HAWAIIAN HOLDINGS INC - FORM 10-Q

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - HAWAIIAN HOLDINGS INC	ex322q32018.htm
EX-32.1 - EXHIBIT 32.1 - HAWAIIAN HOLDINGS INC	ex321q32018.htm
EX-31.2 - EXHIBIT 31.2 - HAWAIIAN HOLDINGS INC	ex312q32018.htm
EX-31.1 - EXHIBIT 31.1 - HAWAIIAN HOLDINGS INC	ex311q32018.htm
EX-12 - EXHIBIT 12 - HAWAIIAN HOLDINGS INC	exhibit12q32018.htm
EX-10.2 - EXHIBIT 10.2 - HAWAIIAN HOLDINGS INC	exhibit102purchaseagreement.htm
EX-10.1 - EXHIBIT 10.1 - HAWAIIAN HOLDINGS INC	exhibit101aircraftgeneralt.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

o 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 1-31443

HAWAIIAN HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)



Delaware		71-0879698
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)



3375 Koapaka Street, Suite G-350
Honolulu, HI		96819
(Address of Principal Executive Offices)		(Zip Code)

(808) 835-3700

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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. ý Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ý Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer x		Accelerated filer o
Non-accelerated filer o		Smaller reporting company o
		Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes ý No

As of October 19, 2018, 49,403,496 shares of the registrant’s common stock were outstanding.

Hawaiian Holdings, Inc.

Form 10-Q

Quarterly Period ended September 30, 2018

Table of Contents



Part I.	Financial Information	3

Item 1.	Consolidated Financial Statements of Hawaiian Holdings, Inc. (Unaudited)	3

	Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017	3

	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2018 and 2017	4

	Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017	5

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45

Item 4.	Controls and Procedures	46

Part II.	Other Information	47

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 3.	Defaults Upon Senior Securities	47

Item 4.	Mine Safety Disclosures	47

Item 5.	Other Information	47

Item 6.	Exhibits	48

	Signatures	49

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Hawaiian Holdings, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017 (a)			2018			2017 (a)
	(unaudited)
Operating Revenue:
Passenger	$	697,232		$	668,643		$	1,963,994		$	1,856,401
Other	61,855			47,573			175,952			136,140
Total	759,087			716,216			2,139,946			1,992,541
Operating Expenses:
Wages and benefits	176,642			161,059			516,906			466,772
Aircraft fuel, including taxes and delivery	162,932			110,111			449,404			316,423
Maintenance, materials and repairs	57,118			49,396			176,229			161,366
Aircraft and passenger servicing	42,063			37,533			117,207			107,459
Aircraft rent	31,768			35,195			93,533			102,883
Commissions and other selling	32,704			33,163			96,482			94,967
Other rentals and landing fees	33,227			30,989			95,226			86,763
Depreciation and amortization	36,373			28,447			101,537			83,787
Purchased services	32,509			24,736			95,104			79,428
Contract terminations expense	—			—			35,322			—
Special items	—			—			—			23,450
Other	37,925			36,585			117,977			101,371
Total	643,261			547,214			1,894,927			1,624,669
Operating Income	115,826			169,002			245,019			367,872
Nonoperating Income (Expense):
Other nonoperating special items	—			(50,202		)	—			(50,202		)
Interest expense and amortization of debt discounts and issuance costs	(8,446		)	(7,578		)	(24,628		)	(23,292		)
Gains (losses) on fuel derivatives	3,495			3,282			27,064			(10,228		)
Interest income	3,124			1,861			6,529			4,480
Capitalized interest	1,821			2,416			6,414			6,258
Other, net	937			(3,892		)	(759		)	(10,132		)
Total	931			(54,113		)	14,620			(83,116		)
Income Before Income Taxes	116,757			114,889			259,639			284,756
Income tax expense	23,215			43,267			58,075			102,594
Net Income	$	93,542		$	71,622		$	201,564		$	182,162
Net Income Per Common Stock Share:
Basic	$	1.85		$	1.35		$	3.97		$	3.41
Diluted	$	1.84		$	1.34		$	3.96		$	3.39
Weighted Average Number of Common Stock Shares Outstanding:
Basic	50,594			53,185			50,807			53,456
Diluted	50,731			53,509			50,935			53,799
Cash Dividends Declared Per Common Stock Share	$	0.12		$	—		$	0.36		$	—

(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). See Note 2 to Consolidated Financial Statements contained in Part I, Item 1 of this report for additional information.

See accompanying Notes to Consolidated Financial Statements.

Hawaiian Holdings, Inc.

Consolidated Statements of Comprehensive Income

(in thousands)



	Three Months Ended September 30,
	2018		2017 (a)
	(unaudited)
Net Income	$	93,542	$	71,622
Other comprehensive income, net:
Net change related to employee benefit plans, net of tax expense of $146 and $15,247 for 2018 and 2017, respectively	641		25,042
Net change in derivative instruments, net of tax expense of $1,396 and net of tax benefit of $198 for 2018 and 2017, respectively	4,292		(326		)
Net change in available-for-sale investments, net of tax expense of $53 and $43 for 2018 and 2017, respectively	167		70
Total other comprehensive income	5,100		24,786
Total Comprehensive Income	$	98,642	$	96,408



	Nine Months Ended September 30,
	2018			2017 (a)
	(unaudited)
Net Income	$	201,564		$	182,162
Other comprehensive income, net:
Net change related to employee benefit plans, net of tax expense of $478 and $17,040 for 2018 and 2017, respectively	1,668			27,900
Net change in derivative instruments, net of tax expense of $2,050 and net of tax benefit of $3,756 for 2018 and 2017, respectively	6,311			(6,162		)
Net change in available-for-sale investments, net of tax benefit of $42 and net of tax expense of $115 for 2018 and 2017, respectively	(126		)	188
Total other comprehensive income	7,853			21,926
Total Comprehensive Income	$	209,417		$	204,088

See accompanying Notes to Consolidated Financial Statements.

