UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2018~~March 31, 2019

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-31443

HAWAIIAN HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)



Delaware		71-0879698
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)



3375 Koapaka Street, Suite G-350
Honolulu, HI		96819
(Address of Principal Executive Offices)		(Zip Code)

(808) 835-3700

(Registrant’s Telephone Number, Including Area Code)

~~(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)~~



Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock ($0.01 par value)	HA	NASDAQ Stock Market, LLC
		(NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes o No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). ý Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer x		Accelerated filer o
Non-accelerated filer o		Smaller reporting company o
~~(Do not check if a smaller reporting company)~~		Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes ý No

As of ~~July 20, 2018, 50,737,816~~April 19, 2019, 48,044,924 shares of the registrant’s common stock were outstanding.

Hawaiian Holdings, Inc.

Form 10-Q

Quarterly Period ended ~~June 30, 2018~~March 31, 2019

Table of Contents



Part I.	Financial Information	3

Item 1.	Consolidated Financial Statements of Hawaiian Holdings, Inc. (Unaudited)	3

	Consolidated Statements of Operations for the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~	3

	Consolidated Statements of Comprehensive Income for the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~	4

	Consolidated Balance Sheets as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018	5

	Consolidated Statements of Shareholders' Equity for the three months ended March 31, 2019 and 2018	6

	Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~	67

	Notes to Consolidated Financial Statements	78

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3129

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4239

Item 4.	Controls and Procedures	4340

Part II.	Other Information	4542

Item 1.	Legal Proceedings	4542

Item 1A.	Risk Factors	4542

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4542

Item 3.	Defaults Upon Senior Securities	4542

Item 4.	Mine Safety Disclosures	4542

Item 5.	Other Information	4542

Item 6.	Exhibits	4643

	Signatures	4744

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Hawaiian Holdings, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 (a) 2018 2017 (a)
(unaudited)
Operating Revenue:

Passenger $ 655,162
$ 624,006
$ 1,266,762
$ 1,187,758
Other 60,285
46,110
114,097
88,567
Total 715,447
670,116
1,380,859
1,276,325
Operating Expenses:

Wages and benefits 171,555
154,660
340,264
305,713
Aircraft fuel, including taxes and delivery 153,026
102,774
286,472
206,312
Maintenance, materials and repairs 60,970
52,566
119,111
111,970
Aircraft and passenger servicing 38,626
35,636
75,144
69,926
Aircraft rent 29,865
34,553
61,765
67,688
Commissions and other selling 31,853
32,162
63,778
61,804
Other rentals and landing fees 31,184
27,438
61,999
55,774
Depreciation and amortization 32,919
27,872
65,164
55,340
Purchased services 31,474
28,055
62,595
54,692
Contract terminations expense —
—
35,322
—
Special items —
4,771
—
23,450
Other 41,047
32,789
80,052
64,786
Total 622,519
533,276
1,251,666
1,077,455
Operating Income 92,928
136,840
129,193
198,870
Nonoperating Income (Expense):

Interest expense and amortization of debt discounts and issuance costs (7,627 ) (7,711 ) (16,182 ) (15,714 )
Gains (losses) on fuel derivatives 18,952
(4,712 ) 23,569
(13,510 )
Interest income 1,931
1,467
3,405
2,619
Capitalized interest 2,355
2,082
4,593
3,842
Other, net (2,752 ) (4,317 ) (1,696 ) (6,240 )
Total 12,859
(13,191 ) 13,689
(29,003 )
Income Before Income Taxes 105,787
123,649
142,882
169,867
Income tax expense 26,307
46,755
34,860
59,327
Net Income $ 79,480
$ 76,894
$ 108,022
$ 110,540
Net Income Per Common Stock Share:

Basic $ 1.57
$ 1.43
$ 2.12
$ 2.06
Diluted $ 1.56
$ 1.43
$ 2.12
$ 2.05
Weighted Average Number of Common Stock Shares Outstanding:
Basic 50,776
53,626
50,915
53,595
Diluted 50,878
53,914
51,038
53,948
Cash Dividends Declared Per Common Stock Share $ 0.12
$ —
$ 0.24
$ —

~~(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606). See Note 2 to Consolidated Financial Statements contained in Part I, Item 1 of this report for additional information.~~



	Three Months Ended March 31,
	2019			2018
	(unaudited)
Operating Revenue:
Passenger	$	601,304		$	611,600
Other	55,447			53,812
Total	656,751			665,412
Operating Expenses:
Wages and benefits	175,065			168,709
Aircraft fuel, including taxes and delivery	126,104			133,446
Maintenance, materials and repairs	63,045			58,141
Aircraft and passenger servicing	38,900			36,518
Depreciation and amortization	38,151			32,245
Aircraft rent	30,396			31,900
Commissions and other selling	30,836			31,925
Other rentals and landing fees	31,046			30,815
Purchased services	32,453			31,121
Contract terminations expense	—			35,322
Other	38,079			39,005
Total	604,075			629,147
Operating Income	52,676			36,265
Nonoperating Income (Expense):
Interest expense and amortization of debt discounts and issuance costs	(7,530		)	(8,555		)
Gains (losses) on fuel derivatives	570			4,617
Interest income	2,983			1,474
Capitalized interest	1,285			2,238
Other, net	(1,025		)	1,056
Total	(3,717		)	830
Income Before Income Taxes	48,959			37,095
Income tax expense	12,601			8,553
Net Income	$	36,358		$	28,542
Net Income Per Common Stock Share:
Basic	$	0.75		$	0.56
Diluted	$	0.75		$	0.56
Weighted Average Number of Common Stock Shares Outstanding:
Basic	48,392			51,055
Diluted	48,429			51,199

See accompanying Notes to Consolidated Financial Statements.

Hawaiian Holdings, Inc.

Consolidated Statements of Comprehensive Income

(in thousands)

Three Months Ended June 30,
2018 2017 (a)
(unaudited)
Net Income $ 79,480
$ 76,894
Other comprehensive income, net:

Net change related to employee benefit plans, net of tax expense of $166 and $897 for 2018 and 2017, respectively 514
1,390
Net change in derivative instruments, net of tax expense of $2,999 and $768 for 2018 and 2017, respectively 9,263
1,261
Net change in available-for-sale investments, net of tax expense of $54 and $20 for 2018 and 2017, respectively 167
32
Total other comprehensive income 9,944
2,683
Total Comprehensive Income $ 89,424
$ 79,577

Six Months Ended June 30,
2018 2017 (a)
(unaudited)
Net Income $ 108,022
$ 110,540
Other comprehensive income (loss), net:

Net change related to employee benefit plans, net of tax expense of $332 and $1,794 for 2018 and 2017, respectively 1,027
2,858
Net change in derivative instruments, net of tax expense of $654 and net of tax benefit of $3,557 for 2018 and 2017, respectively 2,019
(5,836 )
Net change in available-for-sale investments, net of tax benefit of $95 and net of tax expense of $72 for 2018 and 2017, respectively (293 ) 118
Total other comprehensive income (loss) 2,753
(2,860 )
Total Comprehensive Income $ 110,775
$ 107,680



	Three Months Ended March 31,
	2019		2018
	(unaudited)
Net Income	$	36,358	$	28,542
Other comprehensive income (loss), net:
Net change related to employee benefit plans, net of tax expense of $135 and $166 for 2019 and 2018, respectively	576		513
Net change in derivative instruments, net of tax expense of $374 and net of tax benefit of $2,345 for 2019 and 2018, respectively	1,145		(7,244		)
Net change in available-for-sale investments, net of tax expense of $175 and net of tax benefit of $149 for 2019 and 2018, respectively	540		(460		)
Total other comprehensive income (loss)	2,261		(7,191		)
Total Comprehensive Income	$	38,619	$	21,351

See accompanying Notes to Consolidated Financial Statements.

Hawaiian Holdings, Inc.

Consolidated Balance Sheets

(in thousands, except shares)

June 30, 2018 December 31, 2017 (a)
(unaudited)
ASSETS

Current Assets:

Cash and cash equivalents $ 333,791
$ 190,953
Restricted cash 1,000
1,000
Short-term investments 259,313
269,297
Accounts receivable, net 111,493
140,279
Spare parts and supplies, net 36,387
35,361
Prepaid expenses and other 99,315
79,186
Total 841,299
716,076
Property and equipment, less accumulated depreciation and amortization of $611,642 and $558,548 as of June 30, 2018 and December 31, 2017, respectively
2,086,955
1,842,263
Other Assets:

Long-term prepayments and other 183,276
193,632
Intangible assets, less accumulated amortization of $22,080 and $21,561 as of June 30, 2018 and December 31, 2017, respectively 14,668
15,187
Goodwill 106,663
106,663
Total Assets $ 3,232,861
$ 2,873,821
LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:

Accounts payable $ 153,262
$ 140,805
Air traffic liability 712,069
589,093
Other accrued liabilities 144,003
147,593
Current maturities of long-term debt and capital lease obligations 113,526
59,470
Total 1,122,860
936,961
Long-Term Debt and Capital Lease Obligations 578,453
511,201
Other Liabilities and Deferred Credits:

Accumulated pension and other post-retirement benefit obligations 218,426
220,788
Other liabilities and deferred credits 257,911
225,605
Deferred tax liability, net 135,164
134,141
Total 611,501
580,534
Commitments and Contingencies

Shareholders’ Equity:

Special preferred stock, $0.01 par value per share, three shares issued and outstanding as of June 30, 2018 and December 31, 2017 —
—
Common stock, $0.01 par value per share, 50,735,132 and 51,173,453 shares outstanding as of June 30, 2018 and December 31, 2017, respectively 507
512
Capital in excess of par value 125,871
126,743
Accumulated income 866,180
793,134
Accumulated other comprehensive loss, net (72,511 ) (75,264 )
Total 920,047
845,125
Total Liabilities and Shareholders’ Equity $ 3,232,861
$ 2,873,821

~~(a) Amounts adjusted due to the adoption of Accounting Standards Update No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~.



	March 31, 2019			December 31, 2018
	(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	365,100		$	268,577
Short-term investments	166,817			232,241
Accounts receivable, net	110,658			111,834
Spare parts and supplies, net	36,461			33,942
Prepaid expenses and other	60,553			58,573
Total	739,589			705,167
Property and equipment, less accumulated depreciation and amortization of $678,428 and $663,461 as of March 31, 2019 and December 31, 2018, respectively	2,109,857			2,185,111
Other Assets:
Operating lease right-of-use assets	613,103			—
Long-term prepayments and other	171,013			185,556
Intangible assets, less accumulated amortization of $19,199 and $18,939 as of March 31, 2019 and December 31, 2018, respectively	13,889			14,149
Goodwill	106,663			106,663
Total Assets	$	3,754,114		$	3,196,646
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	145,067		$	143,146
Air traffic liability and current frequent flyer deferred revenue	691,010			603,736
Other accrued liabilities	130,746			158,154
Current maturities of long-term debt and finance lease obligations	93,483			101,097
Current maturities of operating leases	90,481			—
Total	1,150,787			1,006,133
Long-Term Debt and Finance Lease Obligations	519,105			608,684
Other Liabilities and Deferred Credits:
Noncurrent operating leases	480,979			—
Accumulated pension and other post-retirement benefit obligations	180,232			182,620
Other liabilities and deferred credits	107,497			119,826
Noncurrent frequent flyer deferred revenue	170,149			163,619
Deferred tax liability, net	170,305			167,770
Total	1,109,162			633,835
Commitments and Contingencies
Shareholders’ Equity:
Special preferred stock, $0.01 par value per share, three shares issued and outstanding as of March 31, 2019 and December 31, 2018	—			—
Common stock, $0.01 par value per share, 48,202,199 and 48,540,280 shares outstanding as of March 31, 2019 and December 31, 2018, respectively	482			485
Capital in excess of par value	128,891			128,448
Accumulated income	936,566			912,201
Accumulated other comprehensive loss, net	(90,879		)	(93,140		)
Total	975,060			947,994
Total Liabilities and Shareholders’ Equity	$	3,754,114		$	3,196,646

See ~~Note 2~~accompanying Notes to Consolidated Financial Statements.

Hawaiian Holdings, Inc.

Consolidated Statements ~~contained~~ of Shareholders' Equity

(in ~~Part I, Item 1~~thousands)



Three months ended March 31, 2019	Common Stock(*)			Special Preferred Stock(**)		Capital In Excess of Par Value			Accumulated Income			Accumulated Other Comprehensive Income (Loss)			Total
	(unaudited)
Balance at December 31, 2018	$	485		$	—	$	128,448		$	912,201		$	(93,140	)	$	947,994
Net Income	—			—		—			36,358			—			36,358
Dividends declared on common stock ($0.12 per share)	—			—		—			(5,811		)	—			(5,811		)
Other comprehensive income	—			—		—			—			2,261			2,261
Issuance of 65,517 shares of common stock, net of shares withheld for taxes	1			—		(983		)	—			—			(982		)
Repurchase and retirement of 403,598 shares common stock	(4		)	—		—			(11,082		)	—			(11,086		)
Share-based compensation expense	—			—		1,426			—			—			1,426
Cumulative effect of accounting change (ASU 2016-02), net of tax	—			—		—			4,900			—			4,900
Balance at March 31, 2019	$	482		$	—	$	128,891		$	936,566		$	(90,879	)	$	975,060



Three months ended March 31, 2018	Common Stock(*)			Special Preferred Stock(**)		Capital In Excess of Par Value			Accumulated Income			Accumulated Other Comprehensive Income (Loss)			Total
	(unaudited)
Balance at December 31, 2017	$	512		$	—	$	126,743		$	793,134		$	(75,264	)	$	845,125
Net Income	—			—		—			28,542			—			28,542
Dividends declared on common stock ($0.12 per share)	—			—		—			(6,145		)	—			(6,145		)
Other comprehensive loss	—			—		—			—			(7,191		)	(7,191		)
Issuance of 146,923 shares of common stock, net of shares withheld for taxes	1			—		(3,230		)	—			—			(3,229		)
Repurchase and retirement of 548,861 shares common stock	(5		)	—		—			(20,238		)	—			(20,243		)
Share-based compensation expense	—			—		1,355			—			—			1,355
Balance at March 31, 2018	$	508		$	—	$	124,868		$	795,293		$	(82,455	)	$	838,214

(*) Common Stock—$0.01 par value; 118,000,000 authorized as of ~~this report for additional information.~~March 31, 2019 and December 31, 2018.

(**) Special Preferred Stock—$0.01 par value; 2,000,000 shares authorized as of March 31, 2019 and December 31, 2018.

See accompanying Notes to Consolidated Financial Statements.

Hawaiian Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)


	Six Months Ended June 30,						Three Months Ended March 31,
	2018			2017			2019			2018
	(unaudited)						(unaudited)
Net cash provided by Operating Activities	$	373,761		$	335,440		$	150,680		$	225,545
Cash flows from Investing Activities:
Additions to property and equipment, including pre-delivery payments	(258,112		)	(96,278		)	(74,261		)	(110,897		)
Proceeds from disposition of property and equipment	987			33,511
Proceeds from the disposition of aircraft related equipment							2,780			—
Purchases of investments	(110,092		)	(107,533		)	(71,454		)	(30,386		)
Sales of investments	119,236			125,881			137,286			53,984
Other							(6,275		)	—
Net cash used in investing activities	(247,981		)	(44,419		)	(11,924		)	(87,299		)
Cash flows from Financing Activities:
Long-term borrowings	86,500			—
Repayments of long-term debt and capital lease obligations	(30,047		)	(30,484		)
Repayments of long-term debt and finance lease obligations							(24,354		)	(20,395		)
Dividend payments	(12,238		)	—			(5,811		)	(6,145		)
Debt issuance costs	(889		)	—
Repurchases of common stock	(22,745		)	(4,299		)	(11,086		)	(20,243		)
Other	(3,523		)	(7,535		)	(982		)	(3,231		)
Net cash provided by (used in) financing activities	17,058			(42,318		)
Net cash used in financing activities							(42,233		)	(50,014		)
Net increase in cash and cash equivalents	142,838			248,703			96,523			88,232
Cash, cash equivalents, and restricted cash - Beginning of Period	191,953			330,991			268,577			191,953
Cash, cash equivalents, and restricted cash - End of Period	$	334,791		$	579,694		$	365,100		$	280,185

See accompanying Notes to Consolidated Financial Statements.

Hawaiian Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

1. Business and Basis of Presentation

Hawaiian Holdings, Inc. (the Company, ~~or Holdings) is a holding company~~Holdings, we, us and our) and its direct wholly-owned subsidiary, Hawaiian Airlines, Inc. (Hawaiian), are incorporated in the State of Delaware. The Company’s primary asset is its sole ownership of all issued and outstanding shares of common stock of ~~Hawaiian Airlines, Inc. (Hawaiian).~~Hawaiian. The accompanying unaudited financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (SEC). Accordingly, these interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying financial statements contain all adjustments, including normal recurring adjustments, necessary for the fair presentation of the Company’s results of operations and financial position for the periods presented. Due to seasonal fluctuations, among other factors common to the airline industry, the results of operations for the periods presented are not necessarily indicative of the results of operations to be expected for the entire year. The accompanying unaudited Consolidated Financial Statements should be read in conjunction with the financial statements and the notes of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018.

2. Significant Accounting Policies

Recently Adopted Accounting Pronouncements

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ~~2014-09, Revenue from Contracts with Customers, and created Topic 606 (ASC 606)~~2016-02, Leases (ASU 2016-02), ~~requiring an entity~~which was subsequently codified within Accounting Standards Codification (ASC) 842, Leases (ASC 842). ASC 842 requires a lessee to recognize a right-of-use asset and a lease liability in the ~~amount~~statement of ~~revenue~~financial position for all leases (with the exception of short-term leases) at the lease commencement date and recognize expenses similar to ~~which it expects to be entitled for~~ the ~~transfer of promised goods or services to customers.~~current ASC ~~606 replaced most existing revenue recognition guidance in GAAP and~~840, Leases. ASC 842 is effective for fiscal years, and interim periods ~~within those fiscal years,~~ beginning after December 15, ~~2017.~~2018.

The Company ~~elected to adopt the full retrospective transition method~~adopted ASC 842 as of January 1, ~~2018, resulting in~~2019 using the ~~restatement of the prior periods as of the date of~~transition method that provides for a cumulative-effect adjustment to retained earnings upon adoption. The ~~overall decrease in equity as~~Company elected the package of ~~January 1, 2016 was $76.0 million net~~transition provisions available for expired or existing contracts, which allows the Company to carry-forward our historical assessments of ~~tax, with an offsetting change primarily in Other liabilities~~(a) whether contracts are, or contain leases, (b) lease classification, and ~~deferred credits. Refer to Note 5 for additional revenue recognition discussion.~~(c) initial direct costs.

The ~~most significant impact of the standard relates to the accounting for the Company's frequent flyer travel award program. This change, as well as other less significant changes, are described below:~~

~~Frequent flyer~~ ~~- The standard requires the Company to account for miles earned by passengers in the~~ ~~HawaiianMiles~~ program through flight activity as a component of the passenger revenue ticket transaction at the estimated selling price of the miles, effectively eliminating the incremental cost accounting previously applied. ASC 606 resulted in a significant increase to the deferred revenue liability on the Company's balance sheet, as the estimated selling price of the miles significantly exceeds the value previously recorded for incremental cost. The allocated value of miles earned through flights and sold to partners is recognized at the time the free travel or other award is redeemed by the passenger. Previously, the transportation element associated with sold miles was deferred and recognized as passenger revenue over the period when the transportation was expected to be provided (23 months).

~~Passenger revenue~~ - The standard requires the Company to make certain adjustments to its passenger revenue, most notably related to unused tickets, which represents unexercised passenger rights. The Company uses historical information to estimate the proportion of ticket revenue that will expire unused to be recognized at the scheduled flight date. Prior to the adoption of ASC 606, the Company recorded this revenue as the tickets expired unused. As of the adoption date the adjustment due to passenger ticket expiration had the effect of reducing the air traffic liability but did not have a significant effect on revenue recognized. Ticket change fees were previously recognized at the time the fees were assessed; however, under ASC 606, the Company now defers the recognition of ticket change fees as a component of air traffic liability until the related transportation is provided. Further, the Company reclassified revenue items such as checked baggage, charter, ticket change and cancellation fees, in flight revenue, and other incidental sales to passenger revenue (from other operating revenue), as these items do not represent distinct performance obligations separate from the transportation provided to the passenger.

~~Selling Costs~~ - Under ASC 606, the Company will capitalize selling costs associated with credit card fees, booking fees, and commissions, and recognize the associated expense at the ticketed flight date. Prior to ASC 606, the Company recognized the costs associated with credit card and booking fees as they were incurred.

