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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2009

For the transition period from       to       

Commission file number 1-31443

HAWAIIAN HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

(808) 835-3700

(Registrant’s Telephone Number, Including Area Code)

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

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. x  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 during the past 12 months (or for such shorter period that the registrant was required to submit and post such files).  o  Yes  o  No

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

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

As of October 14, 2009, 51,467,919 shares of the registrant’s common stock were outstanding.

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Hawaiian Holdings, Inc.

Form 10-Q

Quarterly Period ended September 30, 2009

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PART I. FINANCIAL INFORMATION

ITEM 1.                    FINANCIAL STATEMENTS.

Hawaiian Holdings, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

See accompanying Notes to Consolidated Financial Statements.

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Hawaiian Holdings, Inc.

Consolidated Balance Sheets

(in thousands)

See accompanying Notes to Consolidated Financial Statements.

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Hawaiian Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

See accompanying Notes to Consolidated Financial Statements.

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Hawaiian Holdings, Inc.

Notes to Consolidated Financial Statements (Unaudited)

1. Summary of Significant Accounting Policies

Business and Basis of Presentation

The accompanying unaudited financial statements of Hawaiian Holdings, Inc. (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 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 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, 2008.

In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles” (SFAS No. 168) [ASC 105-10].  SFAS No. 168 replaces SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” and establishes the FASB Accounting Standards Codification (Codification) as the source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with GAAP.  Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants.  The Codification has become the exclusive authoritative reference effective September 30, 2009.  This Form 10-Q includes a dual presentation of the Codification and the former reference.

In preparing the accompanying unaudited financial statements, and in accordance with the recently issued SFAS No. 165 “Subsequent Events” [ASC 855-10], the Company’s management has evaluated subsequent events through October 22, 2009, which is the date that the financial statements were filed.

Frequent flyer program

During the third quarter of 2009, the Company changed the terms of its HawaiianMiles frequent flyer program with respect to the expiration of frequent flyer miles.  Effective September 1, 2009, frequent flyer miles in HawaiianMiles accounts with no activity (frequent flyer miles earned or redeemed) for eighteen months automatically expire.  Prior to this change, frequent flyer miles automatically expired after thirty-six months of inactivity in the HawaiianMiles member’s account.  As a result of this change, the Company recorded a reduction in its frequent flyer incremental cost liability and a one-time benefit of $1.3 million as a component of commissions and other selling expense.

The impact of this change on estimates of the program’s breakage used in estimating the incremental cost liability and certain deferred revenue estimates will be updated when sufficient history is available.

Aircraft maintenance and repair costs

In its June 12, 2008 meeting, the Financial Accounting Standards Board (FASB)’s Emerging Issues Task Force (EITF) issued EITF 08-03, “Accounting by Lessees for Maintenance Deposits under Lease Agreements” (EITF 08-03) [ASC 840-10] to provide additional guidance on accounting for maintenance deposits which became effective on January 1, 2009.  Under EITF 08-03, lessees should account for nonrefundable maintenance deposits as an asset until it is determined that any portion of the estimated total amount of the deposit at the next maintenance event is less than probable of being returned.  In addition, payments of maintenance deposits that are not “substantially and contractually related to maintenance of the leased assets” should be expensed as incurred.  Upon adoption of EITF 08-03, the Company completed a forecast of maintenance costs for the next scheduled event on applicable leased aircraft and compared these estimates to its forecasted nonrefundable deposits, to identify costs not expected to be recoverable.  Any costs not expected to be recoverable are considered to be not “substantially and contractually related to maintenance of the leased asset” and the Company will bifurcate deposit payments and expense the proportionate share that is estimated to not be recoverable from existing and future nonrefundable deposits.

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Upon completion of its analysis during the second quarter, the Company adopted EITF 08-03 as of January 1, 2009 and recorded a cumulative effect adjustment to reduce recorded maintenance deposits, and increase accumulated deficit, by $0.9 million.  The impact of adopting EITF 08-03 on future periods is not expected to be significant.

