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The Honolulu Advertiser
Posted on: Saturday, May 26, 2001

Aloha Airlines losses reflect expansion costs

By Glenn Scott
Advertiser Staff Writer

Aloha Airlines hopes to show a profit in the third quarter of this year following losses in the first half as it built up its service to the West Coast, Chief Executive Officer Glenn Zander said yesterday.

Costs associated with Aloha Airlines' decision to expand its West Coast service earlier this year caused the carrier to post losses. However, Aloha executives said response to service to Oakland has been good and they are hoping the airline will post a profit in the third quarter.

Advertiser library photo • April 2001

The airline lost $4.4 million in the first quarter, most of it attributed to the cost of starting service this month between Honolulu and Orange County's John Wayne Airport, Zander said.

In statements filed with the Department of Transportation, the privately owned airline reported revenues in the quarter ended March 31 were up by 9.2 percent, to $70.9 million. But expenses rose faster, increasing 11.5 percent to $77.5 million.

In the first quarter of 2000, the airline had a $3.1 million loss on revenue of $65 million and expenses of $69.5 million.

"The costs to get ready for that (Orange County service) are all embedded in the first quarter," Zander said.

Among them were acquiring new aircraft, training pilots, adding staff and promoting the new route.

Second-quarter financial reports also will show some losses, he predicted, since the May 1 startup came a month into the quarter. "By the third quarter, everything will be running with full revenues, and we should be back to a more normalized environment."

Aloha's Orange County route includes a connection to Las Vegas' McCarran International Airport. The airline said it would begin a similar daily flight next month to Orange County from Kahului.

That expansion has come as interisland travel growth has softened. To diversify and take advantage of new midsize Boeing 737-700 aircraft, Aloha began its expansion strategy last year, launching service between Honolulu and Oakland and adding a direct route to Oakland from Kona last month.

Zander described the customer response to the Oakland routes as "very good," and the new Orange County service as "exceptional."

He said higher fuel prices also had a slight effect in reducing earnings.

In an effort to fill seats, Aloha and rival Hawaiian Airlines launched $49.99 one-way interisland fares recently, the lowest published rate in more than two years. They are mostly for early-morning and late-evening flights.

Hawaiian reported a loss of $3.2 million during the first quarter, excluding one-time adjustments, on revenue of $148 million.