EX-99.1 2 exhibit991q22019.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1
NEWS
hawaiianairlineslogoa04.gif
FOR IMMEDIATE RELEASE Tuesday, July 30, 2019
 
INVESTOR RELATIONS CONTACT:
Alanna James - (808) 835-3700
Investor.Relations@HawaiianAir.com

MEDIA RELATIONS CONTACT:
Alex Da Silva - (808) 835-3712
News@HawaiianAir.com
 
Hawaiian Holdings Reports 2019 Second Quarter Financial Results
 
HONOLULU — July 30, 2019 — Hawaiian Holdings, Inc. (NASDAQ: HA) (the “Company”), parent company of Hawaiian Airlines, Inc. (“Hawaiian”), today reported its financial results for the second quarter of 2019.
 
Second Quarter 2019 - Key Financial Metrics
 
 
GAAP
 
YoY Change
 
Adjusted
 
YoY Change
Net Income
 
$57.8M
 
($21.6M)
 
$58.9M
 
($14.4M)
Diluted EPS
 
$1.21
 
($0.35)
 
$1.23
 
($0.21)
Pre-tax Margin
 
11.2%
 
(3.6) pts.
 
11.4%
 
(2.3) pts.

“We’re encouraged by another quarter of strong performance,” said Peter Ingram, Hawaiian Airlines president and CEO. “For the last year and a half, we’ve delivered consistently solid operational and financial results while facing heightened competitive pressures head on. I want to thank the entire Hawaiian ‘ohana for demonstrating day in and day out that no other airline is better suited to serve the needs of guests traveling to, from, and within the Hawaiian Islands than Hawaiian Airlines.”

Statistical information, as well as a reconciliation of the non-GAAP financial measures, can be found in the accompanying tables.

 
Shareholder Returns, Liquidity and Capital Resources

The Company returned $25.3 million to shareholders in the second quarter through share repurchases of $19.6 million and a dividend payment of $5.7 million.

On July 19, 2019, the Company's Board of Directors declared a quarterly cash dividend of 12 cents per share to be paid on August 30, 2019 to all shareholders of record as of August 16, 2019.

As of June 30, 2019, the Company had:
 
•
Unrestricted cash, cash equivalents and short-term investments of $539 million
•
Outstanding debt and finance lease obligations of $565 million




Second Quarter 2019 Highlights

Leadership and People

•
Welcomed Justin Doane as Vice President of Labor Relations and David LeNoir Jr. as Vice President of Financial Planning and Analysis.

Operational

•
Ranked #1 nationally for on-time performance year-to-date through May 2019 as reported in the U.S. Department of Transportation Air Travel Consumer Report, adding to its record of 15 consecutive years as the most punctual U.S. airline.
•
Became the first U.S. airline to adopt the Pacelab Flight Profile Optimizer, a cutting-edge application by software provider PACE that enhances real-time aircraft and weather data to help determine the safest, most comfortable, and efficient flight routes while lowering annual fuel consumption and carbon emissions.
•
Announced the expansion of its in-house pilot training capabilities with its planned purchase of a Boeing 787-9 flight simulator to prepare for the arrival of its new Dreamliner fleet beginning early 2021.

Customer Experience

•
Debuted a newly designed lobby at Maui’s Kahului Airport (OGG), Hawai‘i’s second busiest airport, as part of its ongoing plans to improve the day-of travel experience for its guests. Similar lobby renovations are expected in 2019 at Kona International Airport (KOA), Hilo International Airport (ITO), and Lihue Airport (LIH).

Routes and Network

•
Received a preliminary decision from the U.S. Department of Transportation for additional service from Tokyo Haneda Airport (HND) to Honolulu’s Daniel K. Inouye International Airport (HNL). The additional service, expected to begin in early 2020, will expand Hawaiian’s existing service between Tokyo and Hawai'i that consists of flights between Haneda (HND) and Honolulu (HNL) and Kona (KOA), and Tokyo Narita International Airport (NRT) and Honolulu (HNL).
•
Continued its international expansion with the announcement of non-stop service between Fukuoka Airport (FUK) and Honolulu (HNL) beginning November 2019.
•
Continued its domestic expansion with the launch of non-stop service between Sacramento International Airport (SMF) and Maui (OGG), and non-stop service between Boston's Logan International Airport (BOS) and Honolulu (HNL).