In connection with its review of nonrefundable maintenance deposits to apply EITF 08-03, the Company also changed the estimate of recoverability on certain deposits covering engine life limited parts, and recorded an additional charge to Aircraft rent expense of $3.8 million to adjust the balance of such deposits to reflect uncertainty on whether life limited parts replacements will occur prior to lease termination.  The impact of recording the change in estimate for the nine months ended September 30, 2009 was a decrease of $3.8 million to net income or $0.07 per share.

2. Earnings Per Share

Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.  Diluted earnings per share uses the treasury stock method for in-the-money stock options, warrants and restricted stock.

Options and other equity awards to acquire approximately 0.2 million and 1.4 million shares of the Company’s common stock were not included in the calculation of diluted net income per share of common stock for the three and nine months ended September 30, 2009, respectively, as the inclusion of the options and other equity awards would be antidilutive.  Options and other equity awards to acquire approximately 0.2 million and 1.2 million shares of the Company’s common stock were not included in the calculation of diluted net income per share of common stock for the three and nine months ended September 30, 2008, respectively, as the inclusion of such shares would be antidilutive.  In addition, 6.0 million shares of the Company’s common stock issuable upon exercise of common stock warrants were excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2009 and 0.1 million and 4.0 million shares of the Company’s common stock issuable upon exercise of common stock warrants were excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2008, respectively, as the inclusion of the warrants would be antidilutive.

3.  Fair Value Measurements

The Company records its financial assets and liabilities at fair value in accordance with SFAS No. 157 [ASC 820-10].  The table below presents the Company’s financial assets measured at fair value as of September 30, 2009:

* As of September 30, 2009, the fuel derivative contract assets are reported in Prepaid expenses and other assets in the unaudited Consolidated Balance Sheets.

Cash equivalents and Short-term investments.  The Company has classified its money market securities, U.S. Treasury securities and U.S. government-sponsored enterprise notes (GSE) that are considered to be highly liquid and easily tradable as Level 1 within the fair value hierarchy. These securities are valued using inputs observable in active markets for identical securities.

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Long-term investments.  At September 30, 2009, the Company held tax-exempt municipal auction rate securities at a par value of $32.3 million and a fair value of $29.6 million. The contractual maturities for the tax-exempt bonds underlying these auction rate securities are approximately 20 years with an interest rate that resets every seven days and is currently equal to 1.75 times the seven-day London Interbank Bank Offered Rate (LIBOR) plus a spread based on the current credit rating of the bonds. Typically, the fair value of auction rate security investments approximates par value due to the frequent interest rate resets and liquidation opportunities offered by the auction process. However, starting in the first quarter of 2008, the auction events for these instruments experienced failures and continue to fail through the end of the third quarter of 2009. While the Company continues to earn interest on its auction rate security investments at the maximum contractual rate, these investments are not auctioning and, therefore, do not have a readily determinable market value.

The Company uses a discounted cash flow model to determine the estimated fair value of its investment in auction rate securities which is included in Long-term investments in the table above.  The assumptions used in preparing the discounted cash flow model include estimates for interest rates, including an illiquidity discount, timing and amount of cash flows, and a duration estimate for the underlying tax-exempt bonds.  The discount rate assumption is based on the credit quality of similar investments and their related insurance enhancements.  Additionally, an illiquidity discount is added to the base discount rate to incorporate the illiquidity present in the market for these securities.

During the second quarter of 2009, the Company recorded a $1.7 million correction related to the other-than-temporary impairment charge previously recognized on these investments as of December 31, 2008.  The Company believes that the impact of this correction was not significant to the period of correction or prior periods and that the impact on subsequent periods will not be significant.

In July 2009, the Company received a sinking fund redemption payment of $3.2 million.  As a result of this transaction, the Company recorded a $0.6 million realized gain which is reflected in Gains (losses) on investments.  Aside from this transaction, the Company continues to believe that the market for these instruments may take in excess of twelve months to fully recover.  As a result, the Company continues to classify the remaining investments as Long-term investments in the unaudited Consolidated Balance Sheet at September 30, 2009.