Hawaiian Holdings, Inc.

Consolidated Balance Sheets

(in thousands, except shares)



	September 30, 2018			December 31, 2017 (a)
	(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	346,041		$	190,953
Restricted cash	—			1,000
Short-term investments	245,307			269,297
Accounts receivable, net	126,534			140,279
Spare parts and supplies, net	32,646			35,361
Prepaid expenses and other	95,292			79,186
Total	845,820			716,076
Property and equipment, less accumulated depreciation and amortization of $631,180 and $558,548 as of September 30, 2018 and December 31, 2017, respectively	2,116,204			1,842,263
Other Assets:
Long-term prepayments and other	187,860			193,632
Intangible assets, less accumulated amortization of $22,340 and $21,561 as of September 30, 2018 and December 31, 2017, respectively	14,408			15,187
Goodwill	106,663			106,663
Total Assets	$	3,270,955		$	2,873,821
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	141,209		$	140,805
Air traffic liability	653,113			589,093
Other accrued liabilities	136,820			147,593
Current maturities of long-term debt and capital lease obligations	105,451			59,470
Total	1,036,593			936,961
Long-Term Debt and Capital Lease Obligations	612,583			511,201
Other Liabilities and Deferred Credits:
Accumulated pension and other post-retirement benefit obligations	169,484			220,788
Other liabilities and deferred credits	280,199			225,605
Deferred tax liability, net	188,895			134,141
Total	638,578			580,534
Commitments and Contingencies
Shareholders’ Equity:
Special preferred stock, $0.01 par value per share, three shares issued and outstanding as of September 30, 2018 and December 31, 2017	—			—
Common stock, $0.01 par value per share, 49,961,321 and 51,173,453 shares outstanding as of September 30, 2018 and December 31, 2017, respectively	500			512
Capital in excess of par value	127,621			126,743
Accumulated income	922,491			793,134
Accumulated other comprehensive loss, net	(67,411		)	(75,264		)
Total	983,201			845,125
Total Liabilities and Shareholders’ Equity	$	3,270,955		$	2,873,821

See accompanying Notes to Consolidated Financial Statements.

Hawaiian Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)



	Nine Months Ended September 30,
	2018			2017
	(unaudited)
Net cash provided by Operating Activities	$	444,080		$	295,477
Cash flows from Investing Activities:
Additions to property and equipment, including pre-delivery payments	(386,098		)	(212,535		)
Proceeds from the sale and sale leaseback of aircraft and aircraft related equipment	117,143			33,511
Purchases of investments	(159,648		)	(171,485		)
Sales of investments	182,816			183,930
Net cash used in investing activities	(245,787		)	(166,579		)
Cash flows from Financing Activities:
Long-term borrowings	86,500			—
Repayments of long-term debt and capital lease obligations	(53,741		)	(52,463		)
Dividend payments	(18,327		)	—
Debt issuance costs	(1,108		)	(188		)
Repurchases of common stock	(53,894		)	(50,486		)
Other	(3,635		)	(7,703		)
Net cash used in financing activities	(44,205		)	(110,840		)
Net increase in cash and cash equivalents	154,088			18,058
Cash, cash equivalents, and restricted cash - Beginning of Period	191,953			330,991
Cash, cash equivalents, and restricted cash - End of Period	$	346,041		$	349,049

See accompanying Notes to Consolidated Financial Statements.

Hawaiian Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

1. Business and Basis of Presentation

Hawaiian Holdings, Inc. (the Company or Holdings) is a holding company incorporated in the State of Delaware. The Company’s primary asset is its sole ownership of all issued and outstanding shares of common stock of Hawaiian Airlines, Inc. (Hawaiian). The accompanying unaudited financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (SEC). Accordingly, these interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying financial statements contain all adjustments, including normal recurring adjustments, necessary for the fair presentation of the Company’s results of operations and financial position for the periods presented. Due to seasonal fluctuations, among other factors common to the airline industry, the results of operations for the periods presented are not necessarily indicative of the results of operations to be expected for the entire year. The accompanying unaudited Consolidated Financial Statements should be read in conjunction with the financial statements and the notes of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

2. Significant Accounting Policies

Recently Adopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, and created Accounting Standards Codification (ASC) Topic 606 (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 replaced most existing revenue recognition guidance in GAAP and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017.

The Company elected to adopt the full retrospective transition method as of January 1, 2018, resulting in the restatement of the prior periods as of the date of adoption. The overall decrease in equity as of January 1, 2016 was $76.0 million net of tax, with an offsetting change primarily in Other liabilities and deferred credits. Refer to Note 5 for additional revenue recognition discussion.

The most significant impact of the standard relates to the accounting for the Company's frequent flyer travel award program. This change, as well as other less significant changes, are described below:

•

Frequent flyer - The standard requires the Company to account for miles earned by passengers in the HawaiianMiles program through flight activity as a component of the passenger revenue ticket transaction at the estimated selling price of the miles, effectively eliminating the incremental cost accounting previously applied. ASC 606 resulted in a significant increase to the deferred revenue liability on the Company's balance sheet, as the estimated selling price of the miles significantly exceeds the value previously recorded for incremental cost. The allocated value of miles earned through flights and sold to partners is recognized at the time the free travel or other award is redeemed by the passenger. Previously, the transportation element associated with sold miles was deferred and recognized as passenger revenue over the period when the transportation was expected to be provided (23 months).

