The parent company of Hawaiian Airlines reported better than expected second quarter earnings yesterday, though warned it may face higher fuel prices and lower fares in months ahead.

Hawaiian Holdings Inc. reported net income of $27.3 million, or 53 cents a share, or more than Wall Street analysts had forecast, as it benefited from falling fuel prices and continued dominance of the interisland market.

Hawaiian's profit was down from the $54.3 million, or $1.09 a share, earned during last year's second quarter, but that performance was largely the result of a settlement of a lawsuit against go! airlines owner Mesa Air Group that produced a one-time gain of $52.5 million.

Without that benefit, the airline holding company's earnings a year ago would have been $1.8 million.

"Our second quarter results reflect another period of good financial performance for our company in an extremely challenging macro environment," said Mark Dunkerley, Hawaiian Holdings president and chief executive officer, in a press statement.

The earnings of 53 cents a share beat the 31-cent average forecast of three analysts surveyed by Bloomberg LP. Hawaiian's shares shot up 40 cents to close at $7.09.

On a conference call with analysts and investors, Hawaiian's management talked about challenges facing the business, including having to introduce substantial discounts to induce bookings. That, combined with a slight increase in flights, resulted in passenger revenue per seat mile declining by 14.7 percent.

But the airline benefited from a sharp decline in fuel prices compared with a year earlier, with operating expenses dropping by $62.9 million.

"We do recognize ... it was the huge year-over-year decline in fuel prices that reduced our unit costs, which in turn generated a relatively good financial result at a time when our results, and those of many other airlines, would otherwise have been unimaginably dire," Dunkerley said on the call.

He said discounting in the interisland market had taken some prices into the low $40 range.

"You'll be amused and slightly horrified to learn that as Hawaiian prepares to celebrate its 80th anniversary, our original timetable and price list has been discovered," Dunkerley said.

"It shows that in 1929, 80 years ago, we charged $32 for an interisland ticket, a fare that has been seen in the marketplace as recently as a couple months ago."

Similar pricing pressure has been experienced for Mainland-Hawai'i fares. Hawaiian said the current quarter may experience more of the same and that fuel prices could be higher in the third quarter than they were in the second.

"Higher fuel prices and lower fares suggest that the period ahead will be even more challenging, so this good start to the year is vital," Dunkerley said.

Hawaiian also announced it had terminated its $7 million share repurchase program started on March 26, when the company's shares closed at $3.40 each.

Since that time the price of the shares have more than doubled. Hawaiian had repurchased 201,651 shares under the program.