~~Restated financial statement information, which reflects the~~ adoption of the ~~ASC 606 is below:~~

Three Months Ended June 30, 2017
As Reported Adjustments As Restated
(in thousands)
Operating Revenue:
Passenger $ 593,210
$ 30,796
$ 624,006
Other 82,125
(36,015 ) 46,110
Total $ 675,335
$ (5,219 ) $ 670,116
Operating Expenses 532,786
490
533,276
Operating Income 142,549
(5,709 ) 136,840
Nonoperating Income (Expense) (13,191 ) —
(13,191 )
Income tax expense 48,925
(2,170 ) 46,755
Net Income $ 80,433
$ (3,539 ) $ 76,894
Net Income Per Common Stock Share:
Basic $ 1.50
$ (0.07 ) $ 1.43
Diluted $ 1.49
$ (0.06 ) $ 1.43

Six Months Ended June 30, 2017
As Reported Adjustments As Restated
(in thousands)
Operating Revenue:
Passenger $ 1,130,800
$ 56,958
$ 1,187,758
Other 158,720
(70,153 ) 88,567
Total $ 1,289,520
$ (13,195 ) $ 1,276,325
Operating Expenses 1,079,677
(2,222 ) 1,077,455
Operating Income 209,843
(10,973 ) 198,870
Nonoperating Income (Expense) (29,003 ) —
(29,003 )
Income tax expense 63,495
(4,168 ) 59,327
Net Income $ 117,345
$ (6,805 ) $ 110,540
Net Income Per Common Stock Share:
Basic $ 2.19
$ (0.13 ) $ 2.06
Diluted $ 2.18
$ (0.13 ) $ 2.05

~~Select consolidated balance sheet line items, which reflect the adoption of the new standard are as follows:~~

December 31, 2017
Balance Sheet
As Reported Adjustments As Restated
(in thousands)
ASSETS
Prepaid expenses and other $ 65,196
$ 13,990
$ 79,186
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Air traffic liability 545,362
43,731
589,093
Other accrued liabilities 146,283
1,310
147,593
Noncurrent Liabilities:
Other liabilities and deferred credits 95,636
129,969
225,605
Deferred tax liability 174,344
(40,203 ) 134,141
Shareholders' Equity:
Accumulated income 913,951
(120,817 ) 793,134

~~There was no~~New Lease Standard had a significant impact ~~to the Company's net cash provided by operating activities on the Condensed Consolidated Statements of Cash Flows.~~

~~Recently Issued Accounting Pronouncements~~

~~In February 2018, the FASB issued 2018-02,~~ ~~Income Statement - Reporting Comprehensive Income (Topic 220)Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~ (ASU 2018-02). The guidance allows reclassification from accumulated other comprehensive income to retained earnings of stranded taxes resulting from the Tax Cuts and Jobs Act (the Tax Act). In addition, under ASU 2018-02, certain disclosures regarding stranded tax effects are required. ASU 2018-02 is effective for annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company continues to evaluate the impact of ASU 2018-02 and the potential effects on the Company's consolidated ~~financial statements.~~balance sheet due to the recognition of approximately $593.5 million of operating lease liabilities and right-of-use (ROU) assets for operating leases of $635.6 million. Additionally, the Company recognized a $4.9 million (net of tax of $1.6 million) cumulative effect adjustment credit to retained earnings.

The adjustment to retained earnings was driven principally by ASC 842's elimination of the previous build-to-suit lease accounting guidance under ASC 840, Leases, and resulted in the derecognition of build-to-suit assets and liabilities that remained on the balance sheet after the end of the construction period. ASC 842 then required the application of lease accounting to the agreement, which resulted in an operating lease. This resulted in the recognition of a ROU asset, inclusive of building costs incurred by the Company to place the asset into service, of $124.7 million, and a lease liability of $90.8 million.

The unaudited Consolidated Financial Statements as of and for the quarter ended March 31, 2019 are presented under the new standard, while comparative periods presented are not adjusted and continue to be reported in accordance with our historical accounting policy. See Note 9, Leases, for additional information.

In August 2017, the FASB issued ASU 2017-12, ~~Derivatives and~~Targeted Improvements to Accounting for Hedging Activities (ASU 2017-02), which better aligns a company's risk management activities and financial reporting for hedging relationships and is intended to simplify hedge accounting requirements. ASU 2017-12 is effective for annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company ~~is continuing to evaluate~~adopted this standard during the ~~components and options within ASU 2017-12.~~

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~ ~~(ASU 2016-02), requiring a lessee to recognize in the statement~~first quarter of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018. ASU 2016-02 requires entities to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited.2019. The ~~Company is evaluating the impact the~~ adoption of this standard ~~will~~did not have ~~on its consolidated financial statements and believes this ASU will have a significant impact on its consolidated balance sheet but does not expect that the ASU will have a material~~an impact on the Company's results of operations or cash flows. The effect of adopting the new standard will be to record right-of-use assets and operating lease obligations for current operating leases on the Company's balance sheet. Management is continuing to assess its current inventory of leases; as of June 30, 2018 the Company had 17 aircraft that are treated as an operating leases. Management has also identified and is evaluating the leases surrounding the terminal operations including hangar space, office space, and IT equipment.Consolidated Financial Statements.

~~The FASB is in process of finalizing transition relief which will allow entities to continue to apply the guidance in ASC 840,~~ ~~Leases~~ including its disclosure requirements, in the comparative periods presented in the year that a company adopts ASU 2016-02 (ASC 842). Entities that elect this option will record the cumulative effect of adoption on the effective date rather than at the beginning of the earliest comparative period presented. See Note 10 below which discusses our lease obligations as of June 30, 2018.

3. Accumulated Other Comprehensive Income (Loss)

Reclassifications out of accumulated other comprehensive income (loss) by component are as follows:


Details about accumulated other comprehensive (income) loss components	Three months ended June 30,						Six months ended June 30,						Affected line items in the statement where net income is presented	Three months ended March 31,						Affected line items in the statement where net income is presented
	2018			2017			2018			2017				2019			2018
	(in thousands)													(in thousands)
Derivatives designated as hedging instruments under ASC 815
Foreign currency derivative losses (gains)	$	884		$	(480	)	$	2,105		$	(1,692	)	Passenger revenue	$	(1,587	)	$	1,221		Passenger revenue
Total before tax	884			(480		)	2,105			(1,692		)		(1,587		)	1,221
Tax expense (benefit)	(216		)	182			(515		)	641				391			(299		)
Total, net of tax	$	668		$	(298	)	$	1,590		$	(1,051	)		$	(1,196	)	$	922
Amortization of defined benefit plan items
Actuarial loss	$	624		$	2,228		$	1,248		$	4,456		Nonoperating Income (Expense), Other, net	$	831		$	624		Nonoperating Income (Expense), Other, net
Prior service cost	56			60			112			120			Nonoperating Income (Expense), Other, net	56			56			Nonoperating Income (Expense), Other, net
Total before tax	680			2,288			1,360			4,576				887			680
Tax benefit	(166		)	(898		)	(333		)	(1,765		)		(168		)	(167		)
Total, net of tax	$	514		$	1,390		$	1,027		$	2,811			$	719		$	513
Short-term investments
Realized losses (gain) on sales of investments, net	$	26		$	(12	)	$	31		$	(20	)	Nonoperating Income (Expense), Other, net	$	(98	)	$	5		Nonoperating Income (Expense), Other, net
Total before tax	26			(12		)	31			(20		)		(98		)	5
Tax expense (benefit)	(6		)	5			(7		)	8				24			(1		)
Total, net of tax	$	20		$	(7	)	$	24		$	(12	)		$	(74	)	$	4
Total reclassifications for the period	$	1,202		$	1,085		$	2,641		$	1,748			$	(551	)	$	1,439

A rollforward of the amounts included in accumulated other comprehensive income (loss), net of taxes, for the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~ is as follows:


Three months ended June 30, 2018	Foreign Currency Derivatives			Defined Benefit Plan Items			Short-Term Investments			Total
Three months ended March 31, 2019													Foreign Currency Derivatives			Defined Benefit Plan Items			Short-Term Investments			Total
	(in thousands)												(in thousands)
Beginning balance	$	(5,995	)	$	(75,440	)	$	(1,020	)	$	(82,455	)	$	3,317		$	(95,855	)	$	(602	)	$	(93,140	)
Other comprehensive income before reclassifications, net of tax	8,595			—			147			8,742
Other comprehensive income (loss) before reclassifications, net of tax													2,341			(143		)	614			2,812
Amounts reclassified from accumulated other comprehensive income (loss), net of tax	668			514			20			1,202			(1,196		)	719			(74		)	(551		)
Net current-period other comprehensive income	9,263			514			167			9,944			1,145			576			540			2,261
Ending balance	$	3,268		$	(74,926	)	$	(853	)	$	(72,511	)	$	4,462		$	(95,279	)	$	(62	)	$	(90,879	)

Three months ended June 30, 2017 Foreign Currency Derivatives Defined Benefit Plan Items Short-Term Investments Total
(in thousands)
Beginning balance $ (26 ) $ (108,734 ) $ (276 ) $ (109,036 )
Other comprehensive income before reclassifications, net of tax 1,559
—
39
1,598
Amounts reclassified from accumulated other comprehensive income (loss), net of tax (298 ) 1,390
(7 ) 1,085
Net current-period other comprehensive income 1,261
1,390
32
2,683
Ending balance $ 1,235
$ (107,344 ) $ (244 ) $ (106,353 )

Six months ended June 30, 2018 Foreign Currency Derivatives Defined Benefit Pension Items Short-Term Investments Total
(in thousands)
Beginning balance $ 1,249
$ (75,953 ) $ (560 ) $ (75,264 )
Other comprehensive income (loss) before reclassifications, net of tax 429
—
(317 ) 112
Amounts reclassified from accumulated other comprehensive income (loss), net of tax 1,590
1,027
24
2,641
Net current-period other comprehensive income (loss) 2,019
1,027
(293 ) 2,753
Ending balance $ 3,268
$ (74,926 ) $ (853 ) $ (72,511 )


Six months ended June 30, 2017	Foreign Currency Derivatives			Defined Benefit Pension Items			Short-Term Investments			Total
Three months ended March 31, 2018													Foreign Currency Derivatives			Defined Benefit Plan Items			Short-Term Investments			Total
	(in thousands)												(in thousands)
Beginning balance	$	7,071		$	(110,202	)	$	(362	)	$	(103,493	)	$	1,249		$	(75,953	)	$	(560	)	$	(75,264	)
Other comprehensive income (loss) before reclassifications, net of tax	(4,785		)	47			130			(4,608		)
Other comprehensive loss before reclassifications, net of tax													(8,166		)	—			(464		)	(8,630		)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax	(1,051		)	2,811			(12		)	1,748			922			513			4			1,439
Net current-period other comprehensive income (loss)	(5,836		)	2,858			118			(2,860		)	(7,244		)	513			(460		)	(7,191		)
Ending balance	$	1,235		$	(107,344	)	$	(244	)	$	(106,353	)	$	(5,995	)	$	(75,440	)	$	(1,020	)	$	(82,455	)

4. Earnings Per Share

Basic earnings per share, which excludes dilution, is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period.

Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ anti-dilutive shares, which were excluded from the calculation of diluted earnings per share, were immaterial.


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2018		2017		2018		2017		2019		2018
	(in thousands, except for per share data)								(in thousands, except for per share data)
Numerator:
Net Income	$	79,480	$	76,894	$	108,022	$	110,540	$	36,358	$	28,542
Denominator:
Weighted average common stock shares outstanding - Basic	50,776		53,626		50,915		53,595		48,392		51,055
Assumed exercise of stock options and awards	102		288		123		353		37		144
Weighted average common stock shares outstanding - Diluted	50,878		53,914		51,038		53,948		48,429		51,199
Net Income Per Share
Basic	$	1.57	$	1.43	$	2.12	$	2.06	$	0.75	$	0.56
Diluted	$	1.56	$	1.43	$	2.12	$	2.05	$	0.75	$	0.56

Stock Repurchase Program

In November 2017, the Company's Board of Directors approved ~~a stock~~the repurchase ~~program pursuant to which the Company may repurchase~~of up to $100 million of its outstanding common stock over a two-year period through December ~~2019.~~2019 via the open market, established plans or privately negotiated transactions in accordance with all applicable securities laws, rules and regulations, which was completed in December 2018. In November 2018, the Company's Board of Directors approved a new stock repurchase program pursuant to which the Company may repurchase up to an additional $100 million of its outstanding common stock over a two-year period through December 2020. The stock repurchase program is subject to ~~further~~ modification or termination at any time. The Company will repurchase shares of its common stock subject to prevailing market conditions and may discontinue such repurchases at any time.

The Company spent ~~$2.5~~$11.1 million and ~~$22.8~~$20.2 million to repurchase and retire approximately 65404 thousand shares and ~~614~~549 thousand shares of the Company's common stock in open market transactions during the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018, respectively. As of ~~June 30, 2018,~~March 31, 2019, the Company had ~~$77.2~~$86.4 million remaining to spend under its stock repurchase program.

Dividends

During the three months ended March 31, ~~2018 and June 30,~~2019, the Company declared a cash dividend of $0.12 per share for stockholders of record as of February 8, 2019, which was paid on February 22, 2019, totaling $5.8 million. During the three months ended March 31, 2018, the Company declared and paid cash dividends of $0.12 per share, ~~totaling $12.2~~or $6.1 million.

5. Revenue Recognition

The majority of ~~our~~the Company's revenue is derived from transporting passengers on our aircraft. The Company accounts for revenue in accordance with ASC 606, which was adopted on January 1, 2018, using the full retrospective method. ~~See Note 2 for further discussion of the adoption, including the impact on our previously issued financial statements.~~

The Company's primary operations are that of its wholly-owned subsidiary, Hawaiian. Principally all operations of Hawaiian

either originate and/or end in the State of Hawai'i. The management of such operations is based on a system-wide approach due

to the interdependence of Hawaiian's route structure in its various markets. As Hawaiian is engaged in only one significant line of business (i.e., air transportation), management has concluded that it has only one segment. The Company's operating revenues by geographic region (as defined by the U.S. Department of Transportation) are summarized below:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2018		2017		2018		2017		2019		2018
Geographic Information	(in thousands)								(in thousands)
Domestic	$	528,476	$	501,724	$	1,020,678	$	952,521	$	477,520	$	492,202
Pacific	186,971		168,392		360,181		323,804		179,231		173,210
Total operating revenue	$	715,447	$	670,116	$	1,380,859	$	1,276,325	$	656,751	$	665,412

Hawaiian attributes operating revenue by geographic region based on the destination of each flight segment. Hawaiian's tangible assets consist primarily of flight equipment, which are mobile across geographic markets, and therefore, have not been allocated to specific geographic regions.

Passenger & Other revenue - Generally, the Company’s contracts with customers have two principal performance obligations, which are the promise to provide transportation to the passenger and the frequent flyer miles earned on the flight. In addition, the Company often charges additional fees for items such as baggage and in-flight entertainment. Such items are not capable of being distinct from the transportation provided because the customer can only benefit from the services during the flight. The transportation performance obligation, including the redemption of HawaiianMiles awards for flights, is satisfied, and revenue is recognized, as transportation is provided. In some instances, tickets sold by the Company can include a flight segment on another carrier which is referred to as an interline segment. In this situation, the Company acts as an agent for the other carrier and revenue is recognized net of cost in other revenue. Tickets sold by other airlines where the Company provides the transportation are recognized as passenger revenue at the estimated value to be billed to the other airline when travel is

provided. Differences between amounts billed and the actual amounts may be rejected and rebilled or written off if the amount recorded was different from the original estimate.

Other operating revenue consists of cargo revenue, ground handling fees, commissions, and fees earned under certain joint marketing agreements with other companies. These amounts are recognized when the service is provided.


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2018		2017		2018		2017		2019		2018
Passenger Revenue by Type	(in thousands)								(in thousands)
Passenger revenue, excluding frequent flyer	$	618,406	$	590,527	$	1,196,361	$	1,124,581	$	567,855	$	577,955
Frequent flyer revenue, transportation component	36,756		33,479		70,401		63,177		33,449		33,645
Passenger Revenue	$	655,162	$	624,006	$	1,266,762	$	1,187,758	$	601,304	$	611,600

Other revenue (e.g. cargo and other miscellaneous)	$	41,539	$	33,894	$	80,229	$	66,035
Other revenue (e.g., cargo and other miscellaneous)									$	36,231	$	38,690
Frequent flyer revenue, marketing and brand component	18,746		12,216		33,868		22,532		19,216		15,122
Other Revenue	$	60,285	$	46,110	$	114,097	$	88,567	$	55,447	$	53,812

For the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ the Company's total revenue was ~~$715.4~~$656.8 million and ~~$670.1~~$665.4 million, respectively. As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the Company's Air traffic liability balance as it relates to passenger tickets (excluding frequent flyer) was ~~$536.3~~$514.9 million and ~~$422.6~~$427.8 million, respectively, which represents future revenue that is expected to be realized over the next 12 months. During the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ the amount of passenger ticket revenue recognized that was included in Air traffic liability as of the beginning of the respective period was ~~$293.1~~$296.9 million and ~~$294.5~~$260.3 million, respectively. During the six months ended June 30, 2018 and 2017, the amount of revenue recognized that was included in Air traffic liability as of the beginning of the respective period was $332.5 million and $295.9 million, respectively.

Passenger revenue associated with unused tickets, which represent unexercised passenger rights, is recognized in proportion

to the pattern of rights exercised by related passengers (e.g., scheduled departure dates). To calculate the portion to be recognized as revenue in the period, the Company utilizes historical information and applies the trend rate to the current air traffic liability balances for that specific period.

Certain governmental taxes are imposed on the Company's ticket sales through a fee included in ticket prices. The Company collects these fees and remits them to the appropriate government agency. Management has elected (via a practical expedient election) to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected from a customer ~~e.g.~~(e.g., sales, use, value added, and certain excise ~~taxes.~~taxes). These fees have been presented on a net basis in the accompanying Consolidated Statements of Operations and recorded as a liability until remitted.

Frequent Flyer Revenue - Hawaiian's frequent flyer travel award program provides a variety of awards to program members based on accumulated mileage. ASC 606 requires the Company to account for miles earned by passengers in the HawaiianMiles program through flight activity as a component of the passenger revenue ticket transaction at the estimated selling price of the miles. Ticket consideration received is allocated between the performance obligations, primarily travel and miles earned by passengers. The allocated value of the miles is deferred until the free travel or other award is used by the passenger, at which time it is included in passenger revenue. The value of the ticket used in the determination of the estimated selling price is based on the historical value of equivalent flights to those provided for loyalty awards and the related miles redeemed to obtain that award adjusted for breakage or fulfillment. The equivalent ticket value (ETV) includes a fulfillment discount (breakage) to reflect the value of the award ticket over the number of miles that, based on historical experience, will be needed to obtain the award. On a quarterly basis, the Company calculates the ~~equivalent ticket value (ETV)~~ETV by analyzing the fares of similar tickets for the prior 12 months, considering cabin class and geographic region.

The Company also sells mileage credits to companies participating in our frequent flyer program. These contracts generally include multiple performance obligations, including the transportation that will ultimately be provided when the mileage credits are redeemed and marketing and brand related activities. The marketing and brand performance obligations are effectively provided each time a HawaiianMiles member uses the co-branded credit card and monthly access to customer lists and marketing is provided, which corresponds to the timing of when the Company issues or is obligated to issue the mileage credits to the HawaiianMiles member. Therefore, the Company recognizes revenue for the marketing and brand performance obligations when HawaiianMiles members use their co-brand credit card and the resulting mileage credits are issued to them, which best correlates with the Company’s performance ~~toward~~in satisfying the obligation.

During the first quarter of 2018, wethe Company amended ~~our~~its partnership with Barclaycard US, Hawaiian's co-branded credit card partner. Management determined that the amendment should be accounted for as a termination of the existing contract and the creation of a new contract under ASC 606 and the relative selling price was determined for each performance obligation of the new

agreement. The new agreement continues through 2024 and includes improved economics and enhanced product offerings for our Barclay's co-branded cardholders. The amended agreement did not change any terms of the original agreement, and includes the following performance obligations: (i) transportation that will ultimately be provided when mileage credits are redeemed (transportation); (ii) the Hawaiian Airlines brand and access to its members lists (collectively, brand performance); (iii) marketing; and (iv) airline benefits to cardholders, including discounts and anniversary travel benefits, baggage waivers and inflight purchase credits. The Company determined the relative fair value of each performance obligation by estimating the selling prices of the deliverables by considering discounted cash flows using multiple inputs and assumptions, including: (1) the expected number of miles to be awarded and redeemed; (2) the estimated weighted average equivalent ticket value, adjusted by a fulfillment discount; (3) the estimated total annual cardholder spend; (4) an estimated royalty rate for the Hawaiian portfolio; and (5) the expected use of each of the airline benefits. The overall consideration received is allocated to the performance obligations based on their relative selling prices.

The transportation performance obligation is deferred and recognized as passenger revenue when the transportation is expected to be provided.

Accounting for ~~frequent flyer revenue~~mileage sales to co-branded partners involves the use of various techniques to estimate revenue. The Company sells mileage credits to companies participating in the frequent flyer program, who in turn issue those miles to customers based on the volume of spend, making the majority of the transaction price variable. To determine the total estimated transaction price, the Company forecasts future credit card activity using historical information.

The relative selling price is determined using management’s standalone estimated selling price of each performance obligation. The objective of using the estimated selling price based methodology is to determine the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis. Accordingly, the Company determines the best estimate of selling price by considering multiple inputs and methods including, but not limited to, discounted cash flows, brand value, published selling prices, number of miles awarded and number of miles redeemed. The Company estimates the selling price of miles using an ETV adjusted for a fulfillment discount as described above.