•

Passenger revenue - The standard requires the Company to make certain adjustments to its passenger revenue, most notably related to unused tickets, which represents unexercised passenger rights. The Company uses historical information to estimate the proportion of ticket revenue that will expire unused to be recognized at the scheduled flight date. Prior to the adoption of ASC 606, the Company recorded this revenue as the tickets expired unused. As of the adoption date the adjustment due to passenger ticket expiration had the effect of reducing the air traffic liability but did not have a significant effect on revenue recognized. Ticket change fees were previously recognized at the time the fees were assessed; however, under ASC 606, the Company now defers the recognition of ticket change fees as a component of air traffic liability until the related transportation is provided. Further, the Company reclassified revenue items such as checked baggage, charter, ticket change and cancellation fees, in flight revenue, and other incidental sales to passenger revenue (from other operating revenue), as these items do not represent distinct performance obligations separate from the transportation provided to the passenger.


•	Selling Costs - Under ASC 606, the Company will capitalize selling costs associated with credit card fees, booking fees, and commissions, and recognize the associated expense at the ticketed flight date. Prior to ASC 606, the Company recognized the costs associated with credit card and booking fees as they were incurred.

Restated financial statement information, which reflects the adoption of the ASC 606 is below:



	Three Months Ended September 30, 2017
	As Reported			Adjustments			As Restated
	(in thousands)
Operating Revenue:
Passenger	$	634,475		$	34,168		$	668,643
Other	85,084			(37,511		)	47,573
Total	$	719,559		$	(3,343	)	$	716,216
Operating Expenses	545,808			1,406			547,214
Operating Income	173,751			(4,749		)	169,002
Nonoperating Income (Expense)	(54,113		)	—			(54,113		)
Income tax expense	45,072			(1,805		)	43,267
Net Income	$	74,566		$	(2,944	)	$	71,622
Net Income Per Common Stock Share:
Basic	$	1.40		$	(0.05	)	$	1.35
Diluted	$	1.39		$	(0.05	)	$	1.34



	Nine Months Ended September 30, 2017
	As Reported			Adjustments			As Restated
	(in thousands)
Operating Revenue:
Passenger	$	1,765,275		$	91,126		$	1,856,401
Other	243,804			(107,664		)	136,140
Total	$	2,009,079		$	(16,538	)	$	1,992,541
Operating Expenses	1,625,485			(816		)	1,624,669
Operating Income	383,594			(15,722		)	367,872
Nonoperating Income (Expense)	(83,116		)	—			(83,116		)
Income tax expense	108,567			(5,973		)	102,594
Net Income	$	191,911		$	(9,749	)	$	182,162
Net Income Per Common Stock Share:
Basic	$	3.59		$	(0.18	)	$	3.41
Diluted	$	3.57		$	(0.18	)	$	3.39

Select consolidated balance sheet line items, which reflect the adoption of the new standard are as follows:



	December 31, 2017
	Balance Sheet
	As Reported		Adjustments			As Restated
	(in thousands)
ASSETS
Prepaid expenses and other	$	65,196	$	13,990		$	79,186
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Air traffic liability	545,362		43,731			589,093
Other accrued liabilities	146,283		1,310			147,593
Noncurrent Liabilities:
Other liabilities and deferred credits	95,636		129,969			225,605
Deferred tax liability	174,344		(40,203		)	134,141
Shareholders' Equity:
Accumulated income	913,951		(120,817		)	793,134

There was no impact to the Company's net cash provided by operating activities on the Condensed Consolidated Statements of Cash Flows.

Recently Issued Accounting Pronouncements

In February 2018, the FASB issued 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). The guidance allows reclassification from accumulated other comprehensive income to retained earnings of stranded taxes resulting from the Tax Cuts and Jobs Act (the Tax Act). In addition, under ASU 2018-02, certain disclosures regarding stranded tax effects are required. ASU 2018-02 is effective for annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company continues to evaluate the impact of ASU 2018-02 and the potential effects on the Company's consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities (ASU 2017-02), which better aligns a company's risk management activities and financial reporting for hedging relationships and is intended to simplify hedge accounting requirements. ASU 2017-12 is effective for annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company does not expect that the adoption of ASU 2017-12 will have a significant impact on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (ASU 2016-02). ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability in the statement of financial position for all leases (with the exception of short-term leases) at the lease commencement date and recognize expenses similar to the current ASC 840, Leases (Topic 840). ASU 2016-02 is effective for fiscal years, and interim periods beginning after December 15, 2018, and early adoption is permitted. The Company currently plans to utilize the optional transition method for adoption of ASU 2016-02, which allows entities to continue to apply the legacy guidance in Topic 840, including its disclosure requirements, in the comparative periods presented in the year of adoption. The Company plans to adopt ASU 2016-02 on January 1, 2019, as required.

Under ASU 2016-02, the lease liability will be measured at the present value of remaining lease payments and the right-of-use asset will be derived from the calculation of the lease liability, adjusted for any historically recorded amounts under Topic 840 for rent leveling and certain other adjustments (ROU Asset). Lease payments, which are anticipated to be comparable to the minimum lease payments included in the Company's existing lease commitments disclosure, include fixed and in-substance fixed payments, variable payments based on an index or rate, reasonably certain purchase options, termination penalties and probable amounts the lessee will owe under a residual value guarantee. Lease payments exclude variable payments other than those based on an index or rate or any amount allocated to non-lease components. Variable lease payments will continue to be expensed as incurred. See Note 10 below which discusses the Company's undiscounted lease obligations as of September 30, 2018.

The Company is currently evaluating and implementing ASU 2016-02 and believes the most significant impact on its financial statements will be the consolidated balance sheet impact of recording the ROU Asset and lease liability for existing aircraft and engine operating leases. As of September 30, 2018, the Company will have 14 aircraft and 5 engines under operating lease in its fleet at the date of adoption, with an estimated net present value of future lease payments ranging between approximately $450.0 million to $500.0 million using current rates. The Company also has operating leases related to terminal operations, office, and hangar space, which are not included in the range provided. The Company is currently evaluating the impact of these leases on its consolidated balance sheet at adoption.