As of September 30, 2009, the fair value of the remaining auction rate securities increased by approximately $1.3 million from December 31, 2008 which is reflected in Accumulated other comprehensive income in the unaudited Consolidated Balance Sheets.  Activity in our Level 3 investments for the nine months ended September 30, 2009 is as follows:

In April 2009, the FASB issued FSP 115-2 and FSP 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” [ASC 320-10-65] to make other-than-temporary impairment guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements.  This FSP modified the current indicator that management must assert that it has both the intent and the ability to hold an impaired security for a sufficient time to allow for any anticipated recovery in fair value or an impaired security may be considered other than temporarily impaired.  The new guidance requires management to assert that (a) it does not have the intent to sell the security and (b) it is more likely than not that it will not have to sell the security before recovery of its cost basis.  Upon adoption of the FSP on April 1, 2009 and as of September 30, 2009, the Company reassessed its position of its auction rate securities, and concluded that it was more likely than not that it would have to sell these securities before recovery.  As a result, the other-than-temporary impairment loss that was previously recorded was not reclassified to other comprehensive income.

Fuel derivative contracts.  The Company’s fuel derivative contracts consist of crude oil caps (or call options) and synthetic collars (a combination of call options and put options of crude oil and/or heating oil) which are not traded on a public exchange. The fair value

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of these instruments is determined based on inputs available from public markets; therefore, they are classified as Level 2 in the fair value hierarchy.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” (SFAS No. 157) [ASC 820-10], which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  In February 2008, the FASB issued FSP SFAS 157-2, “Effective Date of FASB Statement No. 157,” [ASC 820-10-55] which deferred the effective date for all nonfinancial assets and liabilities, except for those that are recognized or disclosed at fair value on a recurring basis (that is, at least annually), until January 1, 2009.  The Company adopted the deferred provisions of SFAS No. 157 on January 1, 2009.  The Company performs an annual assessment of impairment on its intangible assets and goodwill and is required to perform an additional assessment on these and other long-lived assets if impairment indicators are present.  The Company will be performing its annual assessment of impairment during the fourth quarter of 2009.  At September 30, 2009, there were no impairment indicators for these assets that would have required an updated assessment of recorded values.

In April 2009, the FASB issued FSP 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” [ASC 820-10-65]  to provide additional guidance for estimating fair value in accordance with SFAS No. 157.  The guidance sets forth factors to consider when evaluating whether there has been a significant decrease in the volume and level of activity when compared with normal market activity.  If the reporting entity concludes that there has been a significant decrease in the volume and level of activity in relation to normal market activity, then transactions or quoted prices may not be determinative of fair value, thus prompting further analysis and adjustment to the transactions or quoted prices in estimating fair value.  There was no impact upon adoption of this guidance on April 1, 2009.

4.  Financial Instruments and Risk Management

On April 1, 2009, the Company adopted FSP 107-1 and Accounting Principles Board Opinion (APB) 28-1, “Interim Disclosures about Fair Value of Financial Instruments” [ASC 825-10-65] which requires additional disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements.

Financial Instruments

All investments are classified as available-for-sale and stated at fair value.  Investments as of September 30, 2009 and December 31, 2008 recorded at fair value consisted of:

Investments at September 30, 2009, by contractual maturity included:

*The contractual maturity for the auction rate securities is based on a forecasted redemption schedule.

Gross unrealized gains on the auction rate securities were $1.3 million as of September 30, 2009.  The table below shows the fair value of the auction rate securities and the location of the unrealized gains as of September 30, 2009:

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Gross unrealized gains and losses for all other available-for-sale investments were not material.

The fair value of the Company’s debt (excluding obligations under capital leases) with a carrying value of $216.0 million and $212.2 million at September 30, 2009 and December 31, 2008, respectively, was approximately $195.5 million and $216.0 million. These estimates were based on the discounted amount of future cash flows using the Company’s estimated current incremental rate of borrowing as comparable market prices were not available.

The carrying amounts of cash and cash equivalents, restricted cash, other receivables and accounts payable approximate their fair value due to their short-term nature.