Fleet & Financing

•
Took delivery of one Airbus A321neo aircraft in May, increasing the size of its A321neo fleet to thirteen aircraft.
•
Retired its Boeing 717-200 Aircraft Facility with scheduled payments of approximately $45 million, increasing its unencumbered fleet to 37 aircraft.
•
On July 1, 2019, Fitch Ratings affirmed Hawaiian's and the Company’s corporate rating of BB- with Stable outlook.





Third Quarter and Full Year 2019 Outlook

The table below summarizes the Company’s expectations for the third quarter ending September 30, 2019, and the full year ending December 31, 2019, expressed as an expected percentage change compared to the results for the quarter ended September 30, 2018, and the full year ended December 31, 2018, as applicable.

For the full year ending December 31, 2019, the Company expects its effective tax rate to be in the range of 26% to 28%.
 
 
Third Quarter
 
 
 
GAAP Third Quarter
Item
 
2019 Guidance
 
GAAP Equivalent
 
2019 Guidance
ASMs
 
Down 1.5% - Up 0.5%
 
 
 
 
Operating revenue per ASM
 
Down 1.5 - 4.5%
 
 
 
 
Cost per ASM excluding fuel and non-recurring items (a)
 
Up 3.5 - 6.5%
 
Cost per ASM (a)
 
Down 0.5% - Up 1.7%
Gallons of jet fuel consumed
 
Down 2.5 - 4.5%
 
 
 
 
Economic fuel cost per gallon (b)(c)
 
$2.11
 
Fuel cost per gallon (b)
 
$2.07

 
 
Full Year
 
 
 
GAAP Full Year
Item
 
2019 Guidance
 
GAAP Equivalent
 
2019 Guidance
ASMs
 
Up 1.5 - 2.5%
 
 
 
 
Cost per ASM excluding fuel and non-recurring items (a)
 
Up 1.0 - 2.5%
 
Cost per ASM (a)
 
Down 2.1 - 3.2%
Gallons of jet fuel consumed
 
Down 1.0 - 2.0%
 
 
 
 
Economic fuel cost per gallon (b)(c)
 
$2.07
 
Fuel cost per gallon (b)
 
$2.03

(a) See Table 4 for a reconciliation of GAAP operating expenses to operating expenses excluding aircraft fuel and non-recurring items.
(b) Fuel cost per gallon estimates are based on the July 9, 2019 fuel forward curve.
(c) See Table 3 for a reconciliation of GAAP fuel costs to economic fuel costs.


Investor Conference Call

Hawaiian Holdings’ quarterly earnings conference call is scheduled to begin today (July 30, 2019) at 4:30 p.m. Eastern Time (USA). The conference call will be broadcast live over the Internet. Investors may access and listen to the live audio webcast on the investor relations section of the Company’s website at HawaiianAirlines.com. For those who are not available for the live webcast, a replay of the webcast will be archived for 90 days on the investor relations section of the Company's website.


About Hawaiian Airlines

Hawaiian® has led all U.S. carriers in on-time performance for each of the past 15 years (2004-2018) as reported by the U.S. Department of Transportation. Consumer surveys by Condé Nast Traveler, Travel + Leisure and TripAdvisor have placed Hawaiian among the top of all domestic airlines serving Hawai‘i.

Now in its 90th year of continuous service, Hawaiian is Hawai‘i’s biggest and longest-serving airline. Hawaiian offers non-stop service to Hawai‘i from more U.S. gateway cities (13) than any other airline, along with service from Japan, South Korea, Australia, New Zealand, American Samoa and Tahiti. Hawaiian also provides, on average, more than 170 jet flights daily between the Hawaiian Islands, with over 260 daily flights system-wide.

Hawaiian Airlines, Inc. is a subsidiary of Hawaiian Holdings, Inc. (NASDAQ: HA). Additional information is available at HawaiianAirlines.com. Follow Hawaiian's Twitter updates (@HawaiianAir), become a fan on Facebook (Hawaiian Airlines), and follow us on Instagram (hawaiianairlines). For career postings and updates, follow Hawaiian's LinkedIn page.



For media inquiries, please visit Hawaiian Airlines' online newsroom.


Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the Company’s current views with respect to certain current and future events and financial performance.  Such forward-looking statements include, without limitation, the Company’s expectations regarding available seat miles, cost per available seat mile, cost per available seat mile excluding fuel and non-recurring items, gallons of jet fuel consumed, fuel cost per gallon, and economic fuel cost per gallon for the quarter ending September 30, 2019 and full year ending December 31, 2019; the Company's expectations regarding operating revenue per available seat mile for the quarter ending September 30, 2019; the Company's expected tax rate for the year ending December 31, 2019; and statements as to other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing.  Words such as “expects,” “anticipates,” “projects,” “intends,” “plans,” “believes,” “estimates,” variations of such words, and similar expressions are also intended to identify such forward-looking statements.  These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and assumptions relating to the Company’s operations and business environment, all of which may cause the Company’s actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. These risks and uncertainties include, without limitation, the Company’s ability to accurately forecast quarterly and annual results; economic volatility; macroeconomic developments; political developments; the price and availability of aircraft fuel; fluctuations in demand for transportation in the markets in which the Company operates, including due to the occurrence of natural disasters such as hurricanes, earthquakes and tsunamis; the Company’s dependence on tourist travel; labor negotiations and related developments; competitive pressures, including the impact of rising industry capacity between North America and Hawai‘i and interisland; the Company's ability to continue to generate sufficient cash flow to support the payment of a quarterly dividend; changes in the Company's future capital needs; foreign currency exchange rate fluctuations; and the Company’s ability to implement its growth strategy.

The risks, uncertainties and assumptions referred to above that could cause the Company’s results to differ materially from the results expressed or implied by such forward-looking statements also include the risks, uncertainties and assumptions discussed from time to time in the Company’s other public filings and public announcements, including the Company’s Annual Report on Form 10-K and the Company’s Quarterly Reports on Form 10-Q, as well as other documents that may be filed by the Company from time to time with the Securities and Exchange Commission.  All forward-looking statements included in this document are based on information available to the Company on the date hereof.  The Company does not undertake to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date hereof even if experience or future changes make it clear that any projected results expressed or implied herein will not be realized.


Table 1.
Hawaiian Holdings, Inc.
Consolidated Statements of Operations (unaudited)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
% Change
 
2019
 
2018
 
% Change
 
 
(in thousands, except per share data)
Operating Revenue:
 
 

 
 

 
 
 
 
 
 
 
 
Passenger
 
$
653,423

 
$
655,162

 
(0.3
)%
 
$
1,254,727

 
$
1,266,762

 
(1.0
)%
Other
 
58,766

 
60,285

 
(2.5
)%
 
114,213

 
114,097

 
0.1
 %
Total
 
712,189

 
715,447

 
(0.5
)%
 
1,368,940

 
1,380,859

 
(0.9
)%
Operating Expenses:
 
 

 
 

 
 
 
 
 
 
 
 
Wages and benefits
 
180,070

 
171,555

 
5.0
 %
 
355,135

 
340,264

 
4.4
 %
Aircraft fuel, including taxes and delivery
 
140,600

 
153,026

 
(8.1
)%
 
266,704

 
286,472

 
(6.9
)%
Maintenance, materials and repairs
 
58,131

 
60,970

 
(4.7
)%
 
121,176

 
119,111

 
1.7
 %
Aircraft and passenger servicing
 
39,641

 
38,626

 
2.6
 %
 
78,541

 
75,144

 
4.5
 %
Depreciation and amortization
 
39,527

 
32,919

 
20.1
 %
 
77,678

 
65,164

 
19.2
 %
Commissions and other selling
 
32,471

 
31,853

 
1.9
 %
 
63,307

 
63,778

 
(0.7
)%
Aircraft rent
 
30,843

 
29,865

 
3.3
 %
 
61,239

 
61,765

 
(0.9
)%
Other rentals and landing fees
 
31,386

 
31,184

 
0.6
 %
 
62,432

 
61,999

 
0.7
 %
Purchased services
 
32,733

 
31,474

 
4.0
 %
 
65,186

 
62,595

 
4.1
 %
Contract terminations expense
 
—

 
—

 
—
 %
 
—

 
35,322

 
(100.0
)%
Other
 
37,906

 
41,047

 
(7.7
)%
 
75,985

 
80,052

 
(5.1
)%
Total
 
623,308

 
622,519

 
0.1
 %
 
1,227,383

 
1,251,666

 
(1.9
)%
Operating Income
 
88,881

 
92,928

 
(4.4
)%
 
141,557

 
129,193

 
9.6
 %
Nonoperating Income (Expense):
 
