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The Honolulu Advertiser
Posted on: Wednesday, April 18, 2001

Aloha loses money as fuel costs soar

By Michele Kayal
Advertiser Staff Writer

Skyrocketing fuel costs and an aggressive expansion to the Mainland pushed Aloha Airlines $4.3 million into the red in 2000, but financial statements filed with the U.S. Department of Transportation showed the airline also narrowed its fourth-quarter losses compared to the previous year.

The state's most-traveled interisland airline lost more money — but also took in more money — in 2000 than it did the year before, posting the $4.3 million loss on $283 million in revenues in 2000, compared with a loss of $1.8 million on $234 million in 1999.

Aloha chief executive Glenn Zander attributed the 21 percent growth in 2000 revenues to the launch of the airline's first Mainland service. But the costs associated with those two daily flights to Oakland, Calif. — about $8.5 million in the fourth quarter alone — combined with fuel prices that hit $1.20 a gallon, and a full year of previously-waived landing fees to sap the extra earnings.

Interisland traffic in 2000 was flat compared to the previous year, Zander said, and he expects it to shrink in 2001 by a couple of percentage points.

"Oakland really made up the money," he said. "The wisdom of expanding was made abundantly clear during the year 2000."

More expansion is under way in 2001. Earlier this month, the airline launched Oakland service from Kona, and will begin flights to California's Orange County in May and June. Las Vegas flights began in February. By the end of the year, Aloha will have five 737-700s operating on long-distance flights, compared with just two now.

The airline, which is privately held but is required to file financial statements each quarter with the U.S. Department of Transportation, showed a stronger fourth quarter in 2000 compared to the previous year. Aloha posted a loss of $2.3 million for the quarter ended Dec. 31, 2000, compared with a loss of $4.4 million during the same period in 1999.

Zander attributed the halving of the losses to a complete ban on "discretionary spending," such as overtime, in the final months of 2000, and to the accumulation of price increases and fuel charges that had been passed along to customers all year. In addition, a daytime freight flight launched in the fourth quarter added to the revenue stream, Zander said.

The fourth quarter of 1999 also suffered under aggressive fuel prices, and what Zander estimates could have been a 10 percent decline in December interisland traffic due to Y2K fears. At that time, the airline also had no Oakland operation to generate revenue.

Operating revenue during the fourth quarter of 2000 came in at $71.6 million, a 28 percent increase over the $56 million operating revenue of the year-earlier period. Total operating expenses during the fourth quarter of 2000 hit $75 million, $12.5 million of which was fuel. During the same period a year earlier, the airline posted $63 million in operating expenses, with $7.2 million of that in fuel.

Fuel prices have historically been about 65 cents a gallon.