Fuel Risk Management

The Company adopted SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133” (SFAS No. 161) [ASC 815-10] effective January 1, 2009.  SFAS No. 161 requires an entity to provide greater transparency about how and why an entity uses derivative instruments, how the instruments and related hedged items are accounted for, and how the instruments and related hedged items affect the financial position, results of operations, and cash flows of such entity under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS No. 133) [ASC 815].

The Company’s operations are inherently dependent upon the price and availability of aircraft fuel.  To manage risks associated with fluctuations in aircraft fuel prices, the Company periodically enters into derivative financial instruments such as heating oil futures contracts and swaps, crude oil caps (or call options) and synthetic collars (a combination of call options and put options of crude oil and/or heating oil).  During the three months ended September 30, 2009, the Company primarily used crude oil caps (call options) and collars (combinations of call options and put options) to hedge its aircraft fuel expense.  As of September 30, 2009, the Company had outstanding fuel derivative contracts covering 38 million gallons of jet fuel that will be settled over the next 12 months.  These derivative instruments were not designated as hedges under SFAS No. 133.  As a result, any changes in fair value of these derivative instruments are adjusted through Nonoperating (income) expense in the period of change.

The following table shows the amount and location of realized and unrealized gains and losses that were recognized during the three and nine months ended September 30, 2009 and 2008, and where those gains and losses were recorded in the unaudited Consolidated Statements of Operations for hedges accounted for under SFAS No. 133 and other hedges not designated as cash flow hedges under SFAS No. 133.

FSP FASB Interpretation Number (FIN) 39-1, “Amendment of FASB Interpretation No. 39” [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, 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 the collateral posted with the counterparty.

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The following table presents the fair value of the asset and liability derivatives that are not designated as hedging instruments under SFAS No. 133 as well as the location of the asset and liability balances within the unaudited Consolidated Balance Sheets.

In the table above, fuel derivative contracts do not reflect $0 and $17.5 million of cash collateral that was required to be posted with counterparties as of September 30, 2009 and December 31, 2008, respectively. As of December 31, 2008, the cash collateral was reported with the fuel derivative contracts in prepaid expenses and other in the unaudited Consolidated Balance Sheet.

As of September 30, 2009 and December 31, 2008, there were no fuel derivative contracts designated as cash flow hedges.

5. Debt and Common Stock Warrant

On March 31, 2009, the Company reached an agreement with its co-branded credit card partner (Partner) to extend its co-branded credit card agreement (Amendment).  Under the Amendment, the Partner purchases frequent flyer miles from the Company for mileage credits earned by HawaiianMiles members for making purchases using a Hawaiian Airlines branded credit card issued by the Partner.  The Amendment provides for an increase in the rate per frequent flyer mile sold to the Partner effective January 1, 2009 as well as an advance payment of $24.1 million to the Company for the forward sale of miles, which was received during the three months ended June 30, 2009.  Per the Amendment, $20 million of the forward sale of miles cannot be applied to any miles sold prior to January 2010.  Should the Amendment be terminated early, any miles not issued to the Partner as of the date of termination are required to be repaid by the Company.

During the second quarter of 2009, the Company recorded $22.9 million of the advance purchase of mileage credits as a loan with an implicit interest rate of 6.75% in accordance with the provisions of EITF 88-18, “Sales of Future Revenue” [ASC 470-10].  Subsequently, the debt balance was reduced by $4.1 million upon the sale of miles to the Partner.  The remaining liability is reported as Current maturities of long-term debt and capital lease obligations in the unaudited Consolidated Balance Sheet as of September 30, 2009 and will be reduced ratably in 2010 as the mileage credits are issued to the Partner.  Additionally, approximately $1.2 million of the advance received from the Partner is treated as consideration for certain other commitments with respect to the co-branding relationship, including extension of the terms of the Amendment until December 2013.  This amount is reported in Air traffic liability in our unaudited Consolidated Balance Sheet as of September 30, 2009 and will be recognized as Other revenue on a straight-line basis over the term of the agreement.