 

 
 

 
 
 
 
 
 
 
 
Interest expense and amortization of debt discounts and issuance costs
 
(7,300
)
 
(7,627
)
 
 
 
(14,830
)
 
(16,182
)
 
 
Interest income
 
3,074

 
1,931

 
 
 
6,057

 
3,405

 
 
Capitalized interest
 
1,257

 
2,355

 
 
 
2,542

 
4,593

 
 
Gains (losses) on fuel derivatives
 
(3,220
)
 
18,952

 
 
 
(2,650
)
 
23,569

 
 
Other, net
 
(3,083
)
 
(2,752
)
 
 
 
(4,108
)
 
(1,696
)
 
 
Total
 
(9,272
)
 
12,859

 
 
 
(12,989
)
 
13,689

 
 
Income Before Income Taxes
 
79,609

 
105,787

 
 
 
128,568

 
142,882

 
 
Income tax expense
 
21,776

 
26,307

 
 
 
34,377

 
34,860

 
 
Net Income
 
$
57,833

 
$
79,480

 
 
 
$
94,191

 
$
108,022

 
 
Net Income Per Common Stock Share:
 
 

 
 

 
 
 
 
 
 
 
 
Basic
 
$
1.21

 
$
1.57

 
 
 
$
1.96

 
$
2.12

 
 
Diluted
 
$
1.21

 
$
1.56

 
 
 
$
1.96

 
$
2.12

 
 
Weighted Average Number of Common Stock Shares Outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
47,854

 
50,776

 
 
 
48,122

 
50,915

 
 
Diluted
 
47,889

 
50,878

 
 
 
48,158

 
51,038

 
 


Table 2.
Hawaiian Holdings, Inc.
Selected Statistical Data (unaudited)
 
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2019
 
2018
 
% Change
 
2019
 
2018
 
% Change
 
 
(in thousands, except as otherwise indicated)
Scheduled Operations (a) :
 
 

 
 

 
 
 
 
 
 
 
 
Revenue passengers flown
 
2,957

 
3,018

 
(2.0
)%
 
5,777

 
5,909

 
(2.2
)%
Revenue passenger miles (RPM)
 
4,487,362

 
4,333,125

 
3.6
 %
 
8,615,090

 
8,363,783

 
3.0
 %
Available seat miles (ASM)
 
5,153,025

 
5,019,962

 
2.7
 %
 
10,003,748

 
9,751,275

 
2.6
 %
Passenger revenue per RPM (Yield)
 

14.56
¢
 

15.12
¢
 
(3.7
)%
 

14.56
¢
 

15.15
¢
 
(3.9
)%
Passenger load factor (RPM/ASM)
 
87.1
%
 
86.3
%
 
0.8
  pt.
 
86.1
%
 
85.8
%
 
0.3
  pt.
Passenger revenue per ASM (PRASM)
 

12.68
¢
 

13.05
¢
 
(2.8
)%
 

12.54
¢
 

12.99
¢
 
(3.5
)%
Total Operations (a) :
 
 

 
 

 
 
 
 
 
 
 
 
Revenue passengers flown
 
2,959

 
3,018

 
(2.0
)%
 
5,781

 
5,910

 
(2.2
)%
Revenue passenger miles (RPM)
 
4,491,974

 
4,333,178

 
3.7
 %
 
8,620,459

 
8,363,961

 
3.1
 %
Available seat miles (ASM)
 
5,157,677

 
5,020,026

 
2.7
 %
 
10,009,598

 
9,751,523

 
2.6
 %
Operating revenue per ASM (RASM)
 

13.81
¢
 

14.25
¢
 
(3.1
)%
 

13.68
¢
 

14.16
¢
 
(3.4
)%
Operating cost per ASM (CASM)
 

12.09
¢
 

12.40
¢
 
(2.5
)%
 

12.26
¢
 

12.84
¢
 
(4.5
)%
CASM excluding aircraft fuel and non-recurring items (b)
 

9.38
¢
 

9.35
¢
 
0.3
 %
 

9.62
¢
 

9.54
¢
 
0.8
 %
Aircraft fuel expense per ASM (c)
 