3. Accumulated Other Comprehensive Income (Loss)

Reclassifications out of accumulated other comprehensive income (loss) by component are as follows:



Details about accumulated other comprehensive (income) loss components	Three months ended September 30,						Nine months ended September 30,						Affected line items in the statement where net income is presented
	2018			2017			2018			2017
	(in thousands)
Derivatives designated as hedging instruments under ASC 815
Foreign currency derivative losses (gains)	$	(1,080	)	$	(449	)	$	1,025		$	(2,141	)	Passenger revenue
Total before tax	(1,080		)	(449		)	1,025			(2,141		)
Tax expense (benefit)	265			170			(250		)	811
Total, net of tax	$	(815	)	$	(279	)	$	775		$	(1,330	)
Amortization of defined benefit plan items
Actuarial loss	$	730		$	2,277		$	1,978		$	6,733		Nonoperating Income (Expense), Other, net
Prior service cost	56			65			168			185			Nonoperating Income (Expense), Other, net
Partial settlement and curtailment loss	—			15,001			—			15,001			Other nonoperating special items
Loss on plan termination	—			35,201			—			35,201			Other nonoperating special items
Total before tax	786			52,544			2,146			57,120
Tax benefit	(145		)	(19,883		)	(478		)	(21,648		)
Total, net of tax	$	641		$	32,661		$	1,668		$	35,472
Short-term investments
Realized losses (gain) on sales of investments, net	$	21		$	(6	)	$	52		$	(26	)	Nonoperating Income (Expense), Other, net
Total before tax	21			(6		)	52			(26		)
Tax expense (benefit)	(5		)	2			(12		)	10
Total, net of tax	$	16		$	(4	)	$	40		$	(16	)
Total reclassifications for the period	$	(158	)	$	32,378		$	2,483		$	34,126

A rollforward of the amounts included in accumulated other comprehensive income (loss), net of taxes, for the three and nine months ended September 30, 2018 and 2017 is as follows:



Three months ended September 30, 2018	Foreign Currency Derivatives			Defined Benefit Plan Items			Short-Term Investments			Total
	(in thousands)
Beginning balance	$	3,268		$	(74,926	)	$	(853	)	$	(72,511	)
Other comprehensive income before reclassifications, net of tax	5,107			—			151			5,258
Amounts reclassified from accumulated other comprehensive income (loss), net of tax	(815		)	641			16			(158		)
Net current-period other comprehensive income	4,292			641			167			5,100
Ending balance	$	7,560		$	(74,285	)	$	(686	)	$	(67,411	)



Three months ended September 30, 2017	Foreign Currency Derivatives			Defined Benefit Plan Items			Short-Term Investments			Total
	(in thousands)
Beginning balance	$	1,235		$	(107,344	)	$	(244	)	$	(106,353	)
Other comprehensive income (loss) before reclassifications, net of tax	(47		)	(7,619		)	74			(7,592		)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax	(279		)	32,661			(4		)	32,378
Net current-period other comprehensive income (loss)	(326		)	25,042			70			24,786
Ending balance	$	909		$	(82,302	)	$	(174	)	$	(81,567	)



Nine months ended September 30, 2018	Foreign Currency Derivatives		Defined Benefit Pension Items			Short-Term Investments			Total
	(in thousands)
Beginning balance	$	1,249	$	(75,953	)	$	(560	)	$	(75,264	)
Other comprehensive income (loss) before reclassifications, net of tax	5,536		—			(166		)	5,370
Amounts reclassified from accumulated other comprehensive income (loss), net of tax	775		1,668			40			2,483
Net current-period other comprehensive income (loss)	6,311		1,668			(126		)	7,853
Ending balance	$	7,560	$	(74,285	)	$	(686	)	$	(67,411	)



Nine months ended September 30, 2017	Foreign Currency Derivatives			Defined Benefit Pension Items			Short-Term Investments			Total
	(in thousands)
Beginning balance	$	7,071		$	(110,202	)	$	(362	)	$	(103,493	)
Other comprehensive income (loss) before reclassifications, net of tax	(4,832		)	(7,572		)	204			(12,200		)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax	(1,330		)	35,472			(16		)	34,126
Net current-period other comprehensive income (loss)	(6,162		)	27,900			188			21,926
Ending balance	$	909		$	(82,302	)	$	(174	)	$	(81,567	)

4. Earnings Per Share

Basic earnings per share, which excludes dilution, is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period.

Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the three and nine months ended September 30, 2018 and 2017, anti-dilutive shares excluded from the calculation of diluted earnings per share were immaterial.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(in thousands, except for per share data)
Numerator:
Net Income	$	93,542	$	71,622	$	201,564	$	182,162
Denominator:
Weighted average common stock shares outstanding - Basic	50,594		53,185		50,807		53,456
Assumed exercise of stock options and awards	137		324		128		343
Weighted average common stock shares outstanding - Diluted	50,731		53,509		50,935		53,799
Net Income Per Share
Basic	$	1.85	$	1.35	$	3.97	$	3.41
Diluted	$	1.84	$	1.34	$	3.96	$	3.39

Stock Repurchase Program

In April 2017, the Company's Board of Directors approved the repurchase of up to $100 million of its outstanding common stock over a two-year period through May 2019 via the open market, established plans or privately negotiated transactions in accordance with all applicable securities laws, rules and regulations, which was completed in December 2017. In November 2017, the Company's Board of Directors approved a new stock repurchase program pursuant to which the Company may repurchase up to an additional $100 million of its outstanding common stock over a two-year period through December 2019. The stock repurchase program is subject to modification or termination at any time. The Company will repurchase shares of it's common stock subject to prevailing market conditions, and may discontinue such repurchases at any time. The Company spent $31.2 million and $53.9 million to repurchase and retire approximately 0.8 million shares and 1.4 million shares of the Company's common stock in open market transactions during the three and nine months ended September 30, 2018, respectively. The Company spent $46.2 million and $50.5 million to repurchase and retire approximately 1.1 million shares and 1.2 million shares of the Company's common stock in open market transactions during the three and nine months ended September 30, 2017, respectively. As of September 30, 2018, the Company had $46.1 million remaining to spend under its stock repurchase program.