6. Employee Benefit Plans

Net periodic defined pension and other post-employment and post-retirement benefit expense included the following components:

The Company made contributions of $7.9 million and $10.5 million during the three and nine months ended September 30, 2009, respectively, to its defined benefit pension and disability plans.  The Company has made its required contributions for 2009 and no other contributions are anticipated for the remainder of 2009.  The Company estimates that it will be required to fund approximately $35.0 million to its defined benefit pension and disability plans in 2010.

In December 2008, the FASB issued Financial Staff Position (FSP) SFAS No. 132(R)-1, “Employers’ Disclosures about Post-retirement Benefit Plan Assets” (SFAS 132(R)-1) [ASC 715-20].  This FSP amends SFAS No. 132 [ASC 230-10] to provide users of financial statements with useful, transparent and timely information about the asset portfolios of post-retirement benefit plans.  These amended disclosure requirements include: a principle for disclosing the fair value of categories of plan assets; categories of plan assets; the nature and amounts of concentrations of risk; and disclosures about fair value measurements similar to those required by SFAS No. 157 , “Fair Value Measurements,” (SFAS No. 157) [ASC 820-10].  These disclosure requirements will be effective December 31, 2009.

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7. Income Taxes

The Company recorded an income tax benefit of $13.7 million and a tax expense of $2.2 million for the three and nine months ended September 30, 2009, respectively.  The primary differences between the statutory rate and the effective rate for these periods were permanent differences, state income taxes, changes in the Company’s unrecognized tax benefits and changes in the deferred tax valuation allowance.

The valuation allowance decreased by approximately $27.0 million for the nine months ended September 30, 2009.  This amount included a decrease of $35.0 million, which was attributable to the current period tax provision, offset by $8.0 million which reflects a correction of the opening balance in the deferred tax assets and related valuation allowance.  The $35.0 million decrease in the valuation allowance consisted of $18.2 million related to changes in the Company’s tax return accounting methods, which resulted in the recoverability of deferred tax assets that were previously subject to a full valuation allowance, $13.2 million related to the realization of deferred tax assets resulting from positive originating temporary differences during the period, and $3.4 million related to changes in estimates, primarily due to the timing of the Company’s funding of its pension plans.  The change in the Company’s tax accounting policy became effective during the quarter ended September 30, 2009, upon the filing of applicable requests with the Internal Revenue Service.

Utilization of deferred tax assets is generally based on the Company’s ability to generate taxable income in future years.  In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the Company’s deferred tax assets will not be realized.  As of September 30, 2009, we have a deferred tax asset valuation allowance balance of $93.5 million.  The Company reviews its tax valuation allowance on an annual basis or as events occur that may impact its position, based on the current trends in the performance and operations of the business.  The Company will be performing its annual review of its valuation allowance during the fourth quarter of 2009.  The Company recorded an income tax expense of $8.6 million during the three and nine months ended September 30, 2008.

The Company’s unrecognized tax benefits increased by $2.2 million during the third quarter of 2009 primarily related to prior years, all of which would favorably affect the Company’s effective income tax rate if recognized in future periods.

SFAS No. 141 (revised 2007) “Business Combinations” (SFAS No. 141R) [ASC 805] amends SFAS No. 109 “Accounting for Income Taxes” (SFAS No. 109) [ASC 740], to require the acquirer in a business combination to recognize changes in the amount of its deferred tax benefits that are recognizable because of a business combination either in income from continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances.  (Such changes arise through changes in the balance of the acquirer’s valuation allowance on its previously existing deferred tax assets because of the business combination.)  Previously, SFAS No. 109 required a reduction of the acquirer’s valuation allowance because of a business combination to be recognized through a corresponding reduction to goodwill or certain noncurrent assets or an increase in so-called negative goodwill.  The Company adopted the requirements of SFAS No. 141R effective January 1, 2009.  The impact of adopting SFAS No. 141R was a reduction in the income tax expense and a corresponding increase in net income of $13.6 million (or $0.26 per diluted share) and $13.9 million (or $0.27 per diluted share) during the three and nine months ended September 30, 2009, respectively.