Miles expire after 18 months of member account inactivity. The ~~ETV includes a fulfillment discount (breakage) to reflect the value of the award ticket over the number of miles that, based on historical experience, will be needed to obtain the award. The~~ Company reviews its breakage estimates annually based upon the latest available information regarding redemption and expiration patterns (e.g., credit card and non-credit card holders). The Company’s estimate of the expected expiration of miles requires significant management judgment. Current and future changes to expiration assumptions or to the expiration policy, or to program rules and program could affect the estimated value of a mile.

The Company's frequent flyer liability is recorded ~~within two balance sheet accounts,~~in Air traffic liability ~~(short-term)~~ and ~~Other liabilities~~current frequent flyer deferred revenue and Noncurrent frequent flyer deferred ~~credits (long-term)~~revenue in the Company's consolidated balance sheet based on estimated and expected redemption patterns using historical data and analysis. As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the Company's contract liability balance was ~~$372.2~~$339.7 million and ~~$321.9~~$332.2 million, respectively.

Accounts Receivable - Accounts receivable primarily consist of amounts due from credit card companies, non-airline partners, and cargo transportation customers. The Company provides an allowance for uncollectible accounts equal to the estimated losses expected to be incurred based on historical chargebacks, write-offs, bankruptcies and other specific analyses. Bad debt expense was not material in any period presented.

Costs to obtain or fulfill a contract - In order for the Company to provide transportation to our customers we incur fulfillment costs which are generally: booking fees, credit card fees, and commission/selling costs. As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the Company's asset balance associated with these costs were ~~$19.9~~$19.2 million and ~~$16.7~~$16.3 million, respectively. During the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ expenses related to these costs totaled to ~~$23.8~~$22.5 million and ~~$24.3 million, respectively. During the six months ended June 30, 2018 and 2017, expenses related to these costs totaled to $47.7 million and $46.8~~$23.9 million, respectively. To determine the amount to capitalize and expense at the end of each period, the Company uses historical sales data and estimates the amount associated with unflown tickets.

6. Short-Term Investments

Debt securities that are not classified as cash equivalents are classified as available-for-sale investments and are stated as current assets at fair value as these securities are available for use in current operations. Realized gains and losses on sales of investments are reflected in nonoperating income (expense) in the Company's unaudited Consolidated Statements of Operations. Unrealized gains and losses on ~~available-for-sale debt~~available for sale securities are reflected as a component of ~~accumulated~~Accumulated other comprehensive ~~income.~~

loss, net.

The following is a summary of short-term investments held as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017:~~2018:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2018	(in thousands)
March 31, 2019										(in thousands)
Corporate debt	$	154,333	$	21	$	(1,002	)	$	153,352	$	101,348	$	231	$	(238	)	$	101,341
U.S. government and agency debt	55,081		—		(182		)	54,899		16,043		—		(17		)	16,026
Municipal bonds	16,684		—		(49		)	16,635		9,073		1		(9		)	9,065
Certificates of Deposit										23,213		—		—			23,213
Other fixed income securities	34,462		—		(35		)	34,427		17,181		—		(9		)	17,172
Total short-term investments	$	260,560	$	21	$	(1,268	)	$	259,313	$	166,858	$	232	$	(273	)	$	166,817


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2017	(in thousands)
December 31, 2018										(in thousands)
Corporate debt	$	165,610	$	8	$	(535	)	$	165,083	$	142,748	$	49	$	(695	)	$	142,102
U.S. government and agency debt	59,054		1		(215		)	58,840		37,163		3		(59		)	37,107
Municipal bonds	21,517		—		(104		)	21,413		9,903		—		(32		)	9,871
Other fixed income securities	23,973		1		(13		)	23,961		43,183		2		(24		)	43,161
Total short-term investments	$	270,154	$	10	$	(867	)	$	269,297	$	232,997	$	54	$	(810	)	$	232,241

Contractual maturities of short-term investments as of ~~June 30, 2018~~March 31, 2019 are shown below.


	Under 1 Year		1 to 5 Years		Total		Under 1 Year		1 to 5 Years		Total
	(in thousands)						(in thousands)
Corporate debt	$	69,250	$	84,102	$	153,352	$	38,940	$	62,401	$	101,341
U.S. government and agency debt	44,011		10,888		54,899		16,026		—		16,026
Municipal bonds	9,643		6,992		16,635		7,235		1,830		9,065
Certificates of Deposit							22,210		1,003		23,213
Other fixed income securities	26,780		7,647		34,427		15,672		1,500		17,172
Total short-term investments	$	149,684	$	109,629	$	259,313	$	100,083	$	66,734	$	166,817

7. Fair Value Measurements

ASC Topic 820, Fair Value Measurement (ASC 820), defines fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 — Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term for the assets or liabilities; and

Level 3 — Unobservable inputs for which there is little or no market data and that are significant to the fair value of the assets or liabilities.

The tables below present the Company’s financial assets and liabilities measured at fair value on a recurring basis:


	Fair Value Measurements as of June 30, 2018								Fair Value Measurements as of March 31, 2019
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
	(in thousands)								(in thousands)
Cash equivalents	$	175,486	$	128,131	$	47,355	$	—	$	152,947	$	122,825	$	30,122	$	—
Restricted cash	1,000		1,000		—		—
Short-term investments	259,313		—		259,313		—		166,817		—		166,817		—
Fuel derivative contracts:
Crude oil call options	28,216		—		28,216		—
Fuel derivative contracts									5,084		—		5,084		—
Foreign currency derivatives	5,674		—		5,674		—		5,022		—		5,022		—
Total assets measured at fair value	$	469,689	$	129,131	$	340,558	$	—	$	329,870	$	122,825	$	207,045	$	—
Foreign currency derivatives	747		—		747		—		228		—		228		—
Total liabilities measured at fair value	$	747	$	—	$	747	$	—	$	228	$	—	$	228	$	—


	Fair Value Measurements as of December 31, 2017								Fair Value Measurements as of December 31, 2018
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
	(in thousands)								(in thousands)
Cash equivalents	$	62,310	$	27,807	$	34,503	$	—	$	121,154	$	42,175	$	78,979	$	—
Restricted cash	1,000		1,000		—		—
Short-term investments	269,297		—		269,297		—		232,241		—		232,241		—
Fuel derivative contracts:
Crude oil call options	20,272		—		20,272		—
Jet fuel swaps	336		—		336		—
Fuel derivative contracts									1,572		—		1,572		—
Foreign currency derivatives	4,300		—		4,300		—		4,579		—		4,579		—
Total assets measured at fair value	$	357,515	$	28,807	$	328,708	$	—	$	359,546	$	42,175	$	317,371	$	—
Foreign currency derivatives	1,713		—		1,713		—		1,347		—		1,347		—
Total liabilities measured at fair value	$	1,713	$	—	$	1,713	$	—	$	1,347	$	—	$	1,347	$	—

Cash equivalents. The Company's ~~level~~Level 1 cash equivalents consist of money market securities and certificates of deposit. The carrying amounts approximate fair value because of the ~~level~~short-term maturity of these assets. The Company's Level 2 cash equivalents consist of U.S. agency bonds, mutual funds, and commercial paper. ~~The~~These instruments ~~classified as level 2~~ are valued using quoted prices for similar assets in active markets.

~~Restricted cash. The Company’s restricted cash consists of money market securities.~~

Short-term investments. Short-term investments include U.S. and foreign government notes and bonds, U.S. agency bonds, variable-rate corporate bonds, asset backed securities, foreign and domestic corporate bonds, municipal bonds, and commercial paper. These instrumentsshown in the table above are classified as available-for-sale. Instruments are valued using quoted prices for similar assets in active markets or other observable inputs.

Fuel derivative contracts. The Company’s fuel derivative contracts consist of crude oil call options, ~~and jet fuel swaps,~~ which are not traded on a public exchange. The fair value of these instruments ~~are~~is determined based on inputs available or derived from public markets including contractual terms, market prices, yield curves, and measures of volatility among others.

Foreign currency derivatives. The Company’s foreign currency derivatives consist of Japanese Yen and Australian Dollar forward contracts and are valued primarily based upon data ~~available or derived from~~readily observable in public markets.

The table below presents the Company’s debt (excluding obligations under ~~capital~~finance leases and financing obligations) measured at fair value:

																																							Fair Value of Debt
June 30, 2018										December 31, 2017
March 31, 2019																				March 31, 2019									December 31, 2018
Carrying	Carrying	Fair Value								Carrying		Fair Value								Carrying	Fair Value								Carrying		Fair Value
Amount	Amount	Total		Level 1		Level 2		Level 3		Amount		Total		Level 1		Level 2		Level 3		Amount	Total		Level 1		Level 2		Level 3		Amount		Total		Level 1		Level 2		Level 3
(in thousands)
$	495,504	$	478,893	$	—	$	—	$	478,893	$	433,072	$	444,099	$	—	$	—	$	444,099	448,399	$	448,960	$	—	$	—	$	448,960	$	467,760	$	461,805	$	—	$	—	$	461,805

The fair value estimates of the Company’s debt were based on the discounted amount of future cash flows using the Company’s current incremental rate of borrowing for similar instruments.

The carrying amounts of cash, other receivables, and accounts payable approximate fair value due to the short-term nature of these financial instruments.

8. Financial Derivative Instruments

The Company uses derivatives to manage risks associated with certain assets and liabilities arising from the potential adverse impact of fluctuations in global fuel prices and foreign currencies.

Fuel Risk Management

The Company’s operations are inherently dependent upon the price and availability of aircraft fuel. To manage economic risks associated with fluctuations in aircraft fuel prices, the Company periodically enters into derivative financial instruments. During the three ~~and six~~ months ended ~~June 30, 2018,~~March 31, 2019, the Company primarily used crude oil call options and jet fuel swaps to hedge its aircraft fuel expense. These derivative instruments were not designated as hedges under ASC Topic 815, Derivatives and Hedging (ASC 815), for hedge accounting treatment. As a result, any changes in fair value of these derivative instruments are adjusted through other nonoperating income (expense) in the period of change.

The following table reflects the amount of realized and unrealized gains and losses recorded as nonoperating income (expense) in the Company's unaudited Consolidated Statements of Operations.


	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
Fuel derivative contracts	2018			2017			2018			2017			2019			2018
	(in thousands)												(in thousands)
Gains (losses) realized at settlement	$	10,827		$	(1,902	)	$	16,488		$	687		$	(2,844	)	$	5,661
Reversal of prior period unrealized amounts	(10,748		)	3,441			(11,792		)	(4,506		)	8,181			(11,792		)
Unrealized gains (losses) that will settle in future periods	18,873			(6,251		)	18,873			(9,691		)	(4,767		)	10,748
Gains (losses) on fuel derivatives recorded as nonoperating income (expense)	$	18,952		$	(4,712	)	$	23,569		$	(13,510	)	$	570		$	4,617

Foreign Currency Exchange Rate Risk Management

The Company is subject to foreign currency exchange rate risk due to revenues and expenses that are denominated in foreign currencies, with the primary exposures being the Japanese Yen and Australian Dollar. To manage exchange rate risk, the Company executes its international revenue and expense transactions in the same foreign currency to the extent practicable. ~~As discussed in Note 9 the Company also recently executed Japanese Yen denominated debt agreements.~~

The Company enters into foreign currency forward contracts to further manage the effects of fluctuating exchange rates. The effective portion of the gain or loss of designated cash flow hedges is reported as a component of accumulated other comprehensive income (AOCI) and reclassified into earnings in the same period in which the related sales are recognized as passenger revenue. The effective portion of the foreign currency forward contracts represents the change in fair value of the hedge that offsets the change in the fair value of the hedged item. To the extent the change in the fair value of the hedge does not perfectly offset the change in the fair value of the hedged item, the ineffective portion of the hedge is immediately recognized as nonoperating income (expense). Foreign currency forward contracts that are not designated as cash flow hedges are recorded at fair value, and any changes in fair value are recognized as other nonoperating income (expense) in the period of change.

The Company believes that its foreign currency forward contracts that are designated as cash flow hedges will continue to be effective in offsetting changes in cash flow attributable to the hedged risk. The Company expects to reclassify a net gain of approximately ~~$3.6~~$4.8 million into earnings over the next 12 months from AOCI based on the values at ~~June 30, 2018.~~March 31, 2019.

The following tables present the gross fair value of asset and liability derivatives that are designated as hedging instruments under ASC 815 and derivatives that are not designated as hedging instruments under ASC 815, as well as the net derivative positions and location of the asset and liability balances within the Company's unaudited Consolidated Balance Sheets.

Derivative position as of ~~June 30, 2018~~March 31, 2019


	Balance Sheet Location	Notional Amount	Final Maturity Date	Gross fair value of assets	Gross fair value of (liabilities)		Net derivative position	Balance Sheet Location	Notional Amount	Final Maturity Date	Gross fair value of assets	Gross fair value of (liabilities)		Net derivative position
		(in thousands)		(in thousands)					(in thousands)		(in thousands)
Derivatives designated as hedges
Foreign currency derivatives	Prepaid expenses and other	16,987,750 Japanese Yen 51,428 Australian Dollars	June 2019	4,600	(558	)	4,042	Prepaid expenses and other	15,964,300 Japanese Yen 46,360 Australian Dollars	March 2020	4,133	(180	)	3,953
	Long-term prepayments and other	4,795,400 Japanese Yen 8,940 Australian Dollars	June 2020	810	(185	)	625	Long-term prepayments and other	4,457,800 Japanese Yen 7,571 Australian Dollars	March 2021	809	(31	)	778
Derivatives not designated as hedges
Foreign currency derivatives	Prepaid expenses and other	1,216,250 Japanese Yen 4,489 Australian Dollars	September 2018	264	(4	)	260	Prepaid expenses and other	841,550 Japanese Yen 2,304 Australian Dollars	June 2019	80	(17	)	63
Fuel derivative contracts	Prepaid expenses and other	94,080 gallons	June 2019	28,216	—		28,216	Prepaid expenses and other	95,760 gallons	March 2020	5,084	—		5,084

Derivative position as of December 31, ~~2017~~2018


	Balance Sheet Location	Notional Amount	Final Maturity Date	Gross fair value of assets	Gross fair value of (liabilities)		Net derivative position		Balance Sheet Location	Notional Amount	Final Maturity Date	Gross fair value of assets	Gross fair value of (liabilities)		Net derivative position
		(in thousands)		(in thousands)						(in thousands)		(in thousands)
Derivatives designated as hedges
Foreign currency derivatives	Prepaid expenses and other	16,732,375 Japanese Yen 47,805 Australian Dollars	December 2018	3,737	(1,441	)	2,296		Prepaid expenses and other	15,933,550 Japanese Yen 48,709 Australian Dollars	December 2019	3,922	(915	)	3,007
	Long-term prepayments and other	4,666,700 Japanese Yen 9,180 Australian Dollars	December 2019	546	(195	)	351		Long-term prepayments and other	4,491,350 Japanese Yen 9,419 Australian Dollars	December 2020	633	(292	)	341
Derivatives not designated as hedges
Foreign currency derivatives	Other accrued liabilities	866,150 Japanese Yen 3,148 Australian Dollars	March 2018	17	(77	)	(60	)	Other accrued liabilities	832,900 Japanese Yen 2,785 Australian Dollars	March 2019	24	(140	)	(116	)
Fuel derivative contracts	Prepaid expenses and other	94,332 gallons	December 2018	20,608	—		20,608		Prepaid expenses and other	95,256 gallons	December 2019	1,572	—		1,572

The following table reflects the impact of cash flow hedges designated for hedge accounting treatment and their location within the Company's unaudited Consolidated Statements of Comprehensive Income.

(Gain) loss recognized in AOCI on derivatives (effective portion) (Gain) loss reclassified from AOCI
into income (effective portion) (Gain) loss recognized in
nonoperating (income) expense
(ineffective portion)
Three months ended June 30, Three months ended June 30, Three months ended June 30,
2018 2017 2018 2017 2018 2017
(in thousands)
Foreign currency derivatives $ (11,378 ) $ (2,505 ) $ 884
$ (480 ) $ —
$ —

(Gain) loss recognized in AOCI on derivatives (effective portion) (Gain) loss reclassified from AOCI
into income (effective portion) (Gain) loss recognized in
nonoperating (income) expense
(ineffective portion)
Six months ended June 30, Six months ended June 30, Six months ended June 30,
2018 2017 2018 2017 2018 2017
(in thousands)
Foreign currency derivatives $ (569 ) $ 7,705
$ 2,105
$ (1,692 ) $ —
$ —



	(Gain) loss recognized in AOCI on derivatives (effective portion)					(Gain) loss reclassified from AOCI into income (effective portion)					(Gain) loss recognized in nonoperating (income) expense (ineffective portion)
	Three months ended March 31,					Three months ended March 31,					Three months ended March 31,
	2019			2018		2019			2018		2019		2018
	(in thousands)
Foreign currency derivatives	$	(3,106	)	$	10,809	$	(1,587	)	$	1,221	$	—	$	—

Risk and Collateral

Financial derivative instruments expose the Company to possible credit loss in the event the counterparties fail to meet their obligations. To manage such credit risks, the Company (1) selects its counterparties based on past experience and credit ratings, (2) limits its exposure to any single counterparty, and (3) regularly monitors the market position and credit rating of each counterparty. Credit risk is deemed to have a minimal impact on the fair value of the derivative instruments, as cash collateral would be provided by the counterparties based on the current market exposure of the derivative.

ASC 815 requires a reporting entity to elect a policy of whether to offset rights to reclaim cash collateral or obligations to return cash collateral against derivative assets and liabilities executed with the same counterparty under a master netting agreement, or present such amounts on a gross basis. The Company’s accounting policy is to present its derivative assets and liabilities on a net basis, including any collateral posted with the counterparty. The Company had no collateral posted with counterparties as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.

The Company is also subject to market risk in the event these financial instruments become less valuable in the market. However, changes in the fair value of the derivative instruments will generally offset the change in the fair value of the hedged item, limiting the Company’s overall exposure.

9. ~~Debt~~Leases

As discussed in Note 2, the Company adopted ASC 842 as of January 1, 2019, using the modified retrospective approach. Prior year financial statements were not recast under the new standard and, therefore, those amounts are not presented below.

The Company leases aircraft, engines, airport terminal facilities, maintenance hangars, commercial real estate, and other property and equipment, among other items. The Company combines lease and nonlease components in calculating the ROU asset and lease liabilities for the aforementioned asset groups. Certain leases include escalation clauses, renewal options, and/or termination options. When lease renewals or termination options are considered to be reasonably certain, such periods are included in the lease term and fixed payments are included in the calculation of the lease liability and ROU asset.

When available, the Company utilizes the rate implicit in the lease to discount lease payments to present value; however, the majority of the Company's leases do not provide a readily determinable implicit rate. Therefore, the Company estimates its incremental borrowing rate to discount the lease payments based on information available at lease commencement. The Company gives consideration to its recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates.

Aircraft and Engines

As of ~~June 30, 2018,~~March 31, 2019, the ~~expected maturities~~Company leased 19 aircraft, of ~~long-term debt~~which 5 are under finance leases and 14 are under operating leases. These leases have remaining lease terms with terms ranging from approximately 1 year to 11 years. The Company also had 5 engines under operating leases with remaining lease terms ranging from less than 1 year to 8 years. Aircraft and engine finance leases continue to be reported on our consolidated balance sheet, while operating leases were added to the balance sheet with the adoption of the new standard.

Airport Terminal Facilities

The Company's facility leases are primarily for space at airports that it serves, most notably, its operations in the State of Hawai'i. These leases are classified as operating leases and reflect the Company's use of airport terminals, office space, cargo and maintenance facilities. The Company leases space from government agencies that control the use of the airport. The remaining lease terms vary from 1 month to 33 years. At the majority of U.S. airports, the lease rates depend on airport operating costs or the use of the facilities and are reset at least annually. Because of the variable nature of the rates, these leases are not recorded on our balance sheet as a ROU asset and lease liability.

Other Commercial Real Estate

The Company leases non-airport facility office space supporting its operations, including its headquarters in Honolulu, Hawaii. These leases are classified as operating and have remaining lease terms ranging between 1 to 8 years.

Maintenance Hangar

In November 2016, the Company entered into a lease agreement with the Department of Transportation of the State of Hawai'i to lease a cargo and maintenance hangar at the Daniel K. Inouye International Airport with a remaining lease term of 33 years. As the hangar was not fully constructed, the Company took responsibility of the construction and was responsible for the remainder of ~~2018~~the construction costs of $37.3 million. In accordance with the applicable accounting guidance, specifically as it relates to the Company's involvement in the construction of the hangar, the Company was considered the owner of the asset under construction and previously recognized an additional $73.0 million asset, with a corresponding finance liability, for the ~~next four years,~~amount previously spent by the lessor.

As discussed in Note 2, ASC 842 eliminated the previous build-to-suit lease accounting guidance and ~~thereafter, were~~resulted in the derecognition of build-to-suit assets and liabilities that remained on the balance sheet after the end of the construction period. ASC 842 then required the application of lease accounting to the agreement. The agreement is accounted for as ~~follows (in thousands):~~ an operating lease under ASC 842.

