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HAWAIIAN holdings (HA)

HAWAIIAN holdings (HA). TEAM MEMBERS SHAO-LUN LU PURVI MITTAL HAROUT SAHAKIAN RAKESH VENKATAYOGI Presented March 18, 2014. agenda. Business Overview Macro-Economic & Industry Overview Technical Analysis Financial Ratios Valuation Recommendation. Company business overview.

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HAWAIIAN holdings (HA)

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  1. HAWAIIAN holdings(HA) TEAM MEMBERS SHAO-LUN LUPURVI MITTALHAROUT SAHAKIAN RAKESH VENKATAYOGI Presented March 18, 2014

  2. agenda Business Overview Macro-Economic & Industry Overview Technical Analysis Financial Ratios Valuation Recommendation

  3. Company business overview • Incorporated in January 1929 • 5249 employees • Market Cap : 712.95 M • 208 operating flights as of December 31,2013 • Business : • Engaged in the scheduled air transportation of passengers and cargo • Operating geographic locations - a) Neighbor Island : amongst the Hawaiian Islands b) North America : between the Hawaiian Islands and certain cities in the United States c) International : between the Hawaiian Islands and the South Pacific, Australia, New Zealand and Asia • Current Fleet: 18 Boeing 717-200 aircraft 12 Boeing 767-300 aircraft 14 Airbus A330-200 aircraft Source: HA 10-K Report

  4. HA Routes & business partners Source: Hawaiianairlines.com

  5. Recent facts of 2013 • Added planes: • Added five new A330-200 • Added one ATR 42 • Retired four Boeing 767-300 • Added routes: • Honolulu to Auckland, New Zealand in March 2013 • Honolulu to Sendai, Japan launched in June 2103 Source: HA 10-K Report

  6. Forward outlook in 2014 Route expansion in 2014 New planes delivery Maui <-> Los Angeles in July 2014 Los Angeles <-> Kona Summer of 2014 Los Angeles <-> Lihu'e Summer of 2014 Oakland <-> Kona Summer of 2014 Oakland <->Lihu'e Summer of 2014 Honolulu -> Beijing, China in April 2014 Source: Company Website HAL Reports 2013 Fourth Quarter and Full year Financial Results

  7. MACRO-ECONOMIC & INDUSTRY OVERVIEW

  8. External Factors • World Price of Oil: Price of oil is forecast to continue to decline in 2014 due to stagnant global demand ; also difference in oil prices around $2. Forecast Value for 2018: $37,249 Forecasted Value for 2018: $114.92 per barrel 2013-2018 Compound Growth: 2.5% 2013-2018 Compound Growth: 2.2% • Consumer Spending: With job growth expected to improve steadily over the five years to 2019, coupled with normalizing credit conditions, long term historical growth rate will reassert itself Forecasted Value for 2019: $12.64 trillion 2014-2019 Compound Growth: 2.79% • Per Capita Spending: Greater number of people returning to work and improved housing will mean consumers are willing to spend on purchases delayed due to recession Source: IBIS World Airlines Industry Report

  9. Industry Forecast • US personal consumption expenditures for US airlines are forecasted to grow at annual compound rate of 4% between 2014 to 2018. Source: Mergent Insight research

  10. Industry Opportunities Source: Mergent Insight Research report on Airlines

  11. Hawaii 2014 Arrivals at a Glance Source: Hawaii Tourism Authority 2014 forecast outlook

  12. Porter’s Five forces for HA

  13. Largest airline based in state of Hawaii • Provides services to 20 destinations in the Pacific and US west coast. • Consistently ranked “on-time” carrier • Unbroken decades of records of safety • Hawaii too south a point for connection between Asia and US from west • Relationships with third-party contractors • Ordering of new fleets and already expanded use of leverage around the same time • Expansion into the Japanese and South Asian markets • Only provider of Non-stop services between Seoul, South Korea • Efficiency Opportunities: Closing of Taipei route • Volatility of crude oil prices • Increasing expansion of other carriers giving customers options • Increase in operating expenses and decrease in net income

  14. Financials

  15. Technical Analysis Source: finance.yahoo.com

  16. ROE – DuPont Method Source: Bloomberg

  17. Industry Comparables Source: *Bloomberg - Industry Analysis (average of Q32012 – Q32013), Capital IQ

  18. Comparable Companies

  19. Comparable Valuation

  20. Forecast Assumptions Source: HA 10K 2013

  21. Cost to capital Source: Yahoo Finance and Bloomberg

  22. Residual income Valuation Equity Charge

  23. Residual income Valuation Terminal Growth Rate Cost of Equity

  24. Implied Share Price and Drivers Key Drivers • Unique Business Model • Operates in a market with good growth potential • Tourism to Hawaii is expected to increase • Capable Management • Regular monitoring of the unprofitable routes • Borrowing debt at low interest rates

  25. Recommendation: Buy 100 shares at The market

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