Cash payments for federal and state income taxes were $23 million during the nine months ended September 30, 2009.  No payments were made during the three months ended September 30, 2009 and the comparable periods in 2008.

8. Comprehensive Income

The components of comprehensive income included the following:

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9. Commitments and Contingent Liabilities

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 such proceedings will have a material effect upon the Company’s financial statements.

Credit Card Holdback

Under Hawaiian Airlines, Inc.’s (Hawaiian’s) credit card processing agreements, certain proceeds from advance ticket sales are 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 $29.8 million at September 30, 2009.  The funds are interest-bearing and are subsequently made available to the Company when air travel is provided.  The agreement with Hawaiian’s largest credit card processor (Credit Card Agreement) also contains financial triggers which require, among other things, that Hawaiian maintain a minimum amount of unrestricted cash and short-term investments (Unrestricted Cash Trigger), and maintain certain levels of debt service coverage and operating income.  Under the terms of the Credit Card Agreement, the level of credit card holdback is subject to adjustment based on these specific financial triggers.

As of September 30, 2009, the holdback was at the contractual level of 25% of the applicable credit card air traffic liability.  If these specific financial triggers are not met in the future, the holdback could increase incrementally up to 100% of the applicable credit card air traffic liability, 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 restriction of cash, it could also cause a covenant violation under other debt or lease obligations and have a material adverse impact on the Company.

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 any expectations of operating expenses, deferred revenue, interest rates, income taxes, deferred tax assets or other financial items; statements regarding factors that may affect our operating results; estimates of fair value measurements; statements related to aircraft maintenance and repair costs and deposits and timing of maintenance activities; statements related to cash flow from operations and seasonality; estimates of required funding of and contributions of our defined benefit pension and disability plan; estimates of annual fuel expenses and measure of the effects of fuel prices on our business; potential dilution of our securities; statements regarding cost liability and deferred revenue estimates related to the frequent flyer program; statements related to our hedging program; statements concerning the impact of, and changes to, accounting principles, policies and estimates; statements related to markets for and interest earned on auction rate securities; statements regarding credit card holdback; potential violations under the Company’s debt or lease obligations; statements regarding our ability to comply with covenants under our financing arrangements; statements related to risk management, credit risks and air traffic liability; statements related to future U.S. and global economic conditions or performance; statements related to changes in our fleet plan; statements related to the effects of any litigation on our operations or business; statements as to other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing.  These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors 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 cause actual results to differ materially from any future results, expressed or implied, in these forward-looking statements include, but are not limited to, the following:

·      economic volatility, including a continued decline in the U.S. and global economies;

·      the price and availability of aviation fuel;

·      competition in the transpacific, interisland and South Pacific/Australia/Asia markets;

·      the competitive advantages held by network carriers in the transpacific markets;

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·      reduced fares and the demand for transportation in the markets in which we operate;

·      our dependence on tourist travel;

·      the effects of seasonality and cyclicality;

·      the concentration of our business in Hawaii, and between Hawaii and the western United States;

·      our ability to implement our growth strategy and related cost reduction goals;

·      fluctuations of our share price (including as a result of bankruptcies in the airline industry);

·      our increasing dependence on technologies to operate our business;

·      our fleet concentration in Boeing 767 aircraft and out-of-production Boeing 717 aircraft;

·      our reliance on other companies for facilities and services;

·      our dependence on satisfactory labor relations and our ability to negotiate amendments to labor agreements which are currently amendable;

·      our ability to attract, motivate and retain key executives and other employees;

·      our substantial debt;

·      the effects of credit market conditions on our financial liquidity;

·      our long-term commitments with aircraft and engine manufacturers and eventual financing arrangements and implementation risks;

·      delays in scheduled aircraft deliveries or other loss of fleet capacity;

·      our ability to comply with financial covenants under certain of our financing and credit card agreements;

·      the impact of our substantial financial and operating leverage;

·      our substantial funding obligations under our defined benefit pension plans;

·      the potential impact of airline strategic combinations and consolidation within the airline industry;

·      consumer perceptions of our services compared to other airlines;

·      increased airport rent rates and landing fees at the airports within the State of Hawaii or elsewhere;

·      new state laws and regulations imposed by the State of Hawaii on the airline industry;

·      the effects of any hostilities or act of war (in the Middle East or elsewhere) or any terrorist attack;

·      government legislation and regulation, including the Aviation and Transportation Security Act and other similar regulations;

·      security-related costs and regulation;

·      the cost and availability of insurance, including aircraft insurance;

·      the impact of possible aircraft incidents; and

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·      the impact of an outbreak of diseases.

