10-K

QuickLinks -- Click here to rapidly navigate through this document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2001

OR

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

Commission file number 1-8836

HAWAIIAN AIRLINES, INC.
(Exact name of registrant as specified in its charter)

HAWAII (State or other jurisdiction of incorporation or organization)	99-0042880 (I.R.S. employer identification no.)
3375 Koapaka Street, Suite G-350 Honolulu, Hawaii (Address of principal executive offices)	96819 (Zip code)

Registrant's telephone number, including area code: (808) 835-3700

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock ($.01 par value)	American Stock Exchange and Pacific Exchange
Preferred Stock Purchase Rights	American Stock Exchange and Pacific Exchange

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. Yes ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

        Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by the court. Yes ý    No o

        As of March 18, 2002, 34,464,324 shares of Common Stock of the Registrant were outstanding. The aggregate market value of voting stock held by non-affiliates of the Registrant (14,409,036 shares) on March 18, 2002 is $43,083,018.

DOCUMENTS INCORPORATED BY REFERENCE

        The Registrant's Definitive Proxy Statement for the 2002 Annual Meeting of Shareholders is incorporated herein by reference in Part III of this Form 10-K.

EXHIBIT INDEX ON PAGE 37

TABLE OF CONTENTS

		PAGE
COVER PAGE		1
PART I
ITEM 1.	BUSINESS.	4
ITEM 2	PROPERTIES.	15
ITEM 3.	LEGAL PROCEEDINGS.	16
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.	17
PART II
ITEM 5.	MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.	17
ITEM 6.	SELECTED FINANCIAL DATA.	19
ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	20
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	30
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.	30
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.	30
PART III
ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.	30
ITEM 11.	EXECUTIVE COMPENSATION.	30
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.	30
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.	30
PART IV
ITEM 14.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.	31
	EXHIBIT INDEX.	37
	SIGNATURES.	38
TABLE INDEX
	REPORT OF INDEPENDENT AUDITORS.	F-1
	STATEMENTS OF OPERATIONS.	F-2
	BALANCE SHEETS.	F-4
	STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME.	F-6
	STATEMENTS OF CASH FLOWS.	F-7
	NOTES TO FINANCIAL STATEMENTS.	F-9
	INDEPENDENT AUDITORS' REPORT ON SCHEDULE.	S-1
	FINANCIAL STATEMENT SCHEDULE.	S-2

2

        As used in this Annual Report on Form 10-K, the terms "Hawaiian", "Company, "we", "us", "our" and similar terms refer to Hawaiian Airlines, Inc., unless the context indicates otherwise.

FORWARD-LOOKING STATEMENTS

        This Annual Report on Form 10-K contains statements that are not related to historical results, including, without limitation, statements regarding Hawaiian's business strategy and objectives, future financial position, estimated cost savings, estimated size and growth of relevant markets and the effects on Hawaiian of the September 11, 2001 terrorist attacks, the Air Transportation Safety and System Stabilization Act ("Stabilization Act") and the Aviation and Transportation Security Act ("Security Act"), are forward-looking statements within the meaning of the "Safe Harbor for Forward-Looking Statements" provision of the Private Securities Litigation Act of 1995. It is not reasonably possible to itemize all of the many factors and specific events that could affect the outlook of an airline operating in the global economy. Some factors that could significantly impact expected capacity, traffic, load factors, yields, revenues, unit revenues, expenses, costs, unit costs, capital spending, cash flows, pre-tax margins, earnings, earnings per share, price to earnings ratios, debt load and other forward-looking information include, without limitation, the adverse impact of the September 11 terrorist attacks and the war on terrorism on the economy in general; the demand for air travel; the ability to reduce operating costs and conserve financial resources, taking into account increased costs incurred or to be incurred as a consequence of the attacks; the higher costs associated with new airline security directives and any other increased regulation of air carriers; the significantly higher costs of aircraft insurance coverage for future claims caused by acts of war, terrorism, sabotage, hijacking and other similar perils, and the extent to which such insurance will continue to be available; the ability to reduce costs to a level that takes into account the size of Hawaiian's operation; the ability to raise financing in light of the September 11 events; the cost of crude oil and jet fuel; airline pricing environment; industry capacity decisions; competitors' route decisions; the success of Hawaiian's cost-reduction efforts; strategic decisions of management; adoption of new accounting rules; results of union contract negotiations and their impact on labor costs and operations; the willingness of customers to travel; continued benefits of strategic airline alliances; actions of the U.S., foreign and local governments; foreign currency exchange-rate fluctuations; the stability of the U.S. economy; inflation; the economic environment of the airline industry and the economic environment in general. Forward-looking statements involve risks and uncertainties that may impact Hawaiian's actual results of operations. In some cases, identification of forward-looking statements can be made through use of terminology such as "may," "will," "should," "could," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of such terms and other comparable terminology. Although we believe that the assumptions on which any forward -looking statements are based are reasonable, there can be no assurance that such assumptions will prove to be accurate and actual results could differ materially from those discussed in the forward-looking statements.

        Developments in any of these areas, as well as other risks and uncertainties detailed from time to time in Hawaiian's Securities and Exchange Commission filings, could cause our results to differ from results that have been or may be projected by or on behalf of Hawaiian. We caution that the foregoing list of important factors is not exclusive. We do not undertake and expressly disclaim any obligation to update any forward-looking statements that may be made from time to time by or on behalf of Hawaiian.

3

PART I

ITEM 1.    BUSINESS.

