HAWAIIAN HOLDINGS , INC . 2007 ANNUAL REPORT HAWAIIAN AIRLINES .COM JOB #: HACO-17348 CLIENT : Hawaiian Airlines TITLE : Annual Report Cover 2007 BLEED : .125” COLOR : CMYK Outside Cover TRIM : 16.5” x 10.75” SIZE : Folds to 8.25” x 10.75 RUN DATE : LIVE : BOARD OF DIRECTORS Hoyt H. Zia John R. Wagner Secretary Vice President Lawrence S. Hershfield Hawaiian Holdings, Inc. Public Affairs Chairman of the Board Hawaiian Airlines, Inc. Hawaiian Holdings, Inc. and Senior Vice President Hawaiian Airlines, Inc. General Counsel and Corporate Secretary Hawaiian Airlines, Inc. CORPORATE INFORMATION Chief Executive Officer Ranch Capital, LLC David J. Osborne HEADQUARTERS Executive Vice President 3375 Koapaka Street, Suite G350 Mark B. Dunkerley Chief Information Officer Honolulu, Hawaii 96819 President and Chief Executive Officer Hawaiian Airlines, Inc. Telephone: ...................................(808) 835-3700 Hawaiian Holdings, Inc. and Facsimile: ....................................(808) 835-3690 Hawaiian Airlines, Inc. Barbara D. Falvey Senior Vice President MAILING ADDRESS Gregory S. Anderson Human Resources P. O. Box 30008 Private Investor Hawaiian Airlines, Inc. Honolulu, Hawaii 96820 L. Todd Budge Charles R. Nardello INTERNET ADDRESS President and Chief Executive Officer Senior Vice President www.HawaiianAirlines.com The Tokyo Star Bank, Limited Operations Hawaiian Airlines, Inc. STOCK TRANSFER AGENT AND REGISTRAR Admiral Thomas B. Fargo, USN (Retired) BNY Mellon Shareowner Services President Glenn G. Taniguchi 480 Washington Boulevard Trex Enterprises Corporation Senior Vice President Jersey City, New Jersey 07310-1900 Marketing and Sales Telephone: ................................... (877) 277-9948 Randall L. Jenson Hawaiian Airlines, Inc. www.bnymellon.com/shareowner/isd Managing Director Ranch Capital, LLC Karen A. Berry STOCK EXCHANGE LISTINGS Vice President Symbol – HA Sean Kim Finance American Stock Exchange, LLC Attorney-at-Law Hawaiian Airlines, Inc. New York, New York Bert T. Kobayashi, Jr. Paul Y. Kobayashi, Jr. INVESTOR RELATIONS Partner Vice President Andrew Greenebaum Kobayashi, Sugita & Goda Controller ICR, Inc. Hawaiian Airlines, Inc. Los Angeles, California Eric C. W. Nicolai Telephone: ....................................(310) 954-1100 Captain Blaine J. Miyasato Hawaiian Airlines, Inc. Vice President INDEPENDENT AUDITORS Customer Services Ernst & Young, LLP Crystal K. Rose Hawaiian Airlines, Inc. Honolulu, Hawaii Partner Bays Deaver Lung Rose & Holma Richard J. Peterson CORPORATE COUNSEL Vice President Dechert, LLP William S. Swelbar Marketing and Sales New York, New York Reseach Engineer Hawaiian Airlines, Inc. Massachusetts Institute of Technology Kenneth E. Rewick Vice President Annual Meeting CORPORATE OFFICERS Flight Operations The 2008 Annual Meeting of Stockholders Hawaiian Airlines, Inc. of Hawaiian Holdings, Inc. will be held on Mark B. Dunkerley Tuesday, May 20, 2008 at 10:00 a.m. in the President and Chief Executive Officer Louis D. Saint-Cyr Haleakala/Kilauea Rooms of the Hawaii Prince Boeing 767-300 Hawaiian Holdings, Inc. and Vice President Hotel Waikiki, 100 Holomoana Street, Honolulu, Hawaiian Airlines, Inc. Inflight Services Hawaii 96815. Hawaiian Airlines, Inc. Peter R. Ingram Executive Vice President, Donald A. E. Sealey Chief Financial Officer and Vice President Treasurer Corporate Audit Hawaiian Holdings, Inc. and Hawaiian Airlines, Inc. Hawaiian Airlines, Inc. JOB #: HACO-17348 CLIENT : Hawaiian Airlines TITLE : Annual Report Cover 2007 BLEED : .125” COLOR : CMYK Inside Cover TRIM : 16.5” x 10.75” SIZE : Folds to 8.25” x 10.75 RUN DATE : LIVE : Dear Shareholder: The year 2007 started as a promising one for the U.S. airline industry, but as too often happens, optimism quickly faded as oil prices resumed their multi-year, relentless rise. High oil prices hurt the industry in two ways: first, the obvious direct impact of high jet fuel prices, and second, the impact on discretionary consumer spending (including vacations). Hawaiian Airlines, our operating subsidiary, was in no way immune to this problem: in 2007 our fuel bill was $292 million, or 21% higher than in 2006. Unfortunately, fuel prices rose late in the year and have continued to surge during the early part of 2008. In addition to the very serious problem of high fuel prices, in 2007 Hawaiian continued to operate in an interisland market where over-capacity and competitor activity led to average fares that were at levels well below cost, resulting in significant losses in this part of our business. Given these two significant challenges, your Board is extremely proud of the Company’s performance. We eked out a small profit of $7 million. While that is clearly an insufficient return, it was quite remarkable given the operating environment. And while we will tout our accomplishments in this letter, our shareholders should know that although we are happy with our performance on a relative basis, management and the Board recognize the importance of generating a level of profitability that is acceptable on an