Dividends

During the three months ended September 30, 2018, the Company declared a cash dividend of $0.12 per share for stockholders of record as of August 17, 2018, which was paid on August 31, 2018, totaling $6.1 million. During the nine months ended September 30, 2018, the Company paid total quarterly cash dividends of $18.3 million.

5. Revenue Recognition

The majority of our revenue is derived from transporting passengers on our aircraft. The Company accounts for revenue in accordance with ASC 606, which was adopted on January 1, 2018, using the full retrospective method. See Note 2 for further discussion of the adoption, including the impact on our previously issued financial statements.

The Company's primary operations are that of its wholly-owned subsidiary, Hawaiian. Principally all operations of Hawaiian

either originate and/or end in the State of Hawai'i. The management of such operations is based on a system-wide approach due

to the interdependence of Hawaiian's route structure in its various markets. As Hawaiian is engaged in only one significant line of business (i.e., air transportation), management has concluded that it has only one segment. The Company's operating revenues by geographic region (as defined by the Department of Transportation) are summarized below:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Geographic Information	(in thousands)
Domestic	$	535,155	$	520,510	$	1,555,833	$	1,473,031
Pacific	223,932		195,706		584,113		519,510
Total operating revenue	$	759,087	$	716,216	$	2,139,946	$	1,992,541

Passenger & Other revenue - Generally, the Company’s contracts with customers have two principal performance obligations, which are the promise to provide transportation to the passenger and the frequent flyer miles earned on the flight. In addition, the Company often charges additional fees for items such as baggage and in-flight entertainment. Such items are not capable of being distinct from the transportation provided because the customer can only benefit from the services during the flight. The transportation performance obligation, including the redemption of HawaiianMiles awards for flights, is satisfied, and revenue is recognized, as transportation is provided. In some instances, tickets sold by the Company can include a flight segment on another carrier which is referred to as an interline segment. In this situation, the Company acts as an agent for the other carrier and revenue is recognized net of cost in other revenue. Tickets sold by other airlines where the Company provides the transportation are recognized as passenger revenue at the estimated value to be billed to the other airline when travel is provided. Differences between amounts billed and the actual amounts may be rejected and rebilled or written off if the amount recorded was different from the original estimate.

Other operating revenue consists of cargo revenue, ground handling fees, commissions, and fees earned under certain joint marketing agreements with other companies. These amounts are recognized when the service is provided.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Passenger Revenue by Type	(in thousands)
Passenger revenue, excluding frequent flyer	$	658,886	$	631,604	$	1,855,247	$	1,756,185
Frequent flyer revenue, transportation component	38,346		37,039		108,747		100,216
Passenger Revenue	$	697,232	$	668,643	$	1,963,994	$	1,856,401

Other revenue (e.g. cargo and other miscellaneous)	$	43,046	$	34,996	$	123,275	$	101,031
Frequent flyer revenue, marketing and brand component	18,809		12,577		52,677		35,109
Other Revenue	$	61,855	$	47,573	$	175,952	$	136,140

For the three months ended September 30, 2018 and 2017, the Company's total revenue was $759.1 million and $716.2 million, respectively. For the nine months ended September 30, 2018 and 2017, the Company's total revenue was $2.1 billion and $2.0 billion, respectively. As of September 30, 2018 and December 31, 2017, the Company's Air traffic liability balance as it relates to passenger tickets (excluding frequent flyer) was $477.9 million and $422.6 million, respectively, which represents future revenue that is expected to be realized over the next 12 months. During the three months ended September 30, 2018 and 2017, the amount of revenue recognized that was included in Air traffic liability as of the beginning of the respective period was $323.4 million and $322.7 million, respectively. During the nine months ended September 30, 2018 and 2017, the amount of revenue recognized that was included in Air traffic liability as of the beginning of the respective period was $357.4 million and $322.2 million, respectively.

Passenger revenue associated with unused tickets, which represent unexercised passenger rights, is recognized in proportion

to the pattern of rights exercised by related passengers (e.g. scheduled departure dates). To calculate the portion to be recognized as revenue in the period, the Company utilizes historical information and applies the trend rate to the current air traffic liability balances for that specific period.

Management has elected (via a practical expedient election) to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected from a customer, e.g., sales, use, value added, and certain excise taxes.

Frequent Flyer Revenue - Hawaiian's frequent flyer travel award program provides a variety of awards to program members based on accumulated mileage. ASC 606 requires the Company to account for miles earned by passengers in the HawaiianMiles program through flight activity as a component of the passenger revenue ticket transaction at the estimated selling price of the miles. Ticket consideration received is allocated between the performance obligations, primarily travel and

miles earned by passengers. The allocated value of the miles is deferred until the free travel or other award is used by the passenger, at which time it is included in passenger revenue. The value of the ticket used in the determination of the estimated selling price is based on the historical value of equivalent flights to those provided for loyalty awards and the related miles redeemed to obtain that award adjusted for breakage or fulfillment. The ETV includes a fulfillment discount (breakage) to reflect the value of the award ticket over the number of miles that, based on historical experience, will be needed to obtain the award. On a quarterly basis, the Company calculates the equivalent ticket value (ETV) by analyzing the fares of similar tickets for the prior 12 months, considering cabin class and geographic region.

The Company also sells mileage credits to companies participating in our frequent flyer program These contracts generally include multiple performance obligations, including the transportation that will ultimately be provided when the mileage credits are redeemed and marketing and brand related activities. The marketing and brand performance obligations are effectively provided each time a HawaiianMiles member uses the co-branded credit card and monthly access to customer lists and marketing is provided, which corresponds to the timing of when the Company issues or is obligated to issue the mileage credits to the HawaiianMiles member. Therefore, the Company recognizes revenue for the marketing and brand performance obligations when HawaiianMiles members use their co-brand credit card and the resulting mileage credits are issued to them, which best correlates with the Company’s performance in satisfying the obligation.

