the net cash outflow associated with the purchase of fuel for its operations in a period. The Company defines economic fuel expense as GAAP fuel expense plus losses/(gains) realized through actual cash (receipts)/payments received from or paid to hedge counterparties for fuel hedge derivative contracts settled during the period.

 

 

Three Months Ended December 31,

Twelve Months Ended December 31,

2017

2016

% Change

2017

2016

% Change

Aircraft fuel expense, including taxes and delivery

$

123,960

$

95,806

29.4

%

$

440,383

$

344,322

27.9

%

Realized (gains)/losses on settlement of fuel derivative contracts

(1,565)

(2,778)

(43.7)

%

534

27,572

(98.1)

%

Economic fuel expense

$

122,395

$

93,028

31.6

%

$

440,917

$

371,894

18.6

%

Fuel gallons consumed

66,511

61,647

7.9

%

259,915

244,118

6.5

%

Economic fuel costs per gallon

$

1.84

$

1.51

21.9

%

$

1.70

$

1.52

11.8

%

 

Estimated three months ending

March 31, 2018

 Estimated full year ending

December 31, 2018

Aircraft fuel expense, including taxes and delivery

$

128,994

-

$

137,885

$

540,894

-

$

583,805

Realized (gains)/losses on settlement of fuel derivative contracts

(7,000)

-

(7,000)

(13,500)

-

(13,500)

Economic fuel expense

$

121,994

-

$

130,885

$

527,394

-

$

570,305

Fuel gallons consumed

64,208

-

65,442

267,712

-

275,510

Economic fuel costs per gallon

$

1.90

-

$

2.00

$

1.97

-

$

2.07

 

 

 

Table 4.

Hawaiian Holdings, Inc.

Non-GAAP Financial Reconciliation

(in thousands, except per-share and CASM data) (unaudited)

The Company evaluates its financial performance utilizing various GAAP and non-GAAP financial measures, including net income, diluted net income per share, CASM, PRASM, RASM, Passenger Revenue per RPM and EBITDAR.  Pursuant to Regulation G, the Company has included the following reconciliation of reported non-GAAP financial measures to comparable financial measures reported on a GAAP basis.  The adjustments are described below:

Changes in fair value of derivative contracts, net of tax, are based on market prices for open contracts as of the end of the reporting period. This line item includes the unrealized amounts of fuel and interest rate derivatives (not designated as hedges) that will settle in future periods and the reversal of prior period unrealized amounts.  The Company believes that excluding the impact of these derivative adjustments helps investors to analyze the Company's core operational performance and compare its results to other airlines in the periods presented below. 

Loss on extinguishment of debt, net of tax, is excluded to help investors analyze the Company's core operational performance and compare its results to other airlines in the periods presented below.

As a result of the Tax Cuts and Jobs Act of 2017, the Company recognized a one time benefit of $104.2 million in the quarter ended December 31, 2017 from the estimated impact of the revaluation of deferred tax assets and liabilities. For 2018, the expected reduction in the corporate tax rate will result in an all-in book tax rate for the Company of 24% to 26%. 

2016 special items

The impairment analysis and ultimate charge was triggered by the decision in the fourth quarter of 2016 to exit the Boeing 767-300 fleet in 2018. The Company estimated the fair value of the owned Boeing 767-300 fleet assets using third party pricing information and quotes from potential buyers, which resulted in a $49.4 million impairment charge ($0.92 per diluted share).

In 2016, the Company accrued $34.0 million associated with the tentative agreement with ALPA related to past service (prior to January 1, 2017) and also elected to pay a $4.8 million profit sharing bonus payment to other labor groups related to prior period service. 

In connection with the decision to exit the Boeing 767-300 fleet, the Company negotiated a termination of its Boeing 767-300 maintenance agreement and recorded a $21.0 million charge related to the amount paid to terminate the contract.

2017 special items

In August 2017, the Company terminated the Hawaiian Airlines, Inc. Salaried & IAM Merged Pension Plan (the Merged Plan) and settled a portion of its pilots' other post-retirement medical plan liability. In connection with the reduction of these liabilities the Company recorded one-time other nonoperating special items of $35.2 million related to the Merged Plan termination and $10.4 million related to the other post-retirement (OPEB) medical plan partial settlement. 

In April 2017, the Company executed a sale leaseback transaction with an independent third party for three Boeing 767-300 aircraft. The lease terms for the three aircraft commenced in April 2017 and continues through November 2018, December 2018, and January 2019, respectively. During the twelve months ended December 31, 2017, the Company recorded a loss on sale of aircraft of $4.8 million.