Other Property and Equipment

The Company leases certain IT assets (including data center access, equipment, etc.) and various other non-aircraft equipment. The remaining lease terms range from 1 to 3 years. Certain lease IT assets are embedded within service agreements. The combined lease and nonlease components of those agreements are included in the ROU asset and lease liability.

Lease Position as of March 31, 2019

The table below presents the lease-related assets and liabilities recorded on the consolidated balance sheet.

Remaining months in 2018 $ 28,275
2019 81,023
2020 29,545
2021 56,509
2022 63,622
Thereafter 236,531
$ 495,505



		Three Months Ended March 31,
	Classification on the Balance Sheet	2019
		(in thousands)
Assets:
Operating lease assets	Operating lease right-of use assets	$	613,103
Finance lease assets	Property and equipment, net	164,558
Total lease assets		$	777,661

Liabilities:
Current
Operating	Current maturities of operating leases	$	90,481
Finance	Current maturities of long-term debt and finance lease obligations	21,702
Noncurrent
Operating	Noncurrent operating leases	480,979
Finance	Long-Term Debt and Finance Lease Obligations	152,403
Total lease liabilities		$	745,565

Weighted-average remaining lease term
Operating leases		11.1 years
Finance leases		9.1 years
Weighted-average discount rate
Operating leases ⁽¹⁾		4.97		%
Finance leases		4.74		%

⁽¹⁾ Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.

Lease Costs

During the three months ended March 31, 2019, the total lease costs for finance and operating leases were as follows:



	Three Months Ended March 31,
	2019
	(in thousands)
Finance lease cost:
Amortization of right-of-use assets	$	6,098
Interest of lease liabilities	2,092
Operating lease cost ⁽¹⁾	29,468
Short-term lease cost ⁽¹⁾	1,988
Variable lease cost ⁽¹⁾	29,986
Total lease cost	$	69,632

⁽¹⁾ Expenses are classified within aircraft rent and other rentals and landing fees in the consolidated statements of operations.

During the three months ended ~~June 30, 2018,~~March 31, 2019, the ~~Company executed Japanese Yen denominated debt agreements~~cash paid for a total value of $86.5 million, which is collateralized by aircraft. The loans that were executed were each for a term of 12 years at fixed installment coupon rates of 1.01% and 1.05%. The fluctuation in foreign exchange rates at each balance sheet date is reflected within the nonoperating income (expense) line item. The foreign currency gain or loss for three months ended June 30, 2018 was de minimus.

~~10. Leases~~

The Company leases aircraft, engines, and other assets under long-term lease arrangements. Other leased assets include real property, airport and terminal facilities, maintenance facilities, and general offices. Certain leases include escalation clauses and renewal options. When lease renewals are considered to be reasonably assured, the rental payments that will be due during the renewal periods areamounts included in the ~~determination~~measurement of ~~rent expense over the life of the lease.~~lease liabilities were as follows:



		Three Months Ended March 31,
		2019
		(in thousands)
Operating cash flows from operating leases		28,958
Operating cash flows from finance leases		2,092
Financing cash flows from finance lease		5,622

Undiscounted Cash Flows

As of ~~June 30, 2018,~~March 31, 2019, the scheduled future minimum rental payments under operating and ~~capital~~finance leases with non-cancellable basic terms of more than one year were as follows:


	Capital & Financing Leases						Operating Leases				Finance Leases						Operating Leases
	Aircraft			Other			Aircraft		Other		Aircraft			Other			Aircraft			Other
	(in thousands)										(in thousands)
Remaining in 2018	$	9,675		$	3,665		$	53,421	$	3,487
2019	19,350			6,561			98,327		6,735
Remaining in 2019											$	18,638		$	3,665		$	80,789		$	6,133
2020	19,350			4,641			82,362		6,559		24,850			3,255			90,391			8,217
2021	19,350			4,566			66,259		6,669		24,850			1,798			74,713			8,424
2022	19,205			4,870			60,153		6,938		24,415			1,779			68,133			8,822
2023											21,370			5,019			60,022			9,029
Thereafter	55,666			119,862			164,993		96,147		75,891			7,083			156,680			194,209
	142,596			144,165			$	525,515	$	126,535
Less amounts representing interest	(24,885		)	(54,188		)
Present value of minimum capital lease payments	$	117,711		$	89,977
Total minimum lease payments											190,014			22,599			530,728			234,834
Less: amounts representing interest											(33,224		)	(5,284		)	(77,600		)	(116,502		)
Present value of future minimum lease payments											$	156,790		$	17,315		$	453,128		$	118,332
Less: current maturities of lease obligations											(17,817		)	(3,885		)	(87,908		)	(2,573		)
Long-term lease obligations											$	138,973		$	13,430		$	365,220		$	115,759

~~11.~~10. Employee Benefit Plans

The components of net periodic benefit cost for the Company’s defined benefit and other post-retirement plans included the following:


	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
Components of Net Period Benefit Cost	2018			2017			2018			2017			2019			2018
	(in thousands)												(in thousands)
Service cost	$	1,962		$	3,813		$	3,924		$	7,626		$	2,096		$	1,962
Other cost:
Interest cost	5,009			7,259			10,018			14,518			5,608			5,009
Expected return on plan assets	(5,588		)	(4,796		)	(11,176		)	(9,592		)	(5,483		)	(5,588		)
Recognized net actuarial loss	680			2,287			1,360			4,574			887			680
Total other components of the net periodic benefit cost	101			4,750			202			9,500			1,012			101
Net periodic benefit cost	$	2,063		$	8,563		$	4,126		$	17,126		$	3,108		$	2,063

Total other components of the net periodic benefit cost are recorded within the nonoperating income (expense), other, net line ~~item.~~item in the consolidated statements of operations.

During ~~each of~~ the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018, the Company ~~made no contributions to its defined benefit and other postretirement plans as the Company is~~was not required to, and did not to make ~~any further minimum~~ contributions ~~until 2019 due to the sufficiency of the plans' current position. During the three and six months ended June 30, 2017, the Company contributed $8.0 million and $14.4 million, respectively,~~ to its defined benefit and other post-retirement plans.

In August 2017, the Company completed the termination of the Merged Pension plan by transferring the assets and liabilities to a third-party insurance company. At that time, the Company contributed a total of $18.5 million in cash to fully fund the plan. In March 2017, the Company announced the ratification of a 63-month contract amendment with its pilots as represented by the Air Line Pilots Association (ALPA). In August 2017, the Company made a one-time cash payment of approximately $101.9 million to fund the HRA and settle the post-65 post-retirement medical plan obligation. The cash contributed was distributed to the trust funding the individual health retirement notional accounts of the participants.

~~12.~~11. Commitments and Contingent Liabilities

Commitments

As of ~~June 30, 2018,~~March 31, 2019, the Company had the following capital commitments consisting of firm aircraft and engine orders and purchase ~~rights:~~

rights for additional aircraft and engines:

Aircraft Type

Firm Orders

Purchase Rights

Expected Delivery Dates

Firm Orders

Purchase Rights

Expected Delivery Dates

A321neo aircraft

Between 2018 and 2020

Between 2019 and 2020

B787-9 aircraft

Between 2021 and 2025

Pratt & Whitney spare engines:

A321neo spare engines

Between 2018 and 2019

In 2019

General Electric GEnx spare engines:

B787-9 spare engines

Between 2021 and 2025

In February 2018, the Company exercised its right to terminate its aircraft purchase agreement between the Company and Airbus for six Airbus A330-800neo aircraft and the purchase rights for an additional six Airbus A330-800neo aircraft. Refer to Note 1312 below for discussion on the contract termination charge.

In July 2018, the Company ~~executed~~entered into a purchase agreement for the purchase of 10 Boeing 787-9 "Dreamliner" aircraft with purchase rights for an additional 10 ~~aircraft.~~aircraft with scheduled delivery from 2021 to 2025. In October 2018, the Company entered into a definitive agreement for the selection of GEnx engines to power its Boeing 787-9 fleet. The agreement provides for the purchase of 20 GEnx engines, the right to purchase an additional 20 GEnx engines, and the purchase of up to four spare engines. The committed expenditures under these agreements are reflected in the table below. In December 2018, the Company entered into an amendment to the purchase agreement with Boeing, which includes an option for the Company to accelerate delivery of Boeing 787-9 aircraft from 2024 and 2025 to 2023; however, the Company does not currently expect to execute the option to accelerate its planned delivery schedule. The Company also intends to enter into additional related agreements in connection with the Boeing 787-9 purchases, including for the ~~purchases~~purchase of ~~aircraft engines,~~ a flight simulator, spare parts and materials, and related services. ~~The expected expenditures for the Boeing 787-9 aircraft and related parts are not reflected in the table below.~~

Committed capital and operating expenditures include escalation amounts based on estimates. Capital expenditures represent aircraft and aircraft related equipment commitments, and operating expenditures represent all other non-aircraft commitments the Company has entered into. The gross committed expenditures and committed payments for those deliveries as of ~~June 30, 2018~~March 31, 2019 are detailed below:


	Capital		Operating		Total Committed Expenditures		Aircraft and aircraft related		Other		Total Committed Expenditures
	(in thousands)						(in thousands)
Remaining in 2018	$	207,042	$	35,568	$	242,610
2019	278,254		61,857		340,111
Remaining in 2019							$	277,660	$	55,886	$	333,546
2020	47,978		56,483		104,461		161,854		69,729		231,583
2021	5,075		51,725		56,800		313,668		66,104		379,772
2022	5,075		51,922		56,997		435,406		58,499		493,905
2023							245,465		53,357		298,822
Thereafter	38,067		216,069		254,136		477,144		164,846		641,990
	$	581,491	$	473,624	$	1,055,115	$	1,911,197	$	468,421	$	2,379,618

Litigation and Contingencies

The Company is subject to legal proceedings arising in the normal course of its operations. Management does not anticipate that the disposition of any currently pending proceeding will have a material effect on the Company’s operations, business or financial condition.

General Guarantees and Indemnifications

In the normal course of business, the Company enters into numerous aircraft financing and real estate leasing arrangements that have various guarantees included in such contracts. It is common in such lease transactions for the lessee to agree to indemnify the lessor and other related third-parties for tort liabilities that arise out of, or relate to, the lessee’s use of the leased aircraft or occupancy of the leased premises. In some cases, this indemnity extends to related liabilities arising from the negligence of the indemnified parties, but usually excludes any liabilities caused by such parties' gross negligence or willful misconduct. Additionally, the lessee typically indemnifies such parties for any environmental liability that arises out of or relates to the lessee's use of the real estate leased premises. The Company believes that it is insured (subject to deductibles) for most of the tort liabilities and related indemnities described above with respect to the aircraft and real estate that it leases. The Company cannot reasonably estimate the potential amount of future payments, if any, under the foregoing indemnities and agreements.

Credit Card Holdback

Under the Company’s bank-issued credit card processing agreements, certain proceeds from advance ticket sales may be held back to serve as collateral to cover any possible chargebacks or other disputed charges that may occur. These holdbacks ~~which~~ are included in restricted cash in the Company’s unaudited Consolidated Balance ~~Sheets, totaled $1.0 million at each~~Sheets. As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018, there were no holdbacks held with the Company's credit card processors.

In the event of a material adverse change in the Company's business, the holdback could increase to an amount up to 100% of the outstanding credit card amounts that is unflown (e.g., air traffic ~~liability)~~liability, excluding frequent flyer deferred revenue), which would also cause an increase in the level of restricted cash. If the Company is unable to obtain a waiver of, or otherwise mitigate the increase in the restriction of cash, it could have a material adverse impact on the Company's operations, business or financial condition.

~~13.~~12. Contract Terminations Expense ~~and Special Items~~

Contract terminations expense

For the ~~six~~three months ended ~~June 30,~~March 31, 2018, the Company terminated two contracts which incurred a total of $35.3 million in contract terminations expense. The transactions are described below:

In February 2018, the Company exercised its right to terminate the aircraft purchase agreement between the Company and Airbus for six Airbus A330-800neo aircraft and the purchase rights for an additional six Airbus A330-800neo aircraft. To terminate the purchase agreement, the Company was obligated to repay Airbus for concessions received relating to a prior firm order, training credits, as well as forfeit the pre-delivery progress payments made towards the flight equipment. The Company recorded a contract terminations expense to reflect a portion of the termination penalty within the Consolidated Statements of Operations.

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 lease 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 contract termination fee. The expensed amount represents the total purchase price amount over fair value of the aircraft purchased as of the date of the transaction.

~~Special items~~

In April 2017, the Company executed a sale leaseback transaction with an independent third party for three Boeing 767-300 aircraft. The lease term for the three aircraft commenced in April 2017 and goes through November 2018, December 2018, and January 2019, respectively. During the three and six months ended June 30, 2017, the Company recorded a loss on sale of aircraft of $4.8 million.

In March 2017, the Company received notice from ALPA that the agreement was ratified by ALPA's members. The agreement became effective April 1, 2017. The agreement included, among other various benefits, a pay adjustment and ratification bonus computed based on previous service. During the six months ended June 30, 2017, the Company expensed $18.7 million principally related to a one-time payment to reduce the Company's future 401K employer contribution for certain pilot groups, which was not recoverable once paid.

~~14. Income Taxes~~

The Company’s effective tax rate was 24.9% and 37.8% for the three months ended June 30, 2018 and 2017, respectively and 24.4% and 34.9% for the six months ended June 30, 2018 and 2017, respectively. The effective tax rate represents a blend of federal and state taxes and includes the impact of certain nondeductible items. The effective tax rate for the three and six months ended June 30, 2018 also reflects the reduced federal corporate income tax rate as a result of the enactment of the Tax Act in December 2017. Management continues to analyze the different aspects of the Tax Act which could potentially affect the provisional estimates that were recorded at December 31, 2017.

~~15. Supplemental Cash Flow Information~~

~~Non-cash investing and financing activities for the six months ended June 30, 2018 and 2017 were as follows:~~

Six months ended June 30,
2018 2017
(in thousands)
Investing and Financing Activities Not Affecting Cash:
Property and equipment acquired through a capital lease $ 64,692
$ —

~~16.~~13. Condensed Consolidating Financial Information

The following condensed consolidating financial information is presented in accordance with Regulation S-X paragraph 210.3-10 because, in connection with the issuance by two pass-through trusts formed by Hawaiian (which is also referred to in this Note 1613 as Subsidiary Issuer / Guarantor) of pass-through certificates, the Company (which is also referred to in this Note 1613 as Parent Issuer / Guarantor) is fully and unconditionally guaranteeing the payment obligations of Hawaiian, which is a 100% owned subsidiary of the Company, under equipment notes issued by Hawaiian to purchase new aircraft.

The Company's condensed consolidating financial statements are presented in the following tables:

~~Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)~~

~~Three months ended June 30, 2018~~

Parent Issuer /
Guarantor Subsidiary
Issuer /
Guarantor Non-Guarantor
Subsidiaries Eliminations Consolidated
(in thousands)
Operating Revenue $ —
$ 713,127
$ 2,393
$ (73 ) $ 715,447
Operating Expenses:

Wages and benefits —
171,555
—
—
171,555
Aircraft fuel, including taxes and delivery —
153,026
—
—
153,026
Maintenance materials and repairs —
59,468
1,502
—
60,970
Aircraft and passenger servicing —
38,626
—
—
38,626
Commissions and other selling —
31,863
25
(35 ) 31,853
Aircraft rent —
29,865
—
—
29,865
Other rentals and landing fees —
30,952
232
—
31,184
Depreciation and amortization —
31,902
1,017
—
32,919
Purchased services (2 ) 31,249
242
(15 ) 31,474
Other 2,099
37,435
1,536
(23 ) 41,047
Total 2,097
615,941
4,554
(73 ) 622,519
Operating Income (Loss) (2,097 ) 97,186
(2,161 ) —
92,928
Nonoperating Income (Expense):

Undistributed net income of subsidiaries 81,099
—
—
(81,099 ) —
Interest expense and amortization of debt discounts and issuance costs (3 ) (7,579 ) (45 ) —
(7,627 )
Interest income 51
1,880
—
—
1,931
Capitalized interest —
2,355
—
—
2,355
Gains on fuel derivatives —
18,952
—
—
18,952
Other, net —
(2,752 ) —
—
(2,752 )
Total 81,147
12,856
(45 ) (81,099 ) 12,859
Income (Loss) Before Income Taxes 79,050
110,042
(2,206 ) (81,099 ) 105,787
Income tax expense (benefit) (430 ) 27,201
(464 ) —
26,307
Net Income (Loss) $ 79,480
$ 82,841
$ (1,742 ) $ (81,099 ) $ 79,480
Comprehensive Income (Loss) $ 89,424
$ 92,785
$ (1,742 ) $ (91,043 ) $ 89,424

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)

Three months ended ~~June 30, 2017~~ ^(a)March 31, 2019

Parent Issuer /
Guarantor Subsidiary
Issuer /
Guarantor Non-Guarantor
Subsidiaries Eliminations Consolidated
(in thousands)
Operating Revenue $ —
$ 668,387
$ 1,837
$ (108 ) $ 670,116
Operating Expenses:

Aircraft fuel, including taxes and delivery —
102,774
—
—
102,774
Wages and benefits —
154,660
—
—
154,660
Aircraft rent —
34,183
370
—
34,553
Maintenance materials and repairs —
52,137
429
—
52,566
Aircraft and passenger servicing —
35,636
—
—
35,636
Commissions and other selling 18
32,151
19
(26 ) 32,162
Depreciation and amortization —
26,919
953
—
27,872
Other rentals and landing fees —
27,438
—
—
27,438
Purchased services 177
27,646
247
(15 ) 28,055
Special items —
4,771
—
—
4,771
Other 1,308
31,001
547
(67 ) 32,789
Total 1,503
529,316
2,565
(108 ) 533,276
Operating Income (Loss) (1,503 ) 139,071
(728 ) —
136,840
Nonoperating Income (Expense):

Undistributed net income of subsidiaries 77,574
—
—
(77,574 ) —
Interest expense and amortization of debt discounts and issuance costs —
(7,711 ) —
—
(7,711 )
Interest income 70
1,397
—
—
1,467
Capitalized interest —
2,082
—
—
2,082
Losses on fuel derivatives —
(4,712 ) —
—
(4,712 )
Other, net —
(4,317 ) —
—
(4,317 )
Total 77,644
(13,261 ) —
(77,574 ) (13,191 )
Income (Loss) Before Income Taxes 76,141
125,810
(728 ) (77,574 ) 123,649
Income tax expense (benefit) (756 ) 47,511
—
—
46,755
Net Income (Loss) $ 76,897
$ 78,299
$ (728 ) $ (77,574 ) $ 76,894
Comprehensive Income (Loss) $ 79,577
$ 80,985
$ (728 ) $ (80,257 ) $ 79,577



	Parent Issuer / Guarantor			Subsidiary Issuer / Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Operating Revenue	$	—		$	656,090		$	792		$	(131	)	$	656,751
Operating Expenses:
Wages and benefits	—			175,065			—			—			175,065
Aircraft fuel, including taxes and delivery	—			126,104			—			—			126,104
Maintenance, materials and repairs	—			61,802			1,243			—			63,045
Aircraft and passenger servicing	—			38,900			—			—			38,900
Commissions and other selling	—			30,865			18			(47		)	30,836
Aircraft rent	—			30,367			29			—			30,396
Other rentals and landing fees	—			31,019			27			—			31,046
Depreciation and amortization	—			36,492			1,659			—			38,151
Purchased services	54			32,193			222			(16		)	32,453
Other	1,842			35,856			449			(68		)	38,079
Total	1,896			598,663			3,647			(131		)	604,075
Operating Income (Loss)	(1,896		)	57,427			(2,855		)	—			52,676
Nonoperating Income (Expense):
Undistributed net income of subsidiaries	37,849			—			—			(37,849		)	—
Interest expense and amortization of debt discounts and issuance costs	—			(7,514		)	(16		)	—			(7,530		)
Interest income	8			2,975			—			—			2,983
Capitalized interest	—			1,285			—			—			1,285
Gains on fuel derivatives	—			570			—			—			570
Other, net	—			(1,069		)	44			—			(1,025		)
Total	37,857			(3,753		)	28			(37,849		)	(3,717		)
Income (Loss) Before Income Taxes	35,961			53,674			(2,827		)	(37,849		)	48,959
Income tax expense (benefit)	(397		)	13,591			(593		)	—			12,601
Net Income (Loss)	$	36,358		$	40,083		$	(2,234	)	$	(37,849	)	$	36,358
Comprehensive Income (Loss)	$	38,619		$	42,344		$	(2,234	)	$	(40,110	)	$	38,619

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)