During the first quarter of 2018, we amended our partnership with Barclaycard US, Hawaiian's co-branded credit card partner. Management determined that the amendment should be accounted for as a termination of the existing contract and the creation of a new contract under ASC 606 and the relative selling price was determined for each performance obligation of the new agreement. The new agreement continues through 2024 and includes improved economics and enhanced product offerings for our Barclay's co-branded cardholders.

Accounting for frequent flyer revenue involves the use of various techniques to estimate revenue. To determine the total estimated transaction price, the Company forecasts future credit card activity using historical information. The relative selling price is determined using management’s standalone estimated selling price of each performance obligation. The objective of using the estimated selling price based methodology is to determine the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis. Accordingly, the Company determines the best estimate of selling price by considering multiple inputs and methods including, but not limited to, discounted cash flows, brand value, published selling prices, number of miles awarded and number of miles redeemed. The Company estimates the selling price of miles using an ETV adjusted for a fulfillment discount as described above.

Miles expire after 18 months of member account inactivity. The Company reviews its breakage estimates annually based upon the latest available information regarding redemption and expiration patterns (e.g., credit card and non-credit card holders). The Company’s estimate of the expected expiration of miles requires significant management judgment. Current and future changes to expiration assumptions or to the expiration policy, or to program rules and program could affect the estimated value of a mile.

The Company's frequent flyer liability is recorded in Air traffic liability (short-term) and Other liabilities and deferred credits (long-term) in the Company's consolidated balance sheet based on estimated and expected redemption patterns using historical data and analysis. As of September 30, 2018 and December 31, 2017, the Company's contract liability balance was $372.6 million and $321.9 million, respectively.

Accounts Receivable - Accounts receivable primarily consist of amounts due from credit card companies, non-airline partners, and cargo transportation customers. The Company provides an allowance for uncollectible accounts equal to the estimated losses expected to be incurred based on historical chargebacks, write-offs, bankruptcies and other specific analyses. Bad debt expense was not material in any period presented.

Costs to obtain or fulfill a contract - In order for the Company to provide transportation to our customers we incur fulfillment costs which are generally: booking fees, credit card fees, and commission/selling costs. As of September 30, 2018 and December 31, 2017, the Company's asset balance associated with these costs were $17.9 million and $16.7 million, respectively. During the three months ended September 30, 2018 and 2017, expenses related to these costs totaled to $25.3 million and $25.1 million, respectively. During the nine months ended September 30, 2018 and 2017, expenses related to these costs totaled to $73.0 million and $72.0 million, respectively. To determine the amount to capitalize and expense at the end of each period, the Company uses historical sales data and estimates the amount associated with unflown tickets.

6. Short-Term Investments

Debt securities that are not classified as cash equivalents are classified as available-for-sale investments and are stated as current assets at fair value as these securities are available for use in current operations. Realized gains and losses on sales of investments are reflected in nonoperating income (expense) in the Company's unaudited Consolidated Statements of Operations. Unrealized gains and losses on available-for-sale debt securities are reflected as a component of Accumulated other comprehensive loss, net.

The following is a summary of short-term investments held as of September 30, 2018 and December 31, 2017:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2018	(in thousands)
Corporate debt	$	145,256	$	14	$	(793	)	$	144,477
U.S. government and agency debt	49,850		—		(156		)	49,694
Municipal bonds	13,503		—		(61		)	13,442
Other fixed income securities	37,724		1		(31		)	37,694
Total short-term investments	$	246,333	$	15	$	(1,041	)	$	245,307



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2017	(in thousands)
Corporate debt	$	165,610	$	8	$	(535	)	$	165,083
U.S. government and agency debt	59,054		1		(215		)	58,840
Municipal bonds	21,517		—		(104		)	21,413
Other fixed income securities	23,973		1		(13		)	23,961
Total short-term investments	$	270,154	$	10	$	(867	)	$	269,297

Contractual maturities of short-term investments as of September 30, 2018 are shown below.



	Under 1 Year		1 to 5 Years		Total
	(in thousands)
Corporate debt	$	68,381	$	76,096	$	144,477
U.S. government and agency debt	49,694		—		49,694
Municipal bonds	9,870		3,572		13,442
Other fixed income securities	29,780		7,914		37,694
Total short-term investments	$	157,725	$	87,582	$	245,307

7. Fair Value Measurements

ASC Topic 820, Fair Value Measurement (ASC 820), defines fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 — Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term for the assets or liabilities; and

Level 3 — Unobservable inputs for which there is little or no market data and that are significant to the fair value of the assets or liabilities.

The tables below present the Company’s financial assets and liabilities measured at fair value on a recurring basis:



	Fair Value Measurements as of September 30, 2018
	Total		Level 1		Level 2		Level 3
	(in thousands)
Cash equivalents	$	202,252	$	139,303	$	62,949	$	—
Short-term investments	245,307		—		245,307		—
Fuel derivative contracts:
Crude oil call options	23,637		—		23,637		—
Foreign currency derivatives	9,187		—		9,187		—
Total assets measured at fair value	$	480,383	$	139,303	$	341,080	$	—
Foreign currency derivatives	13		—		13		—
Total liabilities measured at fair value	$	13	$	—	$	13	$	—



	Fair Value Measurements as of December 31, 2017
	Total		Level 1		Level 2		Level 3
	(in thousands)
Cash equivalents	$	62,310	$	27,807	$	34,503	$	—
Restricted cash	1,000		1,000		—		—
Short-term investments	269,297		—		269,297		—
Fuel derivative contracts:
Crude oil call options	20,272		—		20,272		—
Jet fuel swaps	336		—		336		—
Foreign currency derivatives	4,300		—		4,300		—
Total assets measured at fair value	$	357,515	$	28,807	$	328,708	$	—
Foreign currency derivatives	1,713		—		1,713		—
Total liabilities measured at fair value	$	1,713	$	—	$	1,713	$	—

Cash equivalents. The Company's level 1 cash equivalents consist of money market securities and the level 2 cash equivalents consist of U.S. agency bonds, mutual funds, and commercial paper. The instruments classified as level 2 are valued using quoted prices for similar assets in active markets.