In February 2017, the Company reached a tentative agreement with ALPA, covering the Company's pilots. In March 2017, the Company received notice from ALPA that the agreement was ratified by ALPA's members.  The agreement became effective April 1, 2017 and has a term of 63 months.  The agreement includes, among other various benefits, a pay adjustment and ratification bonus computed based on previous service. During the twelve months ended December 31, 2017, the Company expensed $18.7 million related to (1) a one-time payment to reduce the Company's future 401K employer contribution for certain pilot groups, which is not recoverable once paid and (2) a one-time true up of the pilot vacation accrual at the revised rates set forth in the agreement.

The Company believes that excluding such special items helps investors analyze the Company's operational performance and compare its results to other airlines in the periods presented below.

 

Three Months Ended December 31,

Twelve Months Ended December 31,

2017

2016

2017

2016

Total

Diluted 

Per Share

Total

Diluted 

Per Share

Total

Diluted 

Per Share

Total

Diluted 

Per Share

GAAP net income, as reported

$

172,130

$

3.29

$

1,942

$

0.04

$

364,041

$

6.82

$

235,432

$

4.36

Add: estimated effect of revaluation of deferred tax liability

(104,176)

(1.99)

(104,176)

(1.95)

Add (deduct): changes in fair value of derivative contracts

(11,974)

(0.23)

(1,907)

(0.04)

(3,846)

(0.07)

(47,678)

(0.88)

Add: loss on extinguishment of debt

480

0.01

10,473

0.19

Add: special items

    Operating

  Loss on sale of aircraft

4,771

0.09

  Collective bargaining charge

38,781

0.72

18,679

0.35

38,781

0.72

  Impairment charge

49,361

0.92

49,361

0.92

  Termination of Boeing 767-300

21,000

0.39

21,000

0.39

    Nonoperating

  Partial settlement and curtailment loss

(4,617)

(0.09)

10,384

0.19

  Loss on plan termination

35,201

0.66

Total special items

(4,617)

(0.09)

109,142

2.03

69,035

1.29

109,142

2.03

Add (deduct): tax effect of adjustments

6,089

0.12

(40,903)

(0.76)

(23,924)

(0.45)

(27,307)

(0.51)

Adjusted net income

$

57,452

$

1.10

$

68,754

$

1.28

$

301,130

$

5.64

$

280,062

$

5.19

 

Three months ended 

December 31,

Twelve months ended 

December 31,

2017

2016

2017

2016

Income Before Income Taxes, as reported

$

110,077

$

3,561

$

410,555

$

379,464

Add: changes in fair value of derivative contracts

(11,974)

(1,907)

(3,846)

(47,678)

Add: loss on extinguishment of debt

480

10,473

Add: special items

    Operating

  Loss on sale of aircraft

4,771

  Collective bargaining charge

38,781

18,679

38,781

  Impairment charge

49,361

49,361

  Termination of Boeing 767-300

21,000

21,000

    Nonoperating

  Partial settlement and curtailment loss

(4,617)

10,384

  Loss on plan termination

35,201

  Total special items

$

(4,617)

$

109,142

$

69,035

$

109,142

Adjusted Income Before Income Taxes

$

93,486

$

111,276

$

475,744

$

451,401

Operating Costs per Available Seat Mile (CASM)

The Company has separately listed in the table below its fuel costs per ASM and non-GAAP unit costs, excluding fuel and special items.  These amounts are included in CASM, but for internal purposes the Company consistently uses cost metrics that exclude fuel and special items (if applicable) to measure and monitor its costs.

 

Three Months Ended 

December 31,

Twelve Months Ended 

December 31,

2017

2016 (a)

2017

2016 (a)

GAAP operating expenses

$

586,371

$

617,051

$

2,211,856

$

2,034,848

Less: aircraft fuel, including taxes and delivery

(123,960)

(95,806)

(440,383)

(344,322)

Less: special items

    Operating

Loss on sale of aircraft

(4,771)

Collective bargaining charge

(38,781)

(18,679)

(38,781)

Impairment charge

(49,361)

(49,361)

Termination of Boeing 767-300

(21,000)

(21,000)

  Total special items

$

$

(109,142)

$

(23,450)

$

(109,142)

Adjusted operating expenses—excluding aircraft fuel and special items

$

462,411

$

412,103

$

1,748,023

$

1,581,384

Available Seat Miles

4,798,039

4,570,679

19,006,682

18,384,637

CASM—GAAP

12.22

¢

13.50

¢

11.64

¢

11.07

¢

Less: aircraft fuel

(2.58)