~~Six~~Three months ended ~~June 30,~~March 31, 2018


	Parent Issuer / Guarantor			Subsidiary Issuer / Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated			Parent Issuer / Guarantor			Subsidiary Issuer / Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)															(in thousands)
Operating Revenue	$	—		$	1,376,539		$	4,520		$	(200	)	$	1,380,859		$	—		$	663,412		$	2,127		$	(127	)	$	665,412
Operating Expenses:
Wages and benefits																—			168,709			—			—			168,709
Aircraft fuel, including taxes and delivery	—			286,472			—			—			286,472			—			133,446			—			—			133,446
Wages and benefits	—			340,264			—			—			340,264
Aircraft rent	—			61,765			—			—			61,765
Maintenance materials and repairs	—			116,962			2,149			—			119,111
Maintenance, materials and repairs																—			57,494			647			—			58,141
Aircraft and passenger servicing	—			75,144			—			—			75,144			—			36,518			—			—			36,518
Commissions and other selling	(5		)	63,821			45			(83		)	63,778			(5		)	31,958			20			(48		)	31,925
Aircraft rent																—			31,900			—			—			31,900
Depreciation and amortization	—			63,177			1,987			—			65,164			—			31,275			970			—			32,245
Other rentals and landing fees	—			61,767			232			—			61,999			—			30,815			—			—			30,815
Purchased services	88			62,117			420			(30		)	62,595			90			30,868			178			(15		)	31,121
Contract termination expense	—			35,322			—			—			35,322
Contract terminations expense																—			35,322			—			—			35,322
Other	3,680			74,558			1,901			(87		)	80,052			1,581			37,123			365			(64		)	39,005
Total	3,763			1,241,369			6,734			(200		)	1,251,666			1,666			625,428			2,180			(127		)	629,147
Operating Income (Loss)	(3,763		)	135,170			(2,214		)	—			129,193			(1,666		)	37,984			(53		)	—			36,265
Nonoperating Income (Expense):
Undistributed net income of subsidiaries	110,909			—			—			(110,909		)	—			29,810			—			—			(29,810		)	—
Interest expense and amortization of debt discounts and issuance costs	(3		)	(16,134		)	(45		)	—			(16,182		)	—			(8,555		)	—			—			(8,555		)
Interest income	116			3,289			—			—			3,405			65			1,409			—			—			1,474
Capitalized interest	—			4,593			—			—			4,593			—			2,238			—			—			2,238
Gains on fuel derivatives	—			23,569			—			—			23,569			—			4,617			—			—			4,617
Other, net	(4		)	(1,697		)	5			—			(1,696		)	(4		)	1,055			5			—			1,056
Total	111,018			13,620			(40		)	(110,909		)	13,689			29,871			764			5			(29,810		)	830
Income (Loss) Before Income Taxes	107,255			148,790			(2,254		)	(110,909		)	142,882			28,205			38,748			(48		)	(29,810		)	37,095
Income tax expense (benefit)	(767		)	36,101			(474		)	—			34,860			(337		)	8,900			(10		)	—			8,553
Net Income (Loss)	$	108,022		$	112,689		$	(1,780	)	$	(110,909	)	$	108,022		$	28,542		$	29,848		$	(38	)	$	(29,810	)	$	28,542
Comprehensive Income (Loss)	$	110,775		$	115,442		$	(1,780	)	$	(113,662	)	$	110,775		$	21,351		$	22,657		$	(38	)	$	(22,619	)	$	21,351

~~Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)~~

~~Six months ended June 30, 2017~~^(a)

Parent Issuer /
Guarantor Subsidiary
Issuer /
Guarantor Non-Guarantor
Subsidiaries Eliminations Consolidated
(in thousands)
Operating Revenue $ —
$ 1,272,954
$ 3,583
$ (212 ) $ 1,276,325
Operating Expenses:

Aircraft fuel, including taxes and delivery —
206,312
—
—
206,312
Wages and benefits —
305,713
—
—
305,713
Aircraft rent —
67,318
370
—
67,688
Maintenance materials and repairs —
109,430
2,540
—
111,970
Aircraft and passenger servicing —
69,926
—
—
69,926
Commissions and other selling 24
61,814
38
(72 ) 61,804
Depreciation and amortization —
53,436
1,904
—
55,340
Other rentals and landing fees —
55,774
—
—
55,774
Purchased services 283
54,000
439
(30 ) 54,692
Special items —
23,450
—
—
23,450
Other 2,460
61,454
982
(110 ) 64,786
Total 2,767
1,068,627
6,273
(212 ) 1,077,455
Operating Income (Loss) (2,767 ) 204,327
(2,690 ) —
198,870
Nonoperating Income (Expense):

Undistributed net income of subsidiaries 111,306
—
—
(111,306 ) —
Interest expense and amortization of debt discounts and issuance costs —
(15,714 ) —
—
(15,714 )
Interest income 140
2,479
—
—
2,619
Capitalized interest —
3,842
—
—
3,842
Losses on fuel derivatives —
(13,510 ) —
—
(13,510 )
Other, net —
(6,240 ) —
—
(6,240 )
Total 111,446
(29,143 ) —
(111,306 ) (29,003 )
Income (Loss) Before Income Taxes 108,679
175,184
(2,690 ) (111,306 ) 169,867
Income tax expense (benefit) (1,860 ) 61,187
—
—
59,327
Net Income (Loss) $ 110,539
$ 113,997
$ (2,690 ) $ (111,306 ) $ 110,540
Comprehensive Income (Loss) $ 107,680
$ 111,136
$ (2,690 ) $ (108,446 ) $ 107,680

Condensed Consolidating Balance Sheets

~~June 30, 2018~~March 31, 2019


	Parent Issuer / Guarantor		Subsidiary Issuer / Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated			Parent Issuer / Guarantor		Subsidiary Issuer / Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)														(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	19,918	$	306,679		$	7,194		$	—		$	333,791		$	4,257	$	352,136		$	8,707		$	—		$	365,100
Restricted cash	—		1,000			—			—			1,000
Short-term investments	—		259,313			—			—			259,313			—		166,817			—			—			166,817
Accounts receivable, net	25		110,932			784			(248		)	111,493			—		109,685			1,290			(317		)	110,658
Spare parts and supplies, net	—		36,387			—			—			36,387			—		36,461			—			—			36,461
Prepaid expenses and other	181		99,056			78			—			99,315			301		60,022			230			—			60,553
Total	20,124		813,367			8,056			(248		)	841,299			4,558		725,121			10,227			(317		)	739,589
Property and equipment at cost	—		2,610,253			88,344			—			2,698,597			—		2,698,634			89,651			—			2,788,285
Less accumulated depreciation and amortization	—		(598,700		)	(12,942		)	—			(611,642		)	—		(661,647		)	(16,781		)	—			(678,428		)
Property and equipment, net	—		2,011,553			75,402			—			2,086,955			—		2,036,987			72,870			—			2,109,857
Operating lease right-of-use assets															—		613,103			—			—			613,103
Long-term prepayments and other	—		183,013			263			—			183,276			—		170,709			304			—			171,013
Deferred tax assets, net	33,086		—			—			(33,086		)	—
Goodwill and other intangible assets, net	—		120,407			924			—			121,331			—		119,975			577			—			120,552
Intercompany receivable	—		405,270			—			(405,270		)	—			—		478,365			—			(478,365		)	—
Investment in consolidated subsidiaries	1,261,977		—			—			(1,261,977		)	—			1,438,210		—			504			(1,438,714		)	—
TOTAL ASSETS	$	1,315,187	$	3,533,610		$	84,645		$	(1,700,581	)	$	3,232,861		$	1,442,768	$	4,144,260		$	84,482		$	(1,917,396	)	$	3,754,114
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,178	$	150,294		$	2,038		$	(248	)	$	153,262		$	776	$	142,417		$	2,191		$	(317	)	$	145,067
Air traffic liability	—		707,724			4,345			—			712,069			—		686,165			4,845			—			691,010
Other accrued liabilities	—		143,728			275			—			144,003			—		130,452			294			—			130,746
Current maturities of long-term debt, less discount, and capital lease obligations	—		113,496			30			—			113,526
Current maturities of long-term debt, less discount, and finance lease obligations															—		93,479			4			—			93,483
Current maturities of operating leases															—		90,481			—			—			90,481
Total	1,178		1,115,242			6,688			(248		)	1,122,860			776		1,142,994			7,334			(317		)	1,150,787
Long-term debt and capital lease obligations	—		573,831			4,622			—			578,453
Long-term debt and finance lease obligations															—		519,105			—			—			519,105
Intercompany payable	393,962		—			11,308			(405,270		)	—			466,932		—			11,433			(478,365		)	—
Other liabilities and deferred credits:												=sum(C32:I32)
Noncurrent operating leases															—		480,979			—			—			480,979
Accumulated pension and other post-retirement benefit obligations	—		218,426			—			—			218,426			—		180,232			—			—			180,232
Other liabilities and deferred credits	—		256,798			1,113			—			257,911			—		106,377			1,120			—			107,497
Noncurrent frequent flyer deferred revenue															—		170,149			—			—			170,149
Deferred tax liabilities, net	—		168,250			—			(33,086		)	135,164			—		170,305			—			—			170,305
Total	—		643,474			1,113			(33,086		)	611,501			—		1,108,042			1,120			—			1,109,162
Shareholders’ equity	920,047		1,201,063			60,914			(1,261,977		)	920,047			975,060		1,374,119			64,595			(1,438,714		)	975,060
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,315,187	$	3,533,610		$	84,645		$	(1,700,581	)	$	3,232,861		$	1,442,768	$	4,144,260		$	84,482		$	(1,917,396	)	$	3,754,114

Condensed Consolidating Balance Sheets

December 31, ~~2017~~ ^(a)2018

Parent Issuer /
Guarantor Subsidiary
Issuer /
Guarantor Non-Guarantor
Subsidiaries Eliminations Consolidated
(in thousands)
ASSETS

Current assets:

Cash and cash equivalents $ 57,405
$ 125,861
$ 7,687
$ —
$ 190,953
Restricted cash —
1,000
—
—
1,000
Short-term investments —
269,297
—
—
269,297
Accounts receivable, net 25
139,008
1,455
(209 ) 140,279
Spare parts and supplies, net —
35,361
—
—
35,361
Prepaid expenses and other 171
78,933
82
—
79,186
Total 57,601
649,460
9,224
(209 ) 716,076
Property and equipment at cost —
2,326,249
74,562
—
2,400,811
Less accumulated depreciation and amortization —
(546,831 ) (11,717 ) —
(558,548 )
Property and equipment, net —
1,779,418
62,845
—
1,842,263
Long-term prepayments and other —
193,449
183
—
193,632
Deferred tax assets, net 31,845
—
—
(31,845 ) —
Goodwill and other intangible assets, net —
120,695
1,155
—
121,850
Intercompany receivable —
392,791
—
(392,791 ) —
Investment in consolidated subsidiaries 1,137,941
—
—
(1,137,941 ) —
TOTAL ASSETS $ 1,227,387
$ 3,135,813
$ 73,407
$ (1,562,786 ) $ 2,873,821
LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable $ 622
$ 138,818
$ 1,574
$ (209 ) $ 140,805
Air traffic liability —
584,366
4,727
—
589,093
Other accrued liabilities 32
147,211
350
—
147,593
Current maturities of long-term debt, less discount, and capital lease obligations —
59,470
—
—
59,470
Total 654
929,865
6,651
(209 ) 936,961
Long-term debt and capital lease obligations —
511,201
—
—
511,201
Intercompany payable 381,608
—
11,183
(392,791 ) —
Other liabilities and deferred credits:

0
Accumulated pension and other post-retirement benefit obligations —
220,788
—
—
220,788
Other liabilities and deferred credits —
224,500
1,105
—
225,605
Deferred tax liabilities, net —
165,986
—
(31,845 ) 134,141
Total —
611,274
1,105
(31,845 ) 580,534
Shareholders’ equity 845,125
1,083,473
54,468
(1,137,941 ) 845,125
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 1,227,387
$ 3,135,813
$ 73,407
$ (1,562,786 ) $ 2,873,821



	Parent Issuer / Guarantor		Subsidiary Issuer / Guarantor			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	5,154	$	255,279		$	8,144		$	—		$	268,577
Short-term investments	—		232,241			—			—			232,241
Accounts receivable, net	—		109,499			2,569			(234		)	111,834
Spare parts and supplies, net	—		33,942			—			—			33,942
Prepaid expenses and other	165		58,296			112			—			58,573
Total	5,319		689,257			10,825			(234		)	705,167
Property and equipment at cost	—		2,756,551			92,021			—			2,848,572
Less accumulated depreciation and amortization	—		(648,111		)	(15,350		)	—			(663,461		)
Property and equipment, net	—		2,108,440			76,671			—			2,185,111
Long-term prepayments and other	62,990		185,161			899			(63,494		)	185,556
Goodwill and other intangible assets, net	—		120,119			693			—			120,812
Intercompany receivable	—		456,338			—			(456,338		)	—
Investment in consolidated subsidiaries	1,325,380		—			—			(1,325,380		)	—
TOTAL ASSETS	$	1,393,689	$	3,559,315		$	89,088		$	(1,845,446	)	$	3,196,646
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	665	$	139,552		$	3,163		$	(234	)	$	143,146
Air traffic liability	—		598,387			5,349			—			603,736
Other accrued liabilities	—		157,842			312			—			158,154
Current maturities of long-term debt, less discount, and finance lease obligations	—		101,052			45			—			101,097
Total	665		996,833			8,869			(234		)	1,006,133
Long-term debt and finance lease obligations	—		604,089			4,595			—			608,684
Intercompany payable	445,030		—			11,308			(456,338		)	—
Other liabilities and deferred credits:												0
Accumulated pension and other post-retirement benefit obligations	—		182,620			—			—			182,620
Other liabilities and deferred credits	—		118,682			1,144			—			119,826
Noncurrent frequent flyer deferred revenue	—		163,619			—			—			163,619
Deferred tax liabilities, net	—		167,770			—			—			167,770
Total	—		632,691			1,144			—			633,835
Shareholders’ equity	947,994		1,325,702			63,172			(1,388,874		)	947,994
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,393,689	$	3,559,315		$	89,088		$	(1,845,446	)	$	3,196,646

Condensed Consolidating Statements of Cash Flows

~~Six~~Three months ended ~~June 30, 2018~~March 31, 2019


	Parent Issuer / Guarantor			Subsidiary Issuer / Guarantor			Non- Guarantor Subsidiaries			Eliminations			Consolidated			Parent Issuer / Guarantor			Subsidiary Issuer / Guarantor			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)															(in thousands)
Net Cash Provided By (Used In) Operating Activities	$	(2,603	)	$	375,052		$	1,312		$	—		$	373,761		$	(670	)	$	152,752		$	(1,402	)	$	—		$	150,680
Cash Flows From Investing Activities:
Net payments to affiliates	(8,700		)	(8,721		)	—			17,421			—			(4,250		)	(20,920		)	—			25,170			—
Additions to property and equipment, including pre-delivery deposits	—			(247,607		)	(10,505		)	—			(258,112		)	—			(71,978		)	(2,283		)	—			(74,261		)
Proceeds from disposition of property and equipment	—			987			—			—			987
Proceeds from the sale and sale leaseback of aircraft and aircraft related equipment																—			2,780			—			—			2,780
Purchases of investments	—			(110,092		)	—			—			(110,092		)	—			(71,454		)	—			—			(71,454		)
Sales of investments	—			119,236			—			—			119,236			—			137,286			—			—			137,286
Other																—			(6,275		)	—			—			(6,275		)
Net cash used in investing activities	(8,700		)	(246,197		)	(10,505		)	17,421			(247,981		)	(4,250		)	(30,561		)	(2,283		)	25,170			(11,924		)
Cash Flows From Financing Activities:
Long-term borrowings	—			86,500			—			—			86,500			—			—			—			—			—
Repayments of long-term debt and capital lease obligations	—			(30,047		)	—			—			(30,047		)
Repayments of long-term debt and finance lease obligations																—			(24,352		)	(2		)	—			(24,354		)
Debt issuance costs	—			(889		)	—			—			(889		)	—			—			—			—			—
Dividend payments	(12,238		)	—			—			—			(12,238		)	(5,811		)	—			—			—			(5,811		)
Net payments from affiliates	8,721			—			8,700			(17,421		)	—			20,920			—			4,250			(25,170		)	—
Repurchases of common stock	(22,745		)	—			—			—			(22,745		)	(11,086		)	—			—			—			(11,086		)
Other	78			(3,601		)	—			—			(3,523		)	—			(982		)	—			—			(982		)
Net cash provided by (used in) financing activities	(26,184		)	51,963			8,700			(17,421		)	17,058			4,023			(25,334		)	4,248			(25,170		)	(42,233		)
Net increase (decrease) in cash and cash equivalents	(37,487		)	180,818			(493		)	—			142,838			(897		)	96,857			563			—			96,523
Cash, cash equivalents, & restricted cash - Beginning of Period	57,405			126,861			7,687			—			191,953			5,154			255,279			8,144			—			268,577
Cash, cash equivalents, & restricted cash - End of Period	$	19,918		$	307,679		$	7,194		$	—		$	334,791		$	4,257		$	352,136		$	8,707		$	—		$	365,100

Condensed Consolidating Statements of Cash Flows

~~Six~~Three months ended ~~June 30, 2017~~March 31, 2018


	Parent Issuer / Guarantor			Subsidiary Issuer / Guarantor			Non- Guarantor Subsidiaries			Eliminations			Consolidated			Parent Issuer / Guarantor			Subsidiary Issuer / Guarantor			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)															(in thousands)
Net Cash Provided By (Used In) Operating Activities	$	(2,498	)	$	339,242		$	(1,304	)	$	—		$	335,440		$	(931	)	$	224,935		$	1,541		$	—		$	225,545
Cash Flows From Investing Activities:
Net payments to affiliates	—			(7,960		)	—			7,960			—			(6,500		)	(6,000		)	—			12,500			—
Additions to property and equipment, including pre-delivery deposits	—			(94,250		)	(2,028		)	—			(96,278		)	—			(102,595		)	(8,302		)	—			(110,897		)
Proceeds from disposition of property and equipment	—			33,511			—			—			33,511
Purchases of investments	—			(107,533		)	—			—			(107,533		)	—			(30,386		)	—			—			(30,386		)
Sales of investments	—			125,881			—			—			125,881			—			53,984			—			—			53,984
Net cash used in investing activities	—			(50,351		)	(2,028		)	7,960			(44,419		)	(6,500		)	(84,997		)	(8,302		)	12,500			(87,299		)
Cash Flows From Financing Activities:
Repayments of long-term debt and capital lease obligations	—			(30,484		)	—			—			(30,484		)
Repayments of long-term debt and finance lease obligations																—			(20,395		)	—			—			(20,395		)
Dividend payments																(6,145		)	—			—			—			(6,145		)
Net payments from affiliates	7,960			—			—			(7,960		)	—			6,000			—			6,500			(12,500		)	—
Repurchases of Common Stock	(4,299		)	—			—			—			(4,299		)	(20,243		)	—			—			—			(20,243		)
Other	86			(7,621		)	—			—			(7,535		)	78			(3,309		)	—			—			(3,231		)
Net cash provided by (used in) financing activities	3,747			(38,105		)	—			(7,960		)	(42,318		)	(20,310		)	(23,704		)	6,500			(12,500		)	(50,014		)
Net increase (decrease) in cash and cash equivalents	1,249			250,786			(3,332		)	—			248,703			(27,741		)	116,234			(261		)	—			88,232
Cash, cash equivalents, & restricted cash - Beginning of Period	67,629			254,985			8,377			—			330,991			57,405			126,861			7,687			—			191,953
Cash, cash equivalents, & restricted cash - End of Period	$	68,878		$	505,771		$	5,045		$	—		$	579,694		$	29,664		$	243,095		$	7,426		$	—		$	280,185

Income Taxes

The income tax expense (benefit) is presented as if each entity that is part of the consolidated group files a separate return.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect our current views with respect to certain current and future events and financial performance. Such forward-looking statements include, without limitation, statements related to our financial statements and results of operations; any expectations of operating expenses, deferred revenue, interest rates, tax rates, income taxes, deferred tax assets, valuation allowances or other financial items; expectations regarding industry capacity, our operating performance, available seat miles, operating revenue per available seat mile and operating cost per available seat mile for the ~~third~~second quarter of ~~2018;~~2019; our expected fleet as of ~~June 30, 2019;~~March 31, 2020; estimates of annual fuel expenses and measure of the effects of fuel prices on our business; the availability of financing; statements regarding our intention to pay quarterly dividends and the amounts thereof, if any; statements regarding our ability and intention to repurchase our shares; changes in our fleet plan and related cash outlays; committed capital expenditures; expected cash payments related to our post-retirement plan obligations; estimated financial charges; expected delivery of new ~~aircraft;~~aircraft and engines; the impact of accounting standards on our financial statements; the effects of any litigation on our operations or business; the effects of our fuel and currency risk hedging policies; the fair value and expected maturity of our debt obligations; our estimated contractual obligations; and 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,” “could,” “may,” 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 our operations and business environment, all of which may cause our actual results to be materially different from any future results, expressed or implied, in these forward-looking statements.