Restricted cash. The Company’s restricted cash included collateral held by one of the Company's credit card processors.

Short-term investments. Short-term investments include U.S. and foreign government notes and bonds, U.S. agency bonds, variable-rate corporate bonds, asset backed securities, foreign and domestic corporate bonds, municipal bonds, and commercial paper. These instruments are valued using quoted prices for similar assets in active markets or other observable inputs.

Fuel derivative contracts. The Company’s fuel derivative contracts consist of crude oil call options and jet fuel swaps, which are not traded on a public exchange. The fair value of these instruments are determined based on inputs available or derived from public markets including contractual terms, market prices, yield curves, and measures of volatility among others.

Foreign currency derivatives. The Company’s foreign currency derivatives consist of Japanese Yen and Australian Dollar forward contracts and are valued primarily based upon data available or derived from public markets.

The table below presents the Company’s debt (excluding obligations under capital leases and financing obligations) measured at fair value:



Fair Value of Debt
September 30, 2018										December 31, 2017
Carrying		Fair Value								Carrying		Fair Value
Amount		Total		Level 1		Level 2		Level 3		Amount		Total		Level 1		Level 2		Level 3
(in thousands)
$	474,401	$	473,282	$	—	$	—	$	473,282	$	433,072	$	444,099	$	—	$	—	$	444,099

The fair value estimates of the Company’s debt were based on the discounted amount of future cash flows using the Company’s current incremental rate of borrowing for similar instruments.

The carrying amounts of cash, other receivables, and accounts payable approximate fair value due to the short-term nature of these financial instruments.

8. Financial Derivative Instruments

The Company uses derivatives to manage risks associated with certain assets and liabilities arising from the potential adverse impact of fluctuations in global fuel prices and foreign currencies.

Fuel Risk Management

The Company’s operations are inherently dependent upon the price and availability of aircraft fuel. To manage economic risks associated with fluctuations in aircraft fuel prices, the Company periodically enters into derivative financial instruments. During the three and nine months ended September 30, 2018, the Company primarily used crude oil call options and jet fuel swaps to hedge its aircraft fuel expense. These derivative instruments were not designated as hedges under ASC Topic 815, Derivatives and Hedging (ASC 815), for hedge accounting treatment. As a result, any changes in fair value of these derivative instruments are adjusted through other nonoperating income (expense) in the period of change.

The following table reflects the amount of realized and unrealized gains and losses recorded as nonoperating income (expense) in the Company's unaudited Consolidated Statements of Operations.



	Three months ended September 30,						Nine months ended September 30,
Fuel derivative contracts	2018			2017			2018			2017
	(in thousands)
Gains (losses) realized at settlement	$	8,085		$	(2,787	)	$	24,572		$	(2,100	)
Reversal of prior period unrealized amounts	(18,873		)	6,251			(11,791		)	(7,946		)
Unrealized gains (losses) that will settle in future periods	14,283			(182		)	14,283			(182		)
Gains (losses) on fuel derivatives recorded as nonoperating income (expense)	$	3,495		$	3,282		$	27,064		$	(10,228	)

Foreign Currency Exchange Rate Risk Management

The Company is subject to foreign currency exchange rate risk due to revenues and expenses that are denominated in foreign currencies, with the primary exposures being the Japanese Yen and Australian Dollar. To manage exchange rate risk, the Company executes its international revenue and expense transactions in the same foreign currency to the extent practicable. As discussed in more detail in Note 9, the Company also entered into two Japanese Yen denominated debt agreements during the nine month period ended September 30, 2018.

The Company enters into foreign currency forward contracts to further manage the effects of fluctuating exchange rates. The effective portion of the gain or loss of designated cash flow hedges is reported as a component of accumulated other comprehensive income (AOCI) and reclassified into earnings in the same period in which the related sales are recognized as passenger revenue. The effective portion of the foreign currency forward contracts represents the change in fair value of the hedge that offsets the change in the fair value of the hedged item. To the extent the change in the fair value of the hedge does not perfectly offset the change in the fair value of the hedged item, the ineffective portion of the hedge is immediately recognized as nonoperating income (expense). Foreign currency forward contracts that are not designated as cash flow hedges are recorded at fair value, and any changes in fair value are recognized as other nonoperating income (expense) in the period of change.

The Company believes that its foreign currency forward contracts that are designated as cash flow hedges will continue to be effective in offsetting changes in cash flow attributable to the hedged risk. The Company expects to reclassify a net gain of approximately $8.2 million into earnings over the next 12 months from AOCI based on the values at September 30, 2018.

The following tables present the gross fair value of asset and liability derivatives that are designated as hedging instruments under ASC 815 and derivatives that are not designated as hedging instruments under ASC 815, as well as the net derivative positions and location of the asset and liability balances within the Company's unaudited Consolidated Balance Sheets.