(2.10)

(2.32)

(1.87)

Less: special items

    Operating

Loss on sale of aircraft

(0.02)

Collective bargaining charge

(0.84)

(0.10)

(0.20)

Impairment charge

(1.08)

(0.28)

Termination of Boeing 767-300

(0.46)

(0.11)

  Total special items

¢

(2.38)

¢

(0.12)

¢

(0.59)

¢

CASM—excluding aircraft fuel and special items

9.64

¢

9.02

¢

9.20

¢

8.61

¢

 

(a) 

The other components of net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented.  Accounting Standard Update 2017-07 (ASU 2017-07) is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption only permitted for the Company in the first quarter of 2017, provided all provisions of the ASU are adopted. The Company early adopted this standard during the first quarter of 2017. The adoption of ASU 2017-07 resulted in a reclassification of $5.1 million and $20.3 million from wages and benefits to other components of net periodic benefit cost on the Company's consolidated statement of operations for the three months and twelve months ended December 31, 2016, respectively.

 

Estimated three months ending 

March 31, 2018

Estimated full year ending 

December 31, 2018

(in thousands, except for CASM 

figures)

(in thousands, except for CASM 

figures)

GAAP operating expenses

$

576,870

-

$

607,691

$

2,365,773

-

$

2,517,418

Less: aircraft fuel, including taxes and delivery

(128,994)

-

(137,885)

(540,894)

-

(583,805)

Adjusted operating expenses - excluding aircraft fuel

$

447,876

-

$

469,806

$

1,824,879

-

$

1,933,613

Available Seat Miles

4,658,024

-

4,748,471

19,957,016

-

20,527,217

CASM - GAAP

12.39

¢

-

12.79

¢

11.85

¢

-

12.26

¢

Less: aircraft fuel

(2.77)

-

(2.90)

(2.71)

-

(2.84)

CASM - excluding aircraft fuel

9.62

¢

-

9.89

¢

9.14

¢

-

9.42

¢

Pre-tax margin

The Company excludes unrealized (gains) losses from fuel derivative contracts, losses on extinguishment of debt and special items from pre-tax margin for the same reasons as described above.

 

Three months ended 

December 31,

Twelve months ended 

December 31,

2017

2016

2017

2016

Pre-Tax Margin, as reported

16.0

%

0.6

%

15.2

%

15.5

%

Add: changes in fair value of derivative contracts

(1.7)

%

(0.3)

%

(0.2)

%

(2.0)

%

Add: loss on extinguishment of debt

%

0.1

%

%

0.4

%

Add: special items

    Operating

  Loss on sale of aircraft

%

%

0.2

%

%

  Collective bargaining charge

%

6.1

%

0.7

%

1.6

%

  Impairment charge

%

7.8

%

%

2.0

%

  Termination of Boeing 767-300

%

3.3

%

%

0.9

%

    Nonoperating

  Partial settlement and curtailment loss

(0.7)

%

%

0.4

%

%

  Loss on plan termination

%

%

1.3

%

%

Adjusted Pre-Tax Margin

13.6

%

17.6

%

17.6

%

18.4

%

Leverage ratio

The Company uses adjusted total debt, including aircraft rent, in addition to long-term adjusted debt and capital leases, to represent long-term financial obligations. The Company excludes unrealized (gains) losses from fuel derivative contracts, losses on extinguishment of debt, and special items from earnings before interest, taxes, depreciation, amortization and rent (EBITDAR) for the reasons as described above.  Management believes this metric is helpful to investors in assessing the Company's overall debt.

 

Twelve months ended

December 31, 2017

Debt and capital lease obligations

$

570,671

Plus: Aircraft leases capitalized at 7x last twelve months' aircraft rent

964,348

Adjusted debt and capital lease obligations

$

1,535,019

EBITDAR:

Income Before Income Taxes

$

410,555

Add back:

Interest and amortization of debt expense

30,901

Depreciation and amortization

113,277

Aircraft rent

137,764

EBITDAR

$

692,497

Adjustments:

Add: changes in fair value of derivative contracts

(3,846)

Add: special items

    Operating

  Collective bargaining charge

18,679

  Loss on sale of aircraft

4,771

    Nonoperating

  Partial settlement and curtailment loss

10,384

  Loss on plan termination

35,201

Adjusted EBITDAR

$

757,686

Leverage Ratio

2.0

x



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