Factors that could affect such forward-looking statements include, but are not limited to: our ability to accurately forecast quarterly and annual results; global economic volatility; macroeconomic developments; political developments; our dependence on the tourism industry; the price and availability of fuel; foreign currency exchange rate fluctuations; ~~our~~ competitive ~~environment,~~pressures, including the ~~potential~~ impact of increasing industry capacity between North America and Hawai’i;

fluctuations in demand for transportation in the markets in which we ~~operate;~~operate, including due to the occurrence of natural disasters, such as hurricanes, earthquakes and tsunamis; maintenance of privacy and security of customer-related information and compliance with applicable federal and foreign privacy or data security regulations or standards; our dependence on technology and automated systems; our reliance on third-party contractors; satisfactory labor relations; our ability to attract and retain qualified personnel and key executives; successful implementation of growth strategy and cost reduction goals; adverse publicity; risks related to the airline industry; our ability to obtain and maintain adequate facilities and infrastructure; seasonal and cyclical volatility; the effect of applicable state, federal and foreign laws and regulations; increases in insurance costs or reductions in coverage; the limited number of suppliers for aircraft, aircraft engines and parts; our existing aircraft purchase agreements; delays in aircraft or engine deliveries or other loss of fleet capacity; our ability to continue to generate sufficient cash flow to support the payment of a quarterly dividend; changes in our future capital needs; fluctuations in our share price; our financial liquidity; and our ~~financial liquidity.~~ability to implement our growth strategy. The risks, uncertainties, and assumptions referred to above that could cause our 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 our public filings and public announcements, including, but not limited to, our risk factors set out in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018. All forward-looking statements included in this Report are based on information available to us as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this quarterly report. The following discussion and analysis should be read in conjunction with our unaudited Consolidated Financial Statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

Our Business

We are engaged in the scheduled air transportation of passengers and cargo amongst the Hawaiian Islands (the ~~“Neighbor Island”~~Neighbor Island routes), between the Hawaiian Islands and certain cities in the U.S. mainland (the ~~“North America”~~North America routes and collectively with the Neighbor Island routes, referred to as our ~~“Domestic”~~Domestic routes), and between the Hawaiian Islands and the South Pacific, Australia, and Asia (the ~~“International”~~International routes), collectively referred to as our “Scheduled Operations.” In addition, we operate various charter flights. We are the largest airline headquartered in the State of Hawai‘i and the tenth largest domestic airline in the United States based on revenue passenger miles reported by the Research and Innovative Technology Administration Bureau of Transportation Statistics for the month of ~~April 2018,~~January 2019, the latest available data. As of ~~June 30, 2018~~March 31, 2019, we had ~~7,142~~7,299 active employees.

General information about us is available at https://www.hawaiianairlines.com. Information contained on our website is not incorporated by reference into, or otherwise to be regarded as part of, this Quarterly Report on Form 10-Q unless expressly noted. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any

amendments and exhibits to those reports, are available free of charge through our website as soon as reasonably practicable after we file them with, or furnish them to, the Securities and Exchange Commission.

Financial Highlights

GAAP net income in the ~~second~~first quarter of ~~$79.5~~$36.4 million, or ~~$1.56~~$0.75 per diluted share.

Adjusted net income in the ~~second~~first quarter of ~~$73.3~~$32.6 million, or ~~$1.44~~$0.67 per diluted share.

Pre-tax margin for the ~~second~~first quarter of ~~14.8%~~7.5%.

Unrestricted cash and cash equivalents and short-term investments of ~~$593.1~~$531.9 million.

See “Results of Operations” below for further discussion of changes in revenue and operating expense. See “Non-GAAP Financial Measures” below for our reconciliation of non-GAAP measures.

Outlook

Looking ahead, industry capacity ~~increases~~ in ~~North America and certain parts of~~ our ~~International~~Domestic network ~~are~~is expected to ~~continue through the third quarter of 2018.~~remain at historically high levels in 2019. We expect our available seat miles during the three months ending ~~September~~June 30, ~~2018~~2019 to increase by ~~7.5%~~1.5% to ~~9.5% from~~3.5% compared to the prior year ~~period, while we expect~~period. While demand for travel to Hawai'i remains robust, the competitive environment results in our expectation of operating revenue per available seat mile to ~~be down 1.5%~~decline 2.0% to ~~up 1.5%.~~5.0% as compared to the same period in 2018. We expect operating cost per available seat mile during the three months ending ~~September~~June 30, ~~2018~~2019 to ~~increase by 6.8%~~be down 2.2% to ~~10.3%~~up 0.3% compared to the prior year period. For the twelve-month period ending December 31, 2019, we expect operating cost per available seat mile to be down 0.7% to up 2.9%.

For the three-months ending June 30, 2019, we expect our corporate federal tax rate will result in an all-in book tax rate ranging between 25% to 27%.

Partnerships

Together with Japan Airlines, we filed an application in 2018 with the U.S. Department of Transportation (DOT) and Japan's Ministry of Land, Infrastructure, Transport and Tourism (MLIT) seeking antitrust immunity (ATI) to create a joint venture that promises significant consumer benefits and the opportunity for service expansion. We enhanced our comprehensive partnership with Japan Airlines with the announcement of reciprocal frequent flyer benefits for HawaiianMiles and JAL Mileage Bank members, which became effective in October 2018. The joint venture ~~will build upon the board codeshare partnership the two carriers initiated~~and enhanced program was launched in March ~~2018.~~2018 with codeshare flights between Japan and Hawai'i. In April 2019, The Company received notification from the DOT that its ATI application was deemed substantially completed; however, we have not yet received approval, and we do not anticipate operations commencing under the joint venture until late 2019 or early 2020.

Fleet Summary

In July 2018, we ~~announced the execution of a purchase~~entered into an agreement for the purchase of 10 Boeing 787-9 "Dreamliner" aircraft with purchase rights for an additional 10 aircraft. We expect those aircraft to be delivered starting in 2021 and, thus, they are not reflected in the table below. The table below summarizes our total fleet as of ~~June 30, 2017~~March 31, 2018 and ~~2018~~2019, and expected fleet as of ~~June 30, 2019~~March 31, 2020 (based on existing executed agreements):


	June 30, 2017			June 30, 2018			June 30, 2019			March 31, 2018			March 31, 2019			March 31, 2020
Aircraft Type	Leased (2)	Owned	Total	Leased (2)	Owned	Total	Leased (2)	Owned	Total	Leased (2)	Owned	Total	Leased (2)	Owned	Total	Leased (2)	Owned	Total
A330-200(1)	11	12	23	11	13	24	11	13	24	11	13	24	12	12	24	12	12	24
A321neo	—	—	—	1	5	6	2	12	14	—	2	2	2	10	12	2	16	18
767-300(5)	4	4	8	4	4	8	—	—	—	4	4	8	—	—	—	—	—	—
717-200	5	15	20	5	15	20	5	15	20	5	15	20	5	15	20	5	15	20
ATR 42-500 ~~(1)~~(3)	—	3	3	—	4	4	—	4	4	—	3	3	—	4	4	—	4	4
ATR 72-200 ~~(3)~~(4)	—	3	3	—	3	3	—	3	3	—	3	3	—	3	3	—	3	3
Total	20	37	57	21	44	65	18	47	65	20	40	60	19	44	63	19	50	69


(1)	In July 2018, we entered into a sale and leaseback transaction for one of our A330-200 aircraft.


(2)	Leased aircraft include aircraft under both finance and operating leases.


(3)	The ATR 42-500 turboprop and ATR 72-200 turboprop aircraft are owned by Airline Contract Maintenance & Equipment, Inc., a wholly-owned subsidiary of the Company.


~~(2)~~(4)	~~Leased~~Aircraft are utilized for our cargo operations.


(5)	We completed the exit from our B767-300 aircraft ~~include aircraft under both capital and operating leases.~~fleet in January 2019.

~~(3) The ATR 72-200 turboprop aircraft are used for our cargo operations.~~

Results of Operations

For the three months ended ~~June 30, 2018,~~March 31, 2019, we generated net income of ~~$79.5~~$36.4 million, or ~~$1.56~~$0.75 per diluted share, compared to net income of ~~$76.9~~$28.5 million, or ~~$1.43~~$0.56 per diluted share, for the same period in 2017. For the six months ended June 30, 2018, we generated net income of $108.0 million, or $2.12 per diluted share, compared to net income of $110.5 million, or $2.05 per diluted share, for the same period in 2017. During the first quarter of 2018, we extended our partnership with Barclaycard US, Hawaiian's co-branded credit card partner. The new agreement continues through 2024 and includes improved economics and enhanced product offerings for our cardholders.2018.

Selected Consolidated Statistical Data (unaudited)


	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
	2018			2017			2018			2017			2019			2018
	(in thousands, except as otherwise indicated)												(in thousands, except as otherwise indicated)
Scheduled Operations (a) :
Scheduled Operations (a):
Revenue passengers flown	3,018			2,885			5,909			5,588			2,821			2,891
Revenue passenger miles (RPM)	4,333,125			4,099,122			8,363,783			7,896,847			4,127,729			4,030,657
Available seat miles (ASM)	5,019,962			4,735,335			9,751,275			9,256,433			4,850,723			4,731,314
Passenger revenue per RPM (Yield)		15.12	¢		15.22	¢		15.15	¢		15.04	¢		14.57	¢		15.17	¢
Passenger load factor (RPM/ASM)	86.3		%	86.6		%	85.8		%	85.3		%	85.1		%	85.2		%
Passenger revenue per ASM (PRASM)		13.05	¢		13.18	¢		12.99	¢		12.83	¢		12.40	¢		12.93	¢
Total Operations (a) :
Revenue passengers flown	3,018			2,886			5,910			5,590			2,823			2,892
RPM	4,333,178			4,099,261			8,363,961			7,897,754			4,128,485			4,030,783
ASM	5,020,026			4,735,491			9,751,523			9,257,844			4,851,921			4,731,498
Operating revenue per ASM (RASM)		14.25	¢		14.15	¢		14.16	¢		13.79	¢		13.54	¢		14.06	¢
Operating cost per ASM (CASM)		12.40	¢		11.26	¢		12.84	¢		11.64	¢		12.45	¢		13.30	¢
CASM excluding aircraft fuel, contract terminations expense, and special items (b)		9.35	¢		8.99	¢		9.54	¢		9.16	¢
CASM excluding aircraft fuel, loss on sale of aircraft, and contract terminations expense (b)														9.87	¢		9.73	¢
Aircraft fuel expense per ASM (c)		3.05	¢		2.17	¢		2.94	¢		2.23	¢		2.60	¢		2.82	¢
Revenue block hours operated	51,477			47,569			100,223			92,574			51,627			48,747
Gallons of aircraft fuel consumed	68,627			64,506			133,906			126,244			64,521			65,279
Average cost per gallon of aircraft fuel (actual) (c)	$	2.23		$	1.59		$	2.14		$	1.63		$	1.95		$	2.04


(a)	Includes the operations of our contract carrier under a capacity purchase agreement.


(b)	Represents adjusted unit costs, a non-GAAP measure. We believe this is a useful measure because it better reflects our controllable costs. See “Non-GAAP Financial Measures” below for a reconciliation of non-GAAP measures.


(c)	Includes applicable taxes and fees.

Operating Revenue

During the three ~~and six~~ months ended ~~June 30, 2018,~~March 31, 2019, operating revenue ~~increased~~decreased by ~~$45.3~~$8.7 million, or ~~6.8%~~1.3%, ~~and $104.5 million, or 8.2%, respectively,~~ as compared to the prior year ~~periods,~~period, driven by ~~increased~~decreased passenger revenue and is discussed further below:

Passenger revenue

For the three ~~and six~~ months ended ~~June 30, 2018,~~March 31, 2019, passenger revenue ~~increased~~decreased by ~~$31.2~~$10.3 million, or ~~5.0%~~1.7%, ~~and $79.0 million, or 6.7%, respectively,~~ as compared to the prior year ~~periods.~~period. Details of these changes are described in the table below:


	Three months ended June 30, 2018 as compared to three months ended June 30, 2017								Six months ended June 30, 2018 as compared to six months ended June 30, 2017								Three months ended March 31, 2019 as compared to three months ended March 31, 2018
	Change in scheduled passenger revenue		Change in Yield		Change in RPM		Change in ASM		Change in scheduled passenger revenue		Change in Yield		Change in RPM		Change in ASM		Change in scheduled passenger revenue			Change in Yield		Change in RPM		Change in ASM
	(in millions)								(in millions)								(in millions)
Domestic	$	14.1	(3.4	)%	6.5	%	8.3	%	$	48.0	(1.2	)%	6.6	%	8.4	%	$	(10.9	)	(8.0	)%	6.0	%	5.0	%
International	17.1		7.6		4.0		1.9		31.0		6.1		4.6		—		0.6			5.2		(4.6	)	(2.2	)
Total scheduled	$	31.2	(0.7	)%	5.7	%	6.0	%	$	79.0	0.7	%	5.9	%	5.3	%	$	(10.3	)	(4.0	)%	2.4	%	2.5	%

Domestic

~~For~~ revenue decreased by $10.9 million driven primarily by a 2.3% decrease in total passengers flown and a 2.4% decline in average fares. The decline in passengers flown was attributed to capacity reductions on certain of our shorter haul routes, which outpaced growth on longer haul routes. Passenger yield declined as a result of reduced average fares on both our shorter haul and longer haul domestic routes, respectively, combined with a higher proportion of longer haul (typically lower yield) flying in the quarter ended March 31, 2019. International revenue increased $0.6 million during the three ~~and six~~ months ended ~~June 30, 2018, revenue on our domestic routes increased by $14.1 million, or 2.9%, and $48.0 million, or 5.3%, respectively,~~March 31, 2019 as compared to the ~~prior year periods. The increase was due to an increase~~same period in overall passengers flown in our North America routes of 7.4% and 7.1% for the three and six months ended June 30, 2018, respectively, partially offset by a slight decrease in average fare prices. During the year2018.

In April 2019, we expanded our operations and ~~now have direct routes that go~~commenced our new five-times-a-week service between ~~Maui, Hawaii~~Honolulu, Hawai'i and ~~Portland, Oregon (January 2018), Kona, Hawaii~~Boston, Massachusetts and ~~Los Angeles,~~our new daily service between Kahului, Hawai'i and Sacramento, California. During the first quarter of 2019, we announced the expansion of service between San Francisco, California ~~(March 2018), Lihue, Hawaii~~ and ~~Los Angeles, California (May 2017),~~ Honolulu, ~~Hawaii and Long Beach, California (May 2018), and Maui, Hawaii and San Diego, California (June 2018).~~Hawai'i with additional daily flights commencing in October 2019.

~~International~~In January 2019, we completed the retirement of our B767 fleet and took delivery of one A321neo aircraft, bringing our total A321 fleet to twelve as of March 31, 2019. We expect to take delivery of an additional five A321neo aircraft during the remainder of 2019 and our eighteenth and final A321neo aircraft in early 2020.

~~For~~Other Operating Revenue

Other operating revenue increased $1.6 million, or 3.0%, during the three ~~and six~~ months ended ~~June 30, 2018, revenue on our international routes increased by $17.1 million, or 11.9%, and $31.0 million, or 10.9%, respectively,~~March 31, 2019, as compared to the ~~prior year periods. During~~same period in 2018, primarily generated through an increase in loyalty program revenue of $4.1 million related to brand usage associated with our co-brand credit card partnership with Barclays, which was amended in the ~~three months ended June 30, 2018, the overall passengers flown increased~~first quarter of 2018. This was offset by 4.1% and average fares increased by 8.0% as compared to the prior year period. During the six months ended June 30, 2018, the overall passengers flow increased by 4.5% and average fares increased by 7.8% as compared to the prior year period.decreases in other revenue, including our cargo operations.

Operating Expense

Operating expenses were ~~$622.5~~$604.1 million and ~~$533.3~~$629.1 million for the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017, respectively, and $1,251.7 million and $1,077.5 million for the six months ended June 30, 2018 and 2017,~~ respectively. Increases (decreases) in operating expenses for the three ~~and six~~ months ended ~~June 30, 2018,~~March 31, 2019, as compared to the prior year ~~periods,~~period, are detailed below:


	Increase / (decrease) for the three months ended June 30, 2018 compared to the three months ended June 30, 2017					Increase / (decrease) for the six months ended June 30, 2018 compared to the six months ended June 30, 2017					Increase / (decrease) for the three months ended March 31, 2019 compared to the three months ended March 31, 2018
	$			%		$			%		$			%
Operating expenses	(in thousands)					(in thousands)					(in thousands)
Wages and benefits	$	16,895		10.9	%	$	34,551		11.3	%	$	6,356		3.8	%
Aircraft fuel, including taxes and delivery	50,252			48.9		80,160			38.9		(7,342		)	(5.5	)
Maintenance, materials and repairs	8,404			16.0		7,141			6.4		4,904			8.4
Aircraft and passenger servicing	2,990			8.4		5,218			7.5		2,382			6.5
Commissions and other selling	(309		)	(1.0	)	1,974			3.2		(1,089		)	(3.4	)
Aircraft rent	(4,688		)	(13.6	)	(5,923		)	(8.8	)	(1,504		)	(4.7	)
Other rentals and landing fees	3,746			13.7		6,225			11.2		231			0.7
Depreciation and amortization	5,047			18.1		9,824			17.8		5,906			18.3
Purchased services	3,419			12.2		7,903			14.5		1,332			4.3
Contract terminations expense	—			—		35,322			100.0		(35,322		)	(100.0	)
Special items	(4,771		)	(100.0	)	(23,450		)	(100.0	)
Other	8,258			25.2		15,266			23.6		(926		)	(2.4	)
Total	$	89,243		16.7	%	$	174,211		16.2	%	$	(25,072	)	(4.0	)%

Wages and benefits

Wages and benefits expense increased by ~~$16.9~~$6.4 million, or ~~10.9%, and $34.6 million, or 11.3%~~3.8%, for the three ~~and six~~ months ended ~~June 30, 2018, respectively~~March 31, 2019 as compared to the prior year ~~periods.~~period. The ~~wages~~increase was a result of higher salary expense, driven by increased headcount and ~~benefits~~annual rate increases for ~~our pilots increased by $8.6 million and $18.7 million, respectively for the three and six months ended June 30, 2018 due to an increase in pilot headcount related to the induction~~certain of our Airbus A321neo fleet. In addition, employee benefits expenses, which includes health insurance costs, increased by $3.9 million and $7.5 million for the three and six months ended June 30, 2018, respectively. We have also increased the number of flight crew personnel and training events which relate to the induction of our Airbus A321neo fleet. Overall employee headcount increased 12.4% from June 30, 2017 to June 30, 2018.collective bargaining groups.

Aircraft fuel

Aircraft fuel expense ~~increased~~decreased during the three ~~and six~~ months ended ~~June 30, 2018,~~March 31, 2019, as compared to the prior year period, primarily due to ~~the increase~~a decrease in the average fuel price per gallon and ~~an increase~~a decrease in consumption as illustrated in the following table:


	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
	2018		2017		% Change		2018		2017		% Change		2019		2018		% Change
	(in thousands, except per-gallon amounts)						(in thousands, except per-gallon amounts)						(in thousands, except per-gallon amounts)
Aircraft fuel expense, including taxes and delivery	$	153,026	$	102,774	48.9	%	$	286,472	$	206,312	38.9	%	$	126,104	$	133,446	(5.5	)%
Fuel gallons consumed	68,627		64,506		6.4	%	133,906		126,244		6.1	%	64,521		65,279		(1.2	)%
Average fuel price per gallon, including taxes and delivery	$	2.23	$	1.59	40.3	%	$	2.14	$	1.63	31.3	%	$	1.95	$	2.04	(4.4	)%

We believe economic fuel expense is a good measure of the effect of fuel prices on our business as it most closely approximates the net cash outflow associated with the purchase of fuel for our operations in a period and is consistent with how our management manages our business and assesses our operating performance. We define economic fuel expense as raw fuel expense plus (gains)/losses realized through actual cash payments to/(receipts from) hedge counterparties for fuel derivatives settled in the period, inclusive of costs related to hedging premiums. Economic fuel expense is calculated as follows:



	Three months ended March 31,
	2019		2018			% Change
	(in thousands, except per-gallon amounts)
Aircraft fuel expense, including taxes and delivery	$	126,104	$	133,446		(5.5	)%
Realized losses (gains) on settlement of fuel derivative contracts	2,844		(5,661		)	NM
Economic fuel expense	$	128,948	$	127,785		0.9	%
Fuel gallons consumed	64,521		65,279			(1.2	)%
Economic fuel costs per gallon	$	2.00	$	1.96		2.0	%

Three months ended June 30, Six months ended June 30,
2018 2017 % Change 2018 2017 % Change
(in thousands, except per-gallon amounts) (in thousands, except per-gallon amounts)
Aircraft fuel expense, including taxes and delivery $ 153,026
$ 102,774
48.9 % $ 286,472
$ 206,312
38.9 %
Realized losses (gains) on settlement of fuel derivative contracts (10,827 )
1,902

(669.2 )%
(16,488 )
(687 ) 2,300.0 %
Economic fuel expense $ 142,199
$ 104,676
35.8 % $ 269,984
$ 205,625
31.3 %
Fuel gallons consumed 68,627
64,506
6.4 % 133,906
126,244
6.1 %
Economic fuel costs per gallon $ 2.07
$ 1.62
27.8 % $ 2.02
$ 1.63
23.9 %

See Item 3, "Quantitative and Qualitative Disclosures About Market Risk" for additional discussion of our aircraft fuel costs and related hedging program.