Derivative position as of September 30, 2018

Balance Sheet
Location

Notional Amount

Final
Maturity
Date

Gross fair
value of
assets

Gross fair
value of
(liabilities)

Net
derivative
position

(in thousands)

Derivatives designated as hedges

Foreign currency derivatives

Prepaid expenses and other

15,557,050 Japanese Yen
51,131 Australian Dollars

September 2019

7,625

)

7,619

Long-term prepayments and other

4,537,300 Japanese Yen
8,963 Australian Dollars

September 2020

1,412

)

1,406

Derivatives not designated as hedges

Foreign currency derivatives

Prepaid expenses and other

674,600 Japanese Yen
1,708 Australian Dollars

December 2018

150

)

149

Fuel derivative contracts

Prepaid expenses and other

91,182 gallons

September 2019

23,637

—

23,637

Derivative position as of December 31, 2017

Balance Sheet
Location

Notional Amount

Final
Maturity
Date

Gross fair
value of
assets

Gross fair
value of
(liabilities)

Net
derivative
position

(in thousands)

Derivatives designated as hedges

Foreign currency derivatives

Prepaid expenses and other

16,732,375 Japanese Yen
47,805 Australian Dollars

December 2018

3,737

(1,441

)

2,296

Long-term prepayments and other

4,666,700 Japanese Yen
9,180 Australian Dollars

December 2019

546

(195

)

351

Derivatives not designated as hedges

Foreign currency derivatives

Other accrued liabilities

866,150 Japanese Yen
3,148 Australian Dollars

March 2018

(77

)

(60

)

Fuel derivative contracts

Prepaid expenses and other

94,332 gallons

December 2018

20,608

—

20,608

The following table reflects the impact of cash flow hedges designated for hedge accounting treatment and their location within the Company's unaudited Consolidated Statements of Comprehensive Income.



	(Gain) loss recognized in AOCI on derivatives (effective portion)					(Gain) loss reclassified from AOCI into income (effective portion)						(Gain) loss recognized in nonoperating (income) expense (ineffective portion)
	Three months ended September 30,					Three months ended September 30,						Three months ended September 30,
	2018			2017		2018			2017			2018		2017
	(in thousands)
Foreign currency derivatives	$	(6,769	)	$	75	$	(1,080	)	$	(449	)	$	—	$	—



	(Gain) loss recognized in AOCI on derivatives (effective portion)					(Gain) loss reclassified from AOCI into income (effective portion)					(Gain) loss recognized in nonoperating (income) expense (ineffective portion)
	Nine months ended September 30,					Nine months ended September 30,					Nine months ended September 30,
	2018			2017		2018		2017			2018		2017
	(in thousands)
Foreign currency derivatives	$	(7,338	)	$	7,780	$	1,025	$	(2,141	)	$	—	$	—

Risk and Collateral

Financial derivative instruments expose the Company to possible credit loss in the event the counterparties fail to meet their obligations. To manage such credit risks, the Company (1) selects its counterparties based on past experience and credit ratings, (2) limits its exposure to any single counterparty, and (3) regularly monitors the market position and credit rating of each counterparty. Credit risk is deemed to have a minimal impact on the fair value of the derivative instruments, as cash collateral would be provided by the counterparties based on the current market exposure of the derivative.

ASC 815 requires a reporting entity to elect a policy of whether to offset rights to reclaim cash collateral or obligations to return cash collateral against derivative assets and liabilities executed with the same counterparty under a master netting agreement, or present such amounts on a gross basis. The Company’s accounting policy is to present its derivative assets and liabilities on a net basis, including any collateral posted with the counterparty. The Company had no collateral posted with counterparties as of September 30, 2018 and December 31, 2017.

The Company is also subject to market risk in the event these financial instruments become less valuable in the market. However, changes in the fair value of the derivative instruments will generally offset the change in the fair value of the hedged item, limiting the Company’s overall exposure.

9. Debt

As of September 30, 2018, the expected maturities of long-term debt for the remainder of 2018 and the next four years, and thereafter, were as follows (in thousands):



Remaining months in 2018	$	9,346
2019	80,810
2020	29,330
2021	56,312
2022	63,443
Thereafter	235,160
	$	474,401

During the nine months ended September 30, 2018, the Company entered into two Japanese Yen denominated debt agreements for a total value of $86.5 million, which is collateralized by aircraft. Each such loan is for a term of 12 years at fixed installment coupon rates of 1.01% and 1.05%. The fluctuation in foreign exchange rates at each balance sheet date is reflected within the nonoperating income (expense) line item. During each of the three and nine months ended September 30, 2018, the Company recorded foreign currency unrealized gains of $2.3 million.

10. Leases

The Company leases aircraft, engines, and other assets under long-term lease arrangements. Other leased assets include real property, airport and terminal facilities, maintenance facilities, and general offices. Certain leases include escalation clauses and renewal options. When lease renewals are considered to be reasonably assured, the rental payments that will be due during the renewal periods are included in the determination of rent expense over the life of the lease.

In July 2018, the Company entered into a sale leaseback transaction with an independent third party for one A330-200 aircraft under an operating lease for a term of 12 years. Future minimum rental payments for this lease are reflected in the table below.

As of September 30, 2018, the scheduled future minimum rental payments under operating and capital leases with non-cancellable basic terms of more than one year were as follows:



	Capital & Financing Leases						Operating Leases
	Aircraft			Other			Aircraft		Other
	(in thousands)
Remaining in 2018	$	6,213		$	1,840		$	28,414	$	2,007
2019	24,850			6,561			106,382		7,751
2020	24,850			4,641			90,417		7,340
2021	24,850			4,566			74,315		6,695
2022	24,705			4,870			68,208		6,920
Thereafter	97,261			119,931			219,196		95,580
	202,729			142,409			$	586,932	$	126,293
Less amounts representing interest	(37,471		)	(53,171		)
Present value of minimum capital lease payments	$	165,258		$	89,238

11. Employee Benefit Plans

The components of net periodic benefit cost for the Company’s defined benefit and other post-retirement plans included the following:



	Three months ended September 30,						Nine months ended September 30,
Components of Net Period Benefit Cost	2018			2017			2018			2017
	(in thousands)
Service cost	$	2,275		$	3,296		$	6,199		$	7,626
Other cost:
Interest cost	5,145			5,983			15,163			14,518
Expected return on plan assets	(5,594		)	(4,533		)	(16,770		)	(9,592		)
Recognized net actuarial loss	786			2,342			2,146

HAWAIIAN HOLDINGS INC - FORM 10-Q - October 24, 2018

Attached files