absolute basis. As an aside, the investing world seemed to recognize the superior relative performance of our Company: our share price gained 4% in 2007, as compared to double-digit declines in the share prices of all other domestic airlines. (This page has been left blank intentionally.) The improved result in the face of deteriorating market conditions was chiefly a product of the Company executing on its cost-control plans, as well as a broad range of initiatives designed to improve our product and revenue performance. During much of 2006, the Company’s management reviewed our cost structure and developed plans for closing the gap between our costs and those of our competitors. In 2007, most of these plans were put into effect. In the span of just about one year, accounting, reservations and information technology functions were moved off-shore to India and the Philippines. While in today’s environment such decisions are an absolute necessity if we are to remain competitive, we are acutely aware of the impact it has on the employees whose jobs are moved, especially given our Company’s long, proud history and the many tenured employees who have contributed to our successes. Under the terms of an agreement we reached with the International Association of Machinists (IAM) which represents the affected employees, and in keeping with our desire to recognize the hard work and dedication of these employees, we offered these employees the choice between a generous severance package and the opportunity to stay with the Company in other positions. We were pleased to see that over 85% of the employees elected to stay with the Company. The largest sacrifice in the name of cost saving was made by our non-union workforce, comprised mainly of managers. After a thorough review of our management structure, 98 non-union employees were released and 38 additional positions, which at the time were unfilled, were eliminated. In all, non-union head count was reduced by over 20%. The annualized savings resulting from outsourcing and staffing reductions is estimated to be over $7 million. A second large component of our cost reduction efforts focused on our relationships with suppliers. In late 2006, the Company initiated a review of third-party vendors and conducted a series of competitions between vendors providing some of the larger elements of purchased services. In 2007, the Company secured better deals with a number of existing vendors and moved some of its business to different vendors, with the result that costs were pared back a further $10 million on an annual run-rate basis. The largest contributions to this total were achieved in the areas of maintenance, catering, ground handling and insurance. The impact of our cost savings initiatives, as well as changes in our mix of business (which will be discussed in more detail below) was a reduction in our unit costs of approximately 7%, before the impact of increased fuel prices. Unfortunately, fuel increases offset almost half of the savings, resulting in an actual decline in unit costs of about 4% for 2007 as compared to 2006. Also contributing to lower unit costs was the change in business mix referred to above: in 2007 Hawaiian grew its long-haul transpacific business, which has lower unit costs, more quickly than its higher-unit-cost interisland operation. In fact, taking into account the delivery of the last of the refurbished 767-300 aircraft in March 2007, Hawaiian grew at a faster pace than any of the airlines against which it competes, and in 2007 for the first time surpassed United Airlines in terms of share of the West Coast-to-Hawaii market (we also retained our number one market share position in the interisland market). Given our growth rate, the narrowing gap between Hawaiian’s unit costs and those of its principal competitors was a significant step in the right direction. In most cases when an airline grows quickly, its load factors decline precipitously as the additional seats are absorbed by the market. This, fortunately, has not been Hawaiian’s experience. Load factors have remained strong both in the interisland and transpacific markets despite the new seats Hawaiian has put into the market and the intense competition from new and (This page has been left blank intentionally.) existing competitors. Our customers choose Hawaiian over competitors for many reasons. When it comes to travel to, from, and between the islands of Hawaii, the Company believes it provides the best quality of service at every step of the travel experience, from the booking process, to the airport, on board and after arrival. As one example, not only does Hawaiian serve free meals on its long haul flights in both first class and coach, but the quality of the food was raised in 2007 with the introduction of the industry’s first “tapas” style tasting menu in first class. We also believe we do a better job of marketing and selling than our competitors. The Company worked hard to ensure that the cost reductions discussed above were achieved without compromising our core product.