·      the impact of litigation, anticipated and unanticipated;

·      the impact of possible disruptions due to unpredictable weather and environmental concerns;

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 those discussed under the heading “Risk Factors” included in this Quarterly Report on Form 10-Q and the risks, uncertainties and assumptions discussed from time to time in our other public filings and public announcements, including our Annual Report on Form 10-K for the year ended December 31, 2008.  All forward-looking statements included in this document 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 consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

Overview

Our Company

Hawaiian Holdings, Inc. (the “Company,” “Holdings,” “we,” “us” and “our”) is a holding company 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 was originally incorporated in January 1929 under the laws of the Territory of Hawaii and became the Company’s indirect wholly-owned subsidiary pursuant to a corporate restructuring that was consummated in August 2002.  Hawaiian became a Delaware corporation and the Company’s direct wholly-owned subsidiary concurrent with its reorganization and reacquisition by the Company in June 2005.

Hawaiian is engaged primarily in the scheduled air transportation of passengers and cargo amongst the Hawaiian Islands (the interisland routes), between the Hawaiian Islands and certain cities in the Western United States (the transpacific routes), and between the Hawaiian Islands and the South Pacific, Australia and Asia (the South Pacific/Australia/Asia routes), collectively referred to as our Scheduled Operations.  In addition, Hawaiian also operates various charter flights.  Hawaiian is the largest airline headquartered in Hawaii and the thirteenth largest domestic airline in the United States based on revenue passenger miles reported by the Research and Innovative Technology Administration Bureau of Transportation Services as of June 2009.  At September 30, 2009, Hawaiian’s operating fleet consisted of 15 Boeing 717-200 aircraft for its interisland routes and 18 Boeing 767-300 aircraft for its transpacific, South Pacific/Australia/Asia and charter routes.  Based in Honolulu, Hawaiian had approximately 3,780 employees as of September 30, 2009.

General information about us is available at http://www.hawaiianair.com/about.  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 SEC.

Third Quarter Highlights

·                  $30.7 million in net income or $0.58 net income per diluted share for the quarter

·                  Operating income of $23.7 million, compared to $27.3 million in the third quarter of 2008

·                  Operating cost per available seat mile (“ASM”) decreased by 12.3% from 12.81 cents during the third quarter of 2008 to 11.24 cents during the third quarter of 2009

·                  Ranked as the #1 carrier for on-time performance as reported by the U.S. Department of Transportation Air Travel Consumer Report for the months of July and August 2009

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Table of Contents

Results of Operations

Statistical Data (unaudited)

(a)           Includes applicable taxes and fees and realized gains and losses from settled SFAS No. 133 [ASC 815] hedges.

Three Months ended September 30, 2009 Compared to Three Months ended September 30, 2008

During the three months ended September 30, 2009, we recognized net income of $30.7 million on operating income of $23.7 million, compared to net income of $6.0 million and operating income of $27.3 million for the same three-month period in 2008.  The results for the three months ended September 30, 2009 reflects nonrecurring benefits to our income tax provision estimated at approximately $20.0 million.  The significant differences between income and expense items for the three months ended September 30, 2009 and 2008 are discussed below.

Operating Revenue.  Operating revenue was $305.6 million for the three months ended September 30, 2009, a 10.1% decrease compared to operating revenue of $339.9 million for the same three-month period in 2008 due to a decrease in passenger revenue, primarily resulting from decreased yields (Passenger revenue per Revenue Passenger Mile).  The decrease in our passenger revenue was partially offset by increases in our cargo and other revenue.  The detail of the change in passenger revenue is described in the table below.