Posted on: Saturday, August 25, 2001

New routes push Aloha into the red

By MIchele Kayal and David Butts
Advertiser Staff Writers

Aloha Airlines posted a loss in the second quarter as it phased in three new aircraft to serve Mainland destinations.

Hawai'i's second-largest airline lost $162,412 in the three months to June 30. Most of the decline can be attributed to pilot training for three new long-range 737 aircraft used on the airline's new routes from Kona to Oakland, and from Honolulu and Maui to Orange County, Calif., said Aloha chief executive officer Glenn Zander.

The second-quarter loss compares with a $4.4 million loss in the first quarter of this year, when Aloha was setting up its new Orange County service. The loss also represents an 84 percent change from the same period last year, when the airline showed a $1.03 million profit.

Zander had expected the airline to show a loss during the quarter because of the startup costs, but said the routes have been up and running in the third quarter and he expects financial results to reflect that.

"As you get into the third quarter you'll see the full operation of the five long-range aircraft in place, and having also had some time to market it, you'll have a much better impression of what's going on with the airline," he said.

Though the year is nearly over, Zander said it is difficult to predict total results for 2001. The new Mainland routes have done exceptionally well, he said, flying 87 percent full in July, and more than 90 percent full this month. But the interisland market has shrunk as fewer customers arrive from Japan and the Mainland.

"It's very difficult to forecast what the full year is going to look like," he said. "We're going to see a much improved profit picture for West Coast and diminished for interisland."

Though interisland traffic is down, Zander said, a rise in the return has nearly offset the decline. Traffic is down about 10 percent, he said, but interisland revenues are down only 1.5 percent.

The new routes contributed to a 13 percent jump in sales from a year earlier. Aloha's total operating revenue was $82.08 million in the second quarter, up from $72.34 million a year ago.

However, expenses climbed even faster, growing by 15 percent to $82.24 million in the second quarter from $71.30 million a year ago.

Aloha's Orange County route includes a connection to Las Vegas' McCarran International Airport.

Aloha began an expansion strategy last year, launching service between Honolulu and Oakland and adding a direct route to Oakland from Kona earlier this year.

The airline is adding Mainland routes to diversify as interisland travel growth has softened.