~~Aircraft rent~~Depreciation and amortization

~~Aircraft rent~~Depreciation and amortization expense ~~decreased~~increased by ~~$4.7 million, or 13.6% and~~ $5.9 million, or ~~8.8%~~18.3%, for the three ~~and six~~ months ended ~~June 30, 2018, respectively~~March 31, 2019 as compared to the prior year ~~periods. As described below~~period, due to the increase in the number of owned aircraft, specifically the addition of eight Airbus A321neo aircraft we took delivery of and placed in service, including those under finance lease, since March 31, 2018.

Contract terminations expense ~~during~~

During the ~~first quarter~~three months ended March 31, 2018, we terminated two contracts which incurred a total of $35.3 million in expense. The transactions are described below:

In January 2018, we entered into a transaction with a lessor to early terminate 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. AsThese aircraft were previously accounted for as operating leases. In order to exit the leases and purchase the aircraft, we ~~now own these aircraft, the amount of aircraft rent expense has been reduced.~~

~~Depreciation and amortization~~

~~Depreciation and amortization expense increased by $5.0 million, or 18.1%, and $9.8 million, or 17.8%, for the three and six months ended June 30, 2018, respectively, as compared~~agreed to the prior year periods, due to the increase in the number of owned aircraft, specifically the addition of an Airbus A330-200, five Airbus A321neo aircraft, as well as the three Boeing 767-300's in our fleet.

~~Contract terminations expense~~

~~During the six months ended June 30, 2018, we terminated two contracts which incurred~~pay a total of ~~$35.3~~$67.1 million ~~in expense.~~(net of all deposits), of which a portion was expensed immediately and recognized as a contract termination fee. The ~~transactions are described below:~~expensed amount represents the total purchase price amount over fair value of the aircraft purchased as of the date of the transaction.

In February 2018, we exercised our right to terminate the aircraft purchase agreement with Airbus for six Airbus A330-800neo aircraft and the purchase rights for an additional six Airbus A330-800neo aircraft. To terminate the purchase agreement, we were obligated to repay Airbus for concessions received relating to a prior firm order, training credits, as well as forfeit the pre-delivery progress payments made towards the flight equipment. We recorded a contract terminations expense to reflect a portion of the termination penalty within our Consolidated Statements of Operations.

In January 2018, we entered into a transaction with a lessor to early terminate 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 lease and purchase the aircraft, we agreed to pay a total of $67.1 million (net of all deposits) of which a portion was expensed immediately and recognized as a contract termination fee. The expensed amount represents the total purchase price amount over fair value of the aircraft purchased as of the date of the transaction.

~~Special items~~

In April 2017, we executed a sale leaseback transaction with an independent third party for three Boeing 767-300 aircraft. The lease term for the three aircraft commenced in April 2017 and goes through November 2018, December 2018, and January 2019, respectively. During the three and six months ended June 30, 2017, we recorded a loss on sale of aircraft of $4.8 million.

In March 2017, we received notice from ALPA that the contract agreement was ratified by ALPA's members. The agreement became effective April 1, 2017. The agreement included, among other various benefits, a pay adjustment and ratification bonus computed based on previous service. During the six months ended June 30, 2017, we expensed $18.7 million principally

~~related to a one-time payment to reduce our future 401K employer contribution for certain pilot groups, which was not recoverable once paid.~~

~~Other expenses~~

Other expenses increased by $8.3 million, or 25.2%, and $15.3 million or 23.6%, for the three and six months ended June 30, 2018, respectively, as compared to the prior year periods. During the period, there was an increase in personnel related expenses for our crew members (e.g. meals, lodging, etc.) due to the increased flying. Other components of our Other expense line item include, but are not limited to: communication costs, professional and technical fees, insurance costs, legal fees, and other miscellaneous expenses.

Nonoperating Income (Expense)

Net nonoperating expense ~~decreased~~increased by ~~$26.1~~$4.5 million, or ~~197.5%~~547.8%, ~~and $42.7 million, or 147.2%~~ for the three ~~and six~~ months ended ~~June 30, 2018, respectively,~~March 31, 2019, as compared to the prior year ~~periods.~~period. The ~~decrease~~increase in expense was ~~due~~attributed to a ~~$23.7 million and $37.1~~$0.6 million gain on fuel derivatives for the three ~~and six~~ months ended ~~June 30, 2018, respectively. As described~~March 31, 2019 as compared to a $4.6 million gain in ~~Note 9 to our Consolidated Financial Statements, during~~ the quarter we originated debt denominated in a foreign currency. The fluctuation in foreign exchange rates at each balance sheet date is reflected within the nonoperating income (expense) line item. The foreign currency fluctuation for the three months ended June 30, 2018 was not material.prior year period.

Income Taxes

Our effective tax rate was ~~24.9%~~25.7% and ~~37.8%~~23.1% for the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017, respectively and 24.4% and 34.9% for the six months ended June 30, 2018 and 2017,~~ respectively. The effective tax rate represents a blend of federal and state taxes and includes the impact of certain nondeductible items. The effective tax rate for the three and six months ended June 30, 2018 also reflects the reduced federal corporate income tax rate as a result of the enactment of the Tax Cuts and Jobs Act (the Tax Act) in December 2017. We continue to analyze the different aspects of the Tax Act which could potentially affect the provisional estimates that were recorded at December 31, 2017. The accounting is expected to be complete when the 2017 U.S. corporate income tax return is filed later in 2018.

Liquidity and Capital Resources

Our primary sources of liquidity are:

Our ~~liquidity is dependent on the cash we generate from operating activities and our debt financing arrangements. As of June 30, 2018, we had $333.8 million in~~existing cash and cash equivalents and ~~$259.3 million in~~ short-term investments ~~an increase~~ of ~~$132.9~~$531.9 million, and our expected cash from operations;

Our 21 unencumbered aircraft as of March 31, 2019 that could be financed, if necessary; and

Our $235.0 million revolving credit facility with no outstanding borrowing. Information about this facility can be found in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

~~We have been able to generate sufficient funds from our operations to meet our working capital requirements and finance our aircraft acquisitions through secured debt and lease financings.~~ At ~~June 30, 2018,~~March 31, 2019, we had ~~approximately $692.0~~$612.6 million of debt and ~~capital~~finance lease obligations, including ~~approximately $113.5~~$93.5 million classified as a current liability in ~~our unaudited~~the Consolidated Balance Sheets. ~~See the Contractual Obligations table below for a description~~As of December 31, 2018, our current liabilities exceeded our current assets by approximately $411.2 million. However, approximately $691.0 million of our ~~estimated contractual obligations as~~current liabilities are related to our advanced ticket sales and frequent flyer deferred revenue, both of ~~June 30, 2018.~~

~~We also~~which largely represent revenue to be recognized for travel within the next 12 months and not actual cash outlays. The deficit in working capital does not have ~~access~~an adverse impact to a secured revolving credit and letter of credit facility of $225 million, maturing in December 2019. As of June 30, 2018, we had no outstanding borrowings under the revolving credit facility. During the three months ended June 30, 2018, we executed multiple foreign-denominated debt agreements for a total principal value of $86.5 million, which is collateralized by aircraft.our cash flows, liquidity, or operations.

Cash Flows

Net cash provided by operating activities was ~~$373.8~~$150.7 million ~~for~~and $225.5 million during the ~~six~~three months ended ~~June 30,~~March 31, 2019 and 2018, respectively. Operating cash flows are primarily ~~due~~derived from providing air transportation to ~~$108.0 million~~customers. The

vast majority of tickets are purchased in ~~net income, increase~~advance of ~~$123.0 million~~when travel is provided, and in ~~air~~some cases, several months before the anticipated travel date. The operating cash flows during each of the three months ended March 31, 2019 and 2018 were impacted by changes in Air traffic liability and current frequent flyer deferred revenue, Accounts receivables and Other asset and liabilities, net.

Cash used in investing activities was $11.9 million and $87.3 million during the three months ended March 31, 2019 and 2018, respectively. Investing activities included Capital expenditures, primarily related to aircraft and other equipment, and the purchases and sales of short-term investments. During the three months ended March 31, 2019, Capital expenditures were $74.3 million, the majority of which were payments for a ~~decrease of $21.7~~A321neo aircraft delivery in the period as compared with $110.9 million in ~~accounts receivables.~~

Capital expenditures during three months ended March 31, 2018. During three months ended March 31, 2019, our purchases and sales of short-term investments resulted in net cash inflow of $65.8 million as compared to net cash outflows of $23.6 million during the same period in 2018.

Net cash used in investing activities was $248.0 million for the six months ended June 30, 2018 due to purchases of property and equipment, specifically the purchase of three Airbus A321neo's along with progress payments on flight equipment during the year.

~~Net cash provided by~~ financing activities was ~~$17.1~~$42.2 million ~~for~~and $50.0 million during the ~~six~~three months ended ~~June 30,~~March 31, 2019 and 2018, ~~due to~~respectively. During the ~~origination of $86.5~~three months ended March 31, 2019, we repaid $24.4 million in debt ~~offset by $22.8~~and finance lease obligations, compared with $20.4 million during the same period in 2018. We repurchased $11.1 million of our outstanding common stock through authorized share repurchases during three months ended March 31, 2019, compared with repurchases of ~~our common stock~~$20.2 million during the same period in ~~the period, $30.1~~2018. We also paid $5.8 million in ~~repayments of our long-term debt and lease obligations, and $12.2~~dividends to shareholders during the three months ended March 31, 2019, compared with $6.1 million in ~~dividend payments~~dividends during the ~~year.~~

three months ended March 31, 2018. Although we currently intend to continue paying dividends on a quarterly basis for the foreseeable future, our Board of Directors may change the timing, amount, and payment of dividends on the basis of the results of operations, financial condition, cash requirements, future prospects, and other factors deemed relevant by our Board of Directors.

Capital Commitments

As of ~~June 30, 2018,~~March 31, 2019, we had the following capital commitments consisting of firm aircraft and engine orders and purchase rights:

Aircraft Type

Firm Orders

Purchase Rights

Expected Delivery Dates

Firm Orders

Purchase Rights

Expected Delivery Dates

A321neo aircraft

Between 2018 and 2020

Between 2019 and 2020

B787-9 aircraft

Between 2021 and 2025

Pratt & Whitney spare engines:

A321neo spare engines

Between 2018 and 2019

In 2019

General Electric GEnx spare engines:

B787-9 spare engines

Between 2021 and 2025

In the first quarter of 2018, we exercised our right to terminate ~~the~~our aircraft purchase agreement ~~between us and~~with Airbus for six Airbus A330-800neo aircraft and the purchase rights for an additional six Airbus A330-800neo aircraft. In July 2018, we executed a purchase agreement for the purchase of 10 Boeing 787-9 "Dreamliner" aircraft with purchase rights for an additional 10 aircraft. ~~We also intend~~In October 2018, we entered into an agreement for the selection of GEnx engines to ~~enter into additional related agreements in connection with the~~power our Boeing 787-9 ~~purchases, including~~fleet. The agreements provide for the ~~purchases~~purchase of ~~aircraft~~20 GEnx engines, ~~a flight simulator,~~the right to purchase an additional 20 GEnx engines and the purchase of up to four spare ~~parts and materials and related services.~~

~~Committed~~engines. The committed expenditures for these aircraft (excluding the Boeing 787-9's), engines and related flight equipment approximates $207 million for the remainder of 2018, $278 million in 2019, $48 million in 2020, $5 million in 2021, $5 million in 2022 and $38 million thereafter.agreements are reflected within our Contractual Obligations Table.

In order to complete the purchase of these aircraft and fund related costs, we may need to secure additional financing. We have backstop financing available from aircraft and engine manufacturers, subject to certain customary conditions. We are also currently exploring various financing alternatives, and while we believe that such financing will be available to us, there can be no assurance that financing will be available when required, or on acceptable terms, or at all. The inability to secure such financing could have an impact on our ability to fulfill our existing purchase commitments and a material adverse effect on our operations.

Stock Repurchase Program and Dividends

In November ~~2017,~~2018, our Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $100 million of our outstanding common stock over a two-year period through December ~~2019.~~2020. The stock repurchase program is subject to further modification or termination at any time. We spent ~~$2.5~~$11.1 million and ~~$22.8~~$20.2 million to repurchase and retire approximately 65404 thousand shares and ~~614~~549 thousand shares of the Company's common stock in open market transactions during the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018, respectively. As of ~~June 30, 2018,~~March 31, 2019, we had ~~$77.2~~$86.4 million remaining to spend under our stock repurchase program.

During the three months ended ~~June 30, 2018,~~March 31, 2019, we declared and paid cash dividends of $0.12 per share, or ~~$6.1~~$5.8 million, which was paid on ~~May 25, 2018,~~February 22, 2019, to stockholders of record as of ~~May 11, 2018.~~February 8, 2019.

Credit Card Holdbacks

Under our bank-issued credit card processing agreements, certain proceeds from advance ticket sales may be held back to serve as collateral to cover any possible chargebacks or other disputed charges that may occur. These holdbacks, which are included in restricted cash in our unaudited Consolidated Balance Sheets set forth in our unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report on Form ~~10-Q, totaled $1.0 million as~~10-Q. As of ~~each of June 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018, there were no holdbacks held with our credit card processors.

In the event of a material adverse change in our business, the holdbacks could increase to an amount up to 100% of the outstanding credit card amounts that is unflown (e.g. air traffic liability), which would also result in an increase in our required level of restricted cash. If we are unable to obtain a waiver of, or otherwise mitigate the increase in the restriction of cash, it could have a material adverse impact on our operations.

Pension and Postemployment Benefit Plan Funding

During the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018, we ~~did not contribute~~had no required contributions to our defined benefit ~~and other post-retirement plans. During the three and six months ended June 30, 2017, we contributed $8.0 million and $14.4 million, respectively, to our defined benefit and other post-retirement~~ plans. Future funding requirements for our defined benefit plans are dependent upon many factors such as interest rates, funded status, applicable regulatory requirements and the level and timing of asset returns.

~~Critical Accounting Policies~~

The discussion and analysis of our financial condition and results of operations are based upon financial statements that have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities as of the date of the financial statements. Actual results may differ from these estimates under different assumptions and/or conditions.

Critical accounting policies and estimates are defined as those accounting policies and accounting estimates that are reflective of significant judgments and uncertainties that potentially result in materially different results under different assumptions and conditions. For a detailed discussion of the application of our critical accounting policies, see Note 2 herein, "Significant Accounting Policies," and the section, titled “Critical Accounting Policies and Estimates,” and Note 1, “Summary of Significant Accounting Policies,” to our Consolidated Financial Statements for the year ended December 31, 2017, each included in our Annual Report on Form 10-K, Updates to those policies since the issuance of our 2017 Annual Report are below.

We adopted ASC 606 as of January 1, 2018, utilizing the full retrospective option. The adoption of the standard has had a significant impact on our financial statements and our critical accounting policies. See Note 2 and Note 5 to our Consolidated Financial Statements above for additional information including estimated quantification of the overall effect. A summary of our significant critical accounting policies as it pertains to the adoption is below.

~~Revenue Recognition~~

~~HawaiianMiles,~~ ~~Hawaiian's frequent flyer travel award program, provides a variety of awards to program members based on accumulated mileage. ASC 606 requires us to account for miles earned by passengers in the~~ ~~HawaiianMiles~~ program through flight activity as a component of the passenger revenue ticket transaction at the estimated selling price of the miles. Ticket consideration received is allocated between the performance obligations, primarily travel and miles earned by passengers. The allocated value of the miles is deferred until the free travel or other award is used by the passenger, at which time it is included in passenger revenue. The value of the ticket used in the determination of the estimated selling price is based on the historical value of equivalent flights to those provided for loyalty awards and the related miles redeemed to obtain that award adjusted for breakage or fulfillment. On a quarterly basis, we calculate the equivalent ticket value (ETV) by analyzing the fares of similar tickets for the prior 12 months, considering cabin class and geographic region.

We also sell mileage credits to companies participating in our frequent flyer program. These contracts generally include multiple performance obligations, including the transportation that will ultimately be provided when the mileage credits are redeemed and marketing and brand related activities. The marketing and brand performance obligations are effectively provided each time a ~~HawaiianMiles~~ member uses the co-branded credit card and monthly access to customer lists and marketing is provided, which corresponds to the timing of when we issue or are obligated to issue the mileage credits to the ~~HawaiianMiles~~ ~~member. Therefore, we recognize revenue for the brand performance obligation when~~ ~~HawaiianMiles~~ ~~members use their co-brand credit card and the resulting mileage credits are issued to them, which best correlates with our performance toward satisfying the obligation.~~

Accounting for frequent flyer revenue involves the use of various techniques to estimate revenue. We sell mileage credits to companies participating in the frequent flyer program, who in turn issue those miles to customers based on the volume of spend making the majority of the transaction price variable. To determine the total estimated transaction price, we forecast future credit card activity based on historical data.

The relative selling price is determined using management’s estimated standalone selling price of each performance obligation. The objective of using the estimated selling price based methodology is to determine the price at which we would transact a sale if the product or service were sold on a standalone basis. Accordingly, we determine our best estimate of selling price by considering multiple inputs and methods including, but not limited to, discounted cash flows, brand value, published selling prices, number of miles awarded and number of miles redeemed. We estimate the selling price of miles using an ETV adjusted for a fulfillment discount as described above.

Miles expire after 18 months of member account inactivity. The ETV includes a fulfillment discount (breakage) to reflect the value of the award ticket over the number of miles that, based on historical experience, will be needed to obtain the award. We review our breakage estimates annually based upon the latest available information regarding redemption and expiration patterns (e.g., credit card and non-credit card holders). Our estimate of the expected expiration of miles requires significant management judgment. Current and future changes to expiration assumptions or to the expiration policy, or to program rules and program could affect the estimated value of a mile.

~~Passenger revenue~~

~~Passenger revenue associated with unused tickets, which represent unexercised passenger rights, is recognized in proportion to~~

~~the pattern of rights exercised by related passengers (e.g. scheduled departure dates). To calculate the portion to be recognized~~

~~as revenue in the period, we utilize historical information and apply the trend rate to the current air traffic liability balances for that specific period.~~

Contractual Obligations

Our estimated contractual obligations as of ~~June 30, 2018~~March 31, 2019 are summarized in the following table:


Contractual Obligations	Total		Remaining in 2018		2019 - 2020		2021 - 2022		2023 and thereafter		Total		Remaining in 2019		2020 - 2021		2022 - 2023		2024 and thereafter
	(in thousands)										(in thousands)
Debt and capital lease obligations (1)	$	867,242	$	51,604	$	190,365	$	189,849	$	435,424
Debt and finance lease obligations (1)											$	727,782	$	92,905	$	166,718	$	161,430	$	306,729
Operating leases—aircraft and related equipment (2)	525,515		53,421		180,689		126,412		164,993		530,729		80,789		165,105		128,155		156,680
Operating leases—non-aircraft	126,533		3,487		13,293		13,606		96,147		234,834		6,133		16,641		17,851		194,209
Purchase commitments - Capital (3)	581,490		207,042		326,232		10,151		38,065
Purchase commitments - Operating (4)	473,624		35,568		118,340		103,648		216,068
Purchase commitments - aircraft and aircraft related (3)											1,911,197		277,660		475,522		680,872		477,143
Purchase commitments - non-aircraft (4)											468,420		55,886		135,833		111,856		164,845
Projected employee benefit contributions (5)	34,890		—		34,890		—		—		40,600		—		10,800		17,800		12,000
Total contractual obligations	$	2,609,294	$	351,122	$	863,809	$	443,666	$	950,697	$	3,913,562	$	513,373	$	970,619	$	1,117,964	$	1,311,606


(1)	Amounts reflect ~~capital~~finance lease obligations for one Airbus A330-200 aircraft, two Boeing 717-200 aircraft, ~~one~~two Airbus A321neo aircraft, one Airbus A330 flight simulator, and aircraft and IT related equipment.


(2)	Amounts reflect leases for ~~ten~~eleven Airbus A330-200 aircraft ~~four Boeing 767-300 aircraft,~~and three Boeing 717-200 ~~aircraft, and one Airbus A321neo~~ aircraft.


(3)	Amounts include our firm commitments for aircraft and aircraft related ~~equipment (which excludes the Boeing 787-9's).~~equipment.

(4)

Amounts include commitments for services provided by third-parties for aircraft maintenance for our Airbus fleet, accounting, IT, capacity purchases, and the estimated rental payments for a cargo and maintenance hangar. Total contractual obligations do not include long-term contracts where the commitment is variable in nature (with no minimum guarantee), such as aircraft maintenance deposits due under operating leases and fees due under certain ~~other agreements such as aircraft maintenance power-by-the-hour, computer reservation systems and credit card processing agreements, or when the agreements contain short-term cancellation provisions.~~

other agreements such as aircraft maintenance power-by-the-hour, computer reservation systems and credit card processing agreements, or when the agreements contain short-term cancellation provisions.

(5)

Amounts include our estimated minimum contributions to our pension plans (based on actuarially determined estimates) and contributions to our pilots’ disability plan. Amounts are subject to change based on numerous factors, including interest rate levels, the amount and timing of asset returns and the impact of future legislation. ~~We are currently unable to estimate the projected contributions beyond 2020.~~

Off-Balance Sheet Arrangements

During the periods presented we did not have, nor do we currently have, any off-balance sheet arrangements as defined under the applicable rules of the SEC.