2.73
¢
 

3.05
¢
 
(10.5
)%
 

2.66
¢
 

2.94
¢
 
(9.5
)%
Revenue block hours operated
 
54,840

 
51,477

 
6.5
 %
 
106,466

 
100,223

 
6.2
 %
Gallons of jet fuel consumed
 
67,277

 
68,627

 
(2.0
)%
 
131,798

 
133,906

 
(1.6
)%
Average cost per gallon of jet fuel (actual) (c)
 
$
2.09

 
$
2.23

 
(6.3
)%
 
$
2.02

 
$
2.14

 
(5.6
)%
Economic fuel cost per gallon (c)(d)
 
$
2.14

 
$
2.07

 
3.4
 %
 
$
2.07

 
$
2.02

 
2.5
 %
 
(a)
Includes the operations of the Company's contract carrier under a capacity purchase agreement.
(b)
See Table 4 for a reconciliation of GAAP operating expenses to operating expenses excluding aircraft fuel and non-recurring items.
(c)
Includes applicable taxes and fees.
(d)
See Table 3 for a reconciliation of GAAP fuel costs to economic fuel costs.



Table 3.
Hawaiian Holdings, Inc.
Economic Fuel Expense (unaudited)
 
The Company believes that economic fuel expense is a good measure of the effect of fuel prices on its business as it most closely approximates the net cash outflow associated with the purchase of fuel for its operations in a period. The Company defines economic fuel expense as GAAP fuel expense plus losses/(gains) realized through actual cash (receipts)/payments received from or paid to hedge counterparties for fuel hedge derivative contracts settled during the period.
 
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2019
 
2018
 
% Change
 
2019
 
2018
 
% Change
 
 
(in thousands, except per-gallon amounts)
Aircraft fuel expense, including taxes and delivery
 
$
140,600

 
$
153,026

 
(8.1
)%
 
$
266,704

 
$
286,472

 
(6.9
)%
Realized losses (gains) on settlement of fuel derivative contracts
 
3,051

 
(10,827
)
 
NM

 
5,895

 
(16,488
)
 
NM

Economic fuel expense
 
$
143,651

 
$
142,199

 
1.0
 %
 
$
272,599

 
$
269,984

 
1.0
 %
Fuel gallons consumed
 
67,277

 
68,627

 
(2.0
)%
 
131,798

 
133,906

 
(1.6
)%
Economic fuel costs per gallon
 
$
2.14

 
$
2.07

 
3.4
 %
 
$
2.07

 
$
2.02

 
2.5
 %

 
 
Estimated three months ending
September 30, 2019
 
 Estimated full year ending
December 31, 2019
 
 
(in thousands, except per-gallon amounts)
Aircraft fuel expense, including taxes and delivery
 
$
142,552

to
$
145,596

 
$
544,996

to
$
550,664

Realized losses (gains) on settlement of fuel derivative contracts
 
2,800

to
2,800

 
10,400

to
10,400

Economic fuel expense
 
$
145,352

to
$
148,396

 
$
555,396

to
$
561,064

Fuel gallons consumed
 
68,887

to
70,330

 
268,307

to
271,045

Economic fuel costs per gallon
 
$
2.11

to
$
2.11

 
$
2.07

to
$
2.07




Table 4.
Hawaiian Holdings, Inc.
Non-GAAP Financial Reconciliation (unaudited)
 
The Company evaluates its financial performance utilizing various GAAP and non-GAAP financial measures, including net income, diluted net income per share, CASM, PRASM, RASM, Passenger Revenue per RPM and EBITDAR. Pursuant to Regulation G, the Company has included the following reconciliation of reported non-GAAP financial measures to comparable financial measures reported on a GAAP basis.  The adjustments are described below:

•
Changes in fair value of derivative contracts, net of tax, are based on market prices for open contracts as of the end of the reporting period. This line item includes the unrealized amounts of fuel derivatives (not designated as hedges) that will settle in future periods and the reversal of prior period unrealized amounts.
 
•
Unrealized loss (gain) on foreign debt is based on fluctuations in foreign exchange rates related to foreign-denominated debt agreements the Company executed during the three months ended June 30, 2018.

•
During the three and six months ended June 30, 2019, the Company recorded a gain on disposal of Boeing 767-300 aircraft equipment of $0.9 million and $1.9 million, respectively, in conjunction with the retirement of its Boeing 767-300 fleet.



The Company believes that excluding the impact of these derivative adjustments, fluctuations in foreign exchange rates, and the sale of aircraft and aircraft equipment helps investors better analyze the Company's operational performance and compare its results to other airlines in the periods presented.

2018 contract terminations expense

•
During the six months ended June 30, 2018, the Company terminated two contracts which resulted in a $35.3 million contract terminations expense. In February 2018, the Company exercised its right to terminate its purchase agreement with Airbus for six Airbus A330-800neo aircraft and the purchase rights for an additional six Airbus A330-800neo aircraft. The Company recorded a contract terminations expense to reflect a portion of the termination penalty. In January 2018, the Company entered into a transaction with its lessor to early terminate and purchase three Boeing 767-300 aircraft leases and concurrently entered into a forward sale agreement for the same three Boeing 767-300 aircraft, including two Pratt & Whitney 4060 engines for each aircraft. These aircraft were previously accounted for as operating leases. In order to exit the leases and purchase the aircraft, the Company agreed to pay a total of $67.1 million (net of all deposits) of which a portion was expensed immediately and recognized as a lease termination fee. The expensed amount represents the total purchase price over fair value of the aircraft purchased as of the date of the transaction.
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
Total
 
Diluted Per Share
 
Total
 
Diluted Per Share
 
Total
 
Diluted Per Share
 
Total
 
Diluted Per Share
 
 
(in thousands, except per share data)
GAAP Net Income, as reported
 
$
57,833

 
$
1.21

 
$
79,480

 
$
1.56

 
$
94,191

 
$
1.96

 
$
108,022

 
$
2.12

Add (deduct): changes in fair value of derivative contracts
 
169

 
0.00
 
(8,125
)
 
(0.16
)
 
(3,245
)
 
(0.07
)
 
(7,081
)
 
(0.14
)
Add: unrealized loss (gain) on foreign debt
 
2,167

 
0.05

 
(64
)
 
(0.00)

 
1,537

 
0.03

 
(64
)
 
(0.00)

Add: loss (gain) on sale of aircraft and equipment
 
(851
)
 
(0.02
)
 
—

 
—

 
(1,948
)
 
(0.04
)
 
—

 
—

Add: contract terminations expense
 
—

 
—

 
—

 
—

 
—

 
—

 
35,322

 
0.69

Deduct: tax effect of adjustments
 
(386
)
 
(0.01
)
 
2,047

 
0.04

 
951

 
0.02

 
(7,045
)
 
(0.14
)
Adjusted Net Income
 
$
58,932

 
$
1.23

 
$
73,338

 
$
1.44

 
$
91,486

 
$
1.90

 
$
129,154

 
$
2.53



 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
(in thousands)
Income Before Income Taxes, as reported
 
$
79,609

 
$
105,787

 
$
128,568

 
$
142,882

Add (deduct): changes in fair value of derivative contracts
 
169

 
(8,125
)
 
(3,245
)
 
(7,081
)
Add: unrealized loss (gain) on foreign debt
 
2,167

 
(64
)
 
1,537

 
(64
)
Add: loss (gain) on sale of aircraft and equipment
 
(851
)
 
—

 
(1,948
)
 
—

Add: contract terminations expense
 
—

 
—

 
—

 
35,322

Adjusted Income Before Income Taxes
 
$
81,094

 
$
97,598

 
$
124,912

 
$
171,059






Operating Costs per Available Seat Mile (CASM)
The Company has separately listed in the table below its fuel costs per ASM and non-GAAP unit costs, excluding fuel and non-recurring items. These amounts are included in CASM, but for internal purposes the Company consistently uses cost metrics that exclude fuel and non-recurring items (if applicable) to measure and monitor its costs.
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
(in thousands, except CASM data)
GAAP Operating Expenses
 
$
623,308

 
$
622,519

 
$
1,227,383

 
$
1,251,666

Less: aircraft fuel, including taxes and delivery
 
(140,600
)
 
(153,026
)
 
(266,704
)
 