Non-GAAP Financial Measures

We believe the disclosure of non-GAAP financial measures is useful information to readers of our financial statements because:

We believe it is the basis by which we are evaluated by many industry analysts and investors;

These measures are often used in management and board of directors decision making analysis;

It improves a reader’s ability to compare our results to those of other airlines; and

It is consistent with how we present information in our quarterly earnings press releases.

See table below for reconciliation between GAAP consolidated net income to adjusted consolidated net income, including per share amounts (in thousands unless otherwise indicated). 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. We believe that excluding the impact of these derivative adjustments helps investors analyze our operational performance and compare our results to other airlines in the periods presented below.

During the three months ended March 31, 2019, we recorded a gain on disposal for Boeing 767-300 aircraft equipment of $1.1 million in conjunction with the retirement of our Boeing 767-300 fleet.

Unrealized loss (gain) on foreign debt is based on fluctuations in foreign exchanges rates related to foreign-denominated debt agreements we executed during the three months ended June 30, 2018. We believe that excluding the impact of these amounts helps investors analyze our operational performance and compare our results to other airlines in the periods presented below.

On April 1, 2017, our agreement with the Airline Pilots Association covering our pilots for a term of 63 months became effective. The agreement includes, among various other benefits, a pay adjustment and ratification bonus computed based on previous service. During the three months ended March 31, 2017, we expensed $18.7 million principally related to a one-time payment to reduce our future 401K employer contribution for certain pilot groups, which is not recoverable once paid. The loss on sale of aircraft was a result of a sale-leaseback transaction covering three Boeing 767 aircraft as part of the planned exit from our Boeing 767 fleet, which resulted in a non-cash loss of $4.8 million.

~~For the six months ended June 30,~~ 2018, we terminated two contracts which incurred a total of $35.3 million in contract terminations expense. In February 2018, we exercised our right to terminate the purchase agreement with Airbus for six Airbus A330-800neo aircraft and the purchase rights for an additional six Airbus A330-800neo aircraft. We recorded a contract terminations expense to reflect a portion of the termination penalty. In January 2018, we entered into a transaction with our 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, we 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,
2018 2017 2018 2017
Total Diluted Per Share Total Diluted Per Share Total Diluted Per Share Total Diluted Per Share
(in thousands, except for per share data)
GAAP net income, as reported $ 79,480
$ 1.56
$ 76,894
$ 1.43
$ 108,022
$ 2.12
$ 110,540
$ 2.05
Add: changes in fair value of derivative contracts (8,125 ) (0.16 ) 2,810
0.05
(7,081 ) (0.14 ) 14,197
0.26
Add: unrealized loss (gain) on foreign debt (64 ) —
—
—
(64 ) —
—
—
Add: contract terminations expense —
—
—
—
35,322
$ 0.69
—
$ —
Add: special items —
—
4,771
0.09
—
—
23,450
0.43
Deduct: tax effect of adjustments 2,047
0.04
(2,764 ) (0.05 ) (7,045 ) (0.14 ) (13,764 ) (0.26 )
Adjusted net income $ 73,338
$ 1.44
$ 81,711
$ 1.52
$ 129,154
$ 2.53
$ 134,423
$ 2.48



	Three months ended March 31,
	2019						2018
	Total			Diluted Per Share			Total			Diluted Per Share
	(in thousands, except for per share data)
GAAP Net Income, as reported	$	36,358		$	0.75		$	28,542		$	0.56
Adjusted for:
Changes in fair value of derivative contracts	(3,414		)	(0.07		)	1,044			0.02
Loss (gain) on sale of aircraft equipment	(1,097		)	(0.02		)	—			—
Unrealized loss (gain) on foreign debt	(630		)	(0.01		)	—			—
Contract terminations expense	—			—			35,322			0.69
Tax effect of adjustments	1,337			0.02			(9,092		)	(0.18		)
Adjusted Net Income	$	32,554		$	0.67		$	55,816		$	1.09

Operating Costs per Available Seat Mile (CASM)

We have listed separately in the table below our fuel costs per ASM and our non-GAAP unit costs, excluding fuel and special items. These amounts are included in CASM, but for internal purposes we consistently use unit cost metrics that exclude fuel and special items (if applicable) to measure and monitor our costs.

CASM and CASM-excluding aircraft fuel, gain on sale of aircraft equipment and contract terminations expense ~~and special items,~~ are summarized in the table below:

Three months ended June 30, Six months ended June 30,
2018 2017 2018 2017
(in thousands, except as otherwise indicated)
GAAP operating expenses $ 622,519
$ 533,276
$ 1,251,666
$ 1,077,455
Less: aircraft fuel, including taxes and delivery (153,026 ) (102,774 ) (286,472 ) (206,312 )
Less: contract terminations expense $ —
$ —
$ (35,322 ) $ —
Less: special items $ —
$ (4,771 ) $ —
$ (23,450 )
Adjusted operating expenses - excluding aircraft fuel, contract terminations expense, and special items $ 469,493
$ 425,731
$ 929,872
$ 847,693
Available Seat Miles 5,020,026
4,735,491
9,751,523
9,257,844
CASM - GAAP
12.40 ¢
11.26 ¢
12.84 ¢
11.64 ¢
Less: aircraft fuel (3.05 ) (2.17 ) (2.94 ) (2.23 )
Less: contract terminations expense —
—
(0.36 ) —
Less: special items —
(0.10 ) —
(0.25 )
CASM - excluding aircraft fuel, contract terminations expense, and special items
9.35 ¢
8.99 ¢
9.54 ¢
9.16 ¢



	Three months ended March 31,
	2019			2018
	(in thousands, except as otherwise indicated)
GAAP Operating Expenses	$	604,075		$	629,147
Adjusted for:
Aircraft fuel, including taxes and delivery	(126,104		)	(133,446		)
Gain on sale of aircraft and equipment	1,097			—
Contract terminations expense	—			(35,322		)
Adjusted Operating Expenses	$	479,068		$	460,379
Available Seat Miles	4,851,921			4,731,498
CASM - GAAP		12.45	¢		13.30	¢
Adjusted for:
Aircraft fuel, including taxes and delivery	(2.60		)	(2.82		)
Gain on sale of aircraft and equipment	0.02			—
Contract terminations expense	—			(0.75		)
Adjusted CASM		9.87	¢		9.73	¢

Critical Accounting Policies

Critical accounting policies and estimates are defined as those accounting policies and accounting estimates that are reflective of significant judgments and uncertainties that potentially result in materially different results under different assumptions and conditions. With the exception of the items noted below, there have been no material changes to our critical accounting policies during the three months ended March 31, 2019. For more information on our critical accounting policies, see Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2018.

Leases

In 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." This ASU and subsequently issued amendments require leases with durations greater than twelve months to be recognized on the consolidated balance sheet. The Company adopted ASC 842 as of January 1, 2019. We adopted the new standard using the modified retrospective approach. Prior year financial statements were not recast under the new standard. We elected the package of transition provisions available for expired or existing contracts, which allowed us to carry-forward our historical assessments of (a) whether contracts are, or contain leases, (b) lease classification, and (c) initial direct costs. The Company leases property and equipment under finance and operating lease, including aircraft and related engines, real property, airport and terminal facilities, maintenance facilities, and general offices. The Company does not separate lease and nonlease components of contracts. Certain leases include escalation clauses, renewal options, and/or termination options. When lease renewals or termination options are considered to be reasonably assured, such periods are included in the lease term and fixed payments are included in the calculation of the lease liability and ROU asset.

When available, the Company utilizes the rate implicit in the lease to discount lease payments to present value; however, the majority of our leases do not provide a readily determinable implicit rate. Therefore, the Company estimates its incremental borrowing rate to discount the lease payments based on information available at lease commencement. The Company gives consideration to its recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are subject to certain market risks, including commodity price risk (e.g., aircraft fuel prices), interest rate risk and foreign currency risk. We have market-sensitive instruments in the form of financial derivatives used to offset our exposure to aircraft fuel price increases and financial hedge instruments used to hedge our exposure to foreign currency exchange risk. The adverse effects of potential changes in these market risks are discussed below.

The sensitivity analyses presented below do not consider the effects that such adverse changes may have on overall economic activity nor do they consider additional actions we might undertake to mitigate our exposure to such changes. Actual results may differ.

Aircraft Fuel Costs

Aircraft fuel costs constitute a significant portion of our operating expense. Fuel costs represented ~~25% and 23%~~21% of our operating expenses for ~~the three and six months ended June 30, 2018, respectively, and 19% for~~ each of the three ~~and six~~ months ended ~~June 30, 2017.~~March 31, 2019 and 2018. Approximately ~~72%~~69% of our fuel was based on Singapore jet fuel prices, ~~25%~~approximately 30% was based on U.S. West Coast jet fuel prices, and 3%approximately 1% was based on other jet fuel prices. We periodically enter into derivative financial instruments to manage our exposure to changes in the price of jet fuel. As of March 31, 2019, we hedged approximately 42% of our projected fuel requirements for the remainder of 2019 with crude oil call options. As of March 31, 2019, the fair value of these fuel derivative agreements reflected a net asset of $5.1 million, which is recorded as a prepaid expense and other asset in our unaudited Consolidated Balance Sheet. Based on the amount of fuel expected to be consumed for the remainder of ~~2018,~~2019, for every one cent increase in the cost of a gallon of jet fuel, our fuel expense would increase by approximately ~~$0.7~~$2.1 million.

We periodically enter into derivative financial instruments to manage our exposure to changes in the price of jet fuel. During the three and six months ended June 30, 2018, our fuel hedge program primarily consisted of crude oil call options and jet fuel swaps. Swaps provide for a settlement in our favor in the event the prices exceed a predetermined contractual level and are unfavorable in the event prices fall below a predetermined contractual level. With call options, we are hedged against spikes in crude oil prices and during a period of decline in crude oil prices we only forfeit cash previously paid for hedge premiums.

As of June 30, 2018, we hedged approximately 47% of our projected fuel requirements for the remainder of 2018 with crude oil call options. As of June 30, 2018, the fair value of these fuel derivative agreements reflected a net asset of $28.2 million, which is recorded as a prepaid expense and other asset in our unaudited Consolidated Balance Sheet.

We expect to continue our program of offsetting some of our exposure to future changes in the price of jet fuel with a combination of fixed forward pricing contracts, swaps, calls, collars and other option-based structures. We do not hold or issue derivative financial instruments for trading purposes.

We continue to believe that our fuel derivative program is an important part of our strategy to reduce our exposure to volatile fuel prices. We expect to continue to enter into these types of contracts prospectively, although significant changes in market conditions could affect our decisions. For more discussion, see Note 8 to our Consolidated Financial Statements.

Interest Rates

~~Changes~~We have exposure to market risk associated with changes in ~~market~~ interest rates ~~have a direct and corresponding effect on~~related to our pre-tax earnings and cash flows associated with our interest-bearing cash ~~accounts.~~equivalent accounts and short-term investments. Based on the balances of our cash and cash equivalents, and ~~restricted cash~~short-term investments as of ~~June 30, 2018,~~March 31, 2019, a change in interest rates is unlikely to have a material impact on our results of operations.

Our variable-rate debt agreements include the revolving credit facility and secured loan agreements, the terms of which are discussed in Note 8 to our Consolidated Financial Statements. At ~~June 30, 2018,~~March 31, 2019, we had ~~$698.5~~$612.6 million of fixed-rate debt including ~~capital~~finance lease obligations, facility agreements for aircraft purchases, and the outstanding ~~equipment~~ notes related to ~~our 2013 EETC~~the aircraft purchase financing. ~~Market risk for~~As of March 31, 2019, we had no variable-rate debt. A 10% increase in average annual interest rates would have decreased the estimated fair value of our fixed-rate long-term debt ~~is estimated as the potential increase in fair value resulting from a hypothetical 10% decrease in interest rates, and amounted to approximately $8.9~~by $7.1 million as of ~~June 30, 2018.~~March 31, 2019.

Foreign Currency

We have ~~debt, generate revenues, and incur expenses in foreign currencies. Changes~~exposure to market risk associated with changes in foreign currency exchange rates ~~impact our results of operations through changes~~because we generate sales, incur expenses, and have debt denominated and paid in ~~the dollar value of~~ foreign currency-denominated operating revenues and expenses. Our most significant foreign currency exposures are the Japanese Yen and Australian Dollar. Based on expected remaining 2018 revenues and expenses denominatedcurrencies, predominantly in Japanese Yen and to a lesser extent, the Australian ~~Dollars,~~Dollar.

To mitigate the exchange rate risk, we transact our international sales and expenditures in the same foreign currency, to the extent practical. Additionally, our Japanese Yen denominated debt serves as a natural hedge against the volatility of exchange rates against cash inflows. We also have an established foreign currency derivative program, where we periodically enter into foreign currency forward contracts. At March 31, 2019, the fair value of our foreign currency forwards reflected a net asset of $4.8 million ($4.0 million and $0.8 million recorded in Prepaid expenses and other (short-term) and Long-term prepayments and other (long-term), respectively) in the consolidated balance sheet.

Based on forecasted transactions in foreign currency, a 10% ~~strengthening~~depreciation in ~~value of~~ the U.S. dollar, relative to the Japanese Yen and Australian Dollar, would result in a decrease in ~~operating~~annual net income, net of the impact of foreign currency hedges, of approximately $17.9 million and $4.6 million, respectively, which excludes the offset of the hedges discussed below. This potential impact to the results of our operation is driven by the inherent nature of our international operations, which requires us to accept a large volume of sales transactions denominated in foreign currencies while few expense transactions are settled in foreign currencies. This disparity is the primary factor in our exposure to foreign currencies.

As of June 30, 2018, the fair value of our foreign currency forward contracts reflected a net asset of $4.3 million and $0.6 million recorded in Prepaid expenses and other (short-term) and Long-term prepayments and other (long-term), respectively, in our unaudited Consolidated Balance Sheets.

As we have foreign-denominated debt, the amount of debt owed will be impacted by the fluctuations in Japanese Yen. A 10% decrease in the value of the U.S. dollar, relative to the Japanese Yen, would result in a increase of our losses by approximately $9.6$14.5 million.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), performed an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), which have been designed to permit us to effectively identify and timely disclose important information. Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective as of ~~June 30, 2018~~March 31, 2019 to provide reasonable assurance that the information required to be disclosed by the Company in reports it files under the Exchange Act, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

~~There~~Except as set forth below, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended ~~June 30, 2018~~March 31, 2019 which materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During the three months ended March 31, 2019, we implemented changes to our processes in response to the adoption of ASC 842 that became effective January 1, 2019. This resulted in a material change to our process for accounting for and reporting of leases. The operating effectiveness of these changes will be evaluated as part of our annual assessment of the effectiveness of internal controls over financial reporting.

Inherent Limitations on Effectiveness of Controls

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are not a party to any litigation that is expected to have a significant effect on our operations or business.

ITEM 1A. RISK FACTORS.

See Part I, Item 1A., “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017~~2018 for a detailed discussion of the risk factors affecting our business, results of operations and financial condition.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table displays information with respect to our repurchases of shares of our common stock during the three months ended ~~June 30, 2018:~~March 31, 2019:

Period Total number of shares purchased (i) Average price paid per share (ii) Total number of shares purchased as part of publicly announced plans or programs (i) Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions) (i)
April 1, 2018 - April 30, 2018 —
$ —
—

May 1, 2018 - May 31, 2018 —
—
—

June 1, 2018 - June 30, 2018 65,389
38.23
65,389

Total 65,389
65,389
$ 77.2



Period	Total number of shares purchased (i)	Average price paid per share (ii)		Total number of shares purchased as part of publicly announced plans or programs (i)	Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions) (i)
January 1, 2019 - January 31, 2019	170,471	$	29.33	170,471
February 1, 2019 - February 28, 2019	13,386	31.12		13,386
March 1, 2019 - March 31, 2019	219,741	25.80		219,741
Total	403,598			403,598	$	86.4


(ii)	In November ~~2017,~~2018, our Board of Directors approved ~~a stock~~the repurchase ~~program pursuant~~of up to ~~which the Company may repurchase up to~~an additional $100 million of our outstanding common stock ~~over a two-year period~~ through December ~~2019.~~2020. The stock repurchase program is subject to further modification or termination at any time.


(ii)	Weighted average price paid per share is calculated on a settlement basis and excludes commission.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.



Exhibit No.		Description

12		~~Computation of ratio of earnings to fixed charges for the six months ended June 30, 2018 and years ended December 31, 2017, 2016, 2015, 2014 and 2013.~~

31.1		Rule 13a-14(a) Certification of Chief Executive Officer.

31.2		Rule 13a-14(a) Certification of Chief Financial Officer.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Valuation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		HAWAIIAN HOLDINGS, INC.


Date:	~~July 25, 2018~~April 24, 2019	By:	/s/ Shannon L. Okinaka
			Shannon L. Okinaka
			Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

4744



	Three Months Ended June 30,
	2018		2017 (a)
	(unaudited)
Net Income	$	79,480	$	76,894
Other comprehensive income, net:
Net change related to employee benefit plans, net of tax expense of $166 and $897 for 2018 and 2017, respectively	514		1,390
Net change in derivative instruments, net of tax expense of $2,999 and $768 for 2018 and 2017, respectively	9,263		1,261
Net change in available-for-sale investments, net of tax expense of $54 and $20 for 2018 and 2017, respectively	167		32
Total other comprehensive income	9,944		2,683
Total Comprehensive Income	$	89,424	$	79,577



	June 30, 2018			December 31, 2017 (a)
	(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	333,791		$	190,953
Restricted cash	1,000			1,000
Short-term investments	259,313			269,297
Accounts receivable, net	111,493			140,279
Spare parts and supplies, net	36,387			35,361
Prepaid expenses and other	99,315			79,186
Total	841,299			716,076
Property and equipment, less accumulated depreciation and amortization of $611,642 and $558,548 as of June 30, 2018 and December 31, 2017, respectively	2,086,955			1,842,263
Other Assets:
Long-term prepayments and other	183,276			193,632
Intangible assets, less accumulated amortization of $22,080 and $21,561 as of June 30, 2018 and December 31, 2017, respectively	14,668			15,187
Goodwill	106,663			106,663
Total Assets	$	3,232,861		$	2,873,821
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	153,262		$	140,805
Air traffic liability	712,069			589,093
Other accrued liabilities	144,003			147,593
Current maturities of long-term debt and capital lease obligations	113,526			59,470
Total	1,122,860			936,961
Long-Term Debt and Capital Lease Obligations	578,453			511,201
Other Liabilities and Deferred Credits:
Accumulated pension and other post-retirement benefit obligations	218,426			220,788
Other liabilities and deferred credits	257,911			225,605
Deferred tax liability, net	135,164			134,141
Total	611,501			580,534
Commitments and Contingencies
Shareholders’ Equity:
Special preferred stock, $0.01 par value per share, three shares issued and outstanding as of June 30, 2018 and December 31, 2017	—			—
Common stock, $0.01 par value per share, 50,735,132 and 51,173,453 shares outstanding as of June 30, 2018 and December 31, 2017, respectively	507			512
Capital in excess of par value	125,871			126,743
Accumulated income	866,180			793,134
Accumulated other comprehensive loss, net	(72,511		)	(75,264		)
Total	920,047			845,125
Total Liabilities and Shareholders’ Equity	$	3,232,861		$	2,873,821



	Three Months Ended June 30, 2017
	As Reported			Adjustments			As Restated
	(in thousands)
Operating Revenue:
Passenger	$	593,210		$	30,796		$	624,006
Other	82,125			(36,015		)	46,110
Total	$	675,335		$	(5,219	)	$	670,116
Operating Expenses	532,786			490			533,276
Operating Income	142,549			(5,709		)	136,840
Nonoperating Income (Expense)	(13,191		)	—			(13,191		)
Income tax expense	48,925			(2,170		)	46,755
Net Income	$	80,433		$	(3,539	)	$	76,894
Net Income Per Common Stock Share:
Basic	$	1.50		$	(0.07	)	$	1.43
Diluted	$	1.49		$	(0.06	)	$	1.43



	December 31, 2017
	Balance Sheet
	As Reported		Adjustments			As Restated
	(in thousands)
ASSETS
Prepaid expenses and other	$	65,196	$	13,990		$	79,186
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Air traffic liability	545,362		43,731			589,093
Other accrued liabilities	146,283		1,310			147,593
Noncurrent Liabilities:
Other liabilities and deferred credits	95,636		129,969			225,605
Deferred tax liability	174,344		(40,203		)	134,141
Shareholders' Equity:
Accumulated income	913,951		(120,817		)	793,134



Six months ended June 30, 2018	Foreign Currency Derivatives		Defined Benefit Pension Items			Short-Term Investments			Total
	(in thousands)
Beginning balance	$	1,249	$	(75,953	)	$	(560	)	$	(75,264	)
Other comprehensive income (loss) before reclassifications, net of tax	429		—			(317		)	112
Amounts reclassified from accumulated other comprehensive income (loss), net of tax	1,590		1,027			24			2,641
Net current-period other comprehensive income (loss)	2,019		1,027			(293		)	2,753
Ending balance	$	3,268	$	(74,926	)	$	(853	)	$	(72,511	)



Remaining months in 2018	$	28,275
2019	81,023
2020	29,545
2021	56,509
2022	63,622
Thereafter	236,531
	$	495,505