(286,472
)
Less: (loss) gain on sale of aircraft and equipment
 
851

 
—

 
1,948

 
—

Less: contract terminations expense
 
—

 
—

 
—

 
(35,322
)
Adjusted Operating Expenses
 
$
483,559

 
$
469,493

 
$
962,627

 
$
929,872

Available Seat Miles
 
5,157,677

 
5,020,026

 
10,009,598

 
9,751,523

CASM - GAAP
 

12.09
¢
 

12.40
¢
 

12.26
¢
 

12.84
¢
Less: aircraft fuel
 
(2.73
)
 
(3.05
)
 
(2.66
)
 
(2.94
)
Less: (loss) gain on sale of aircraft and equipment
 
0.02

 
—

 
0.02

 
—

Less: contract terminations expense
 
—

 
—

 
—

 
(0.36
)
Adjusted CASM
 

9.38
¢
 

9.35
¢
 

9.62
¢
 

9.54
¢

 
 
Estimated three months ending
September 30, 2019
 
Estimated full year ending
December 31, 2019
 
 
(in thousands, except CASM data)
GAAP Operating Expenses
 
$
630,427

to
$
657,806

 
$
2,478,624

to
$
2,532,391

Less: aircraft fuel, including taxes and delivery
 
(142,552
)
to
(145,596
)
 
(544,996
)
to
(550,664
)
Less: (loss) gain on sale of aircraft and equipment
 
—

to
—

 
1,948

to
1,948

Adjusted Operating Expenses
 
$
487,875

to
$
512,210

 
$
1,935,576

to
$
1,983,675

Available Seat Miles
 
5,272,681

to
5,379,741

 
20,474,490

to
20,676,209

CASM - GAAP
 

11.96
¢
to

12.23
¢
 

12.11
¢
to

12.25
¢
Less: aircraft fuel
 
(2.70
)
to
(2.71
)
 
(2.66
)
to
(2.66
)
Less: (loss) gain on sale of aircraft and equipment
 
—

to
—

 
0.01

to
0.01

Adjusted CASM
 

9.25
¢
to

9.52
¢
 

9.45
¢
to

9.59
¢

Pre-tax margin
The Company excludes unrealized gains from fuel derivative contracts, losses on extinguishment of debt, and non-recurring items from pre-tax margin for the same reasons as described above.
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Pre-Tax Margin, as reported
 
11.2
 %
 
14.8
 %
 
9.4
 %
 
10.3
 %
Add: changes in fair value of derivative contracts
 
0.0
 
(1.1
)
 
(0.2
)
 
(0.5
)
Add: unrealized loss (gain) on foreign debt
 
0.3

 
0.0
 
0.1

 
0.0
Add: loss (gain) on sale of aircraft and equipment
 
(0.1
)
 
—

 
(0.1
)
 
—

Add: contract terminations expense
 
—

 
—

 
—

 
2.6

Adjusted Pre-Tax Margin
 
11.4
 %
 
13.7
 %
 
9.2
 %
 
12.4
 %





Leverage ratio
The Company uses adjusted total debt, including aircraft rent, in addition to long-term adjusted debt and finance leases, to represent long-term financial obligations. The Company excludes unrealized (gains) losses from fuel derivative contracts, losses on extinguishment of debt, and non-recurring items from earnings before interest, taxes, depreciation, amortization and rent (EBITDAR) for the reasons described above. Management believes this metric is helpful to investors in assessing the Company’s overall debt.

 
 
Twelve months ended
 
 
June 30, 2019
 
 
(in thousands, except Leverage Ratio)
Debt and finance lease obligations
 
$
565,283

Plus: Aircraft leases capitalized at 7x last twelve months' aircraft rent
 
878,045

Adjusted debt and finance lease obligations
 
$
1,443,328

 
 
 
EBITDAR:
 
 
Income Before Income Taxes
 
$
286,844

Add back:
 
 
Interest and amortization of debt discounts and issuance costs
 
31,649

Depreciation and amortization
 
152,380

Aircraft rent
 
125,435

EBITDAR
 
$
596,308

 
 
 
Adjustments:
 
 
Add: changes in fair value of derivative contracts
 
$
23,809

Add: unrealized loss (gain) on foreign debt
 
1,981

Add: loss (gain) on sale of aircraft and equipment
 
(1,639
)
Adjusted EBITDAR
 
$
620,459

 
 
 
Leverage Ratio
 
2.3
x