Overview

        Hawaiian is the largest airline headquartered in Hawaii, based on operating revenues of $611.6 million for 2001. We are engaged primarily in the scheduled transportation of passengers, cargo and mail. Hawaiian was incorporated in January 1929 under the laws of the Territory of Hawaii. We currently fly approximately 150 daily flights between Hawaii and six major U.S. cities ("transpacific") and among the six major islands in the State of Hawaii ("interisland"), and weekly flights between Hawaii and each of Pago Pago, American Samoa and Papeete, Tahiti in the South Pacific ("south pacific"). Our common stock is listed on the American Stock Exchange and the Pacific Exchange under the symbol "HA." Our principal offices are located at 3375 Koapaka Street, Suite G-350, Honolulu, Hawaii 96819. Our telephone and facsimile numbers are (808) 835-3700 and (808) 835-3690, respectively.

Segment Information

        Principally all of our flight operations either originate or end in the State of Hawaii. The management of our operations is based on a system-wide approach due to the interdependence of our route structure in the various markets that we serve. We operate as a matrix form of organization as we have overlapping sets of components for which managers are held responsible. Managers report to our chief operating decision-maker on both our geographic components and our product and service components, resulting in components based on products and services constituting one operating segment. As we offer only one service (i.e., air transportation), management has concluded that we have only one segment of business.

Recent Developments

        On September 11, 2001, the United States was attacked by terrorists using four hijacked commercial jets of two other U.S. airlines. The Federal Aviation Administration ("FAA") ordered all U.S. aircraft grounded immediately and closed U.S. airspace to all air traffic. Certain airports were reopened on September 13, 2001, and we were able to resume service on a limited basis that day. However, it took several days to reposition aircraft, reopen airports and return to full service capability.

        We responded to the reduced travel demand after the events of September 11, 2001 by reducing operating capacity and furloughing part of our workforce. Effective October 1, 2001 we reduced our capacity, measured by available seat miles, by approximately 22%. On September 28, 2001, we sent out furlough notices to approximately 12% of our total workforce. In addition, on September 25, 2001, Renaissance Cruises, Inc. ceased operations resulting in the termination of our Los Angeles to Papeete charter service, consisting at that time of approximately four round trips weekly.

        On September 22, 2001, President George W. Bush signed into law the Stabilization Act, affecting all U.S. airlines and air cargo carriers. The provisions of the Stabilization Act allow for the airlines and cargo carriers to receive certain reimbursements, suspensions or extensions of payment of fees and taxes, and other costs related to the impact on airline industry of the events of the September 11, 2001 terrorist attacks. Additionally, on November 19, 2001, President Bush signed into law the Security Act, federalizing substantially all aspects of civil aviation security.

        We received $24.9 million in assistance from the federal government under the Stabilization Act as of December 31, 2001 and anticipate receiving an additional $5.9 million in early 2002. In addition, subject to federal guidelines, the Stabilization Act includes federal loan guarantees for airlines of which we expect to be eligible to apply. We cannot guarantee that we will seek or be able to obtain federal loan guarantees under the Stabilization Act.

4

        The environment in which we operate and on which we are dependent has been greatly affected by the events of September 11, 2001 and their aftermath. Tourism is the largest source of revenue for the economy of the State of Hawaii, and the tourism industry in the State of Hawaii has been and continues to be adversely affected. Due to the lack of predictability of future traffic, business mix and yields, we are not able to fully estimate the long-term impact of the events of September 11, 2001 on our business.

        On December 19, 2001, we entered into an Agreement and Plan of Merger (the "Merger Agreement") among Hawaiian, Aloha Airgroup, Inc. ("Aloha"), TurnWorks Acquisition III, Inc. ("Holdco") and TurnWorks, Inc. ("TurnWorks"), pursuant to which each of Hawaiian and Aloha agreed to become a wholly owned subsidiary of Holdco and the existing shareholders of Hawaiian and Aloha would become, along with TurnWorks, shareholders of Holdco (the "proposed merger"). On February 14, 2002, Holdco and its subsidiaries filed a Registration Statement on Form S-4 with the Securities and Exchange Commission with respect to the proposed merger.

        When it became clear to the parties that the April 18, 2002 outside date agreed to by the parties in the Merger Agreement would not be satisfied due to the expected timing of regulatory approvals and reviews and other matters, TurnWorks requested that Hawaiian extend the outside date. After considering the request, Hawaiian announced on March 16, 2002 that it had determined not to extend the outside date. The parties conducted discussions with respect to potential revisions to the Merger Agreement and a potential formal termination of the Merger Agreement, but no resolution was reached. As the parties have now publicly announced their intentions to pursue other courses of action, we have treated the Merger Agreement as having been effectively terminated. We believe the other parties are taking the same position.

Flight Operations

        In the first half of 2001, we added daily transpacific flights between Honolulu, Hawaii and San Diego, California.    In response to the events of September 11, 2001, we suspended on October 1, 2001 our transpacific flight between Maui, Hawaii and Los Angeles, California, as well as our second flight between Honolulu, Hawaii and Seattle, Washington. We continue to evaluate our transpacific expansion plans and are increasing service into these markets as travel patterns warrant. In 2002, we announced that we will begin in June 2002 additional transpacific flights between Maui, Hawaii and San Francisco, California, and between Maui, Hawaii and Los Angeles, California, as well as a seasonal flight between Honolulu, Hawaii and Los Angeles, California. On March 15, 2002, we introduced a daily flight between Maui, Hawaii and Seattle, Washington. We also announced that we will begin in June 2002 service to two new mainland cities with daily nonstop service between Honolulu, Hawaii and Sacramento, California, and between Honolulu, Hawaii and Ontario, California.

        On average and depending on seasonality, we operate approximately 150 scheduled flights per day with

•

daily service on our transpacific routes between Hawaii and Las Vegas, Nevada and the five key U.S. West Coast gateway cities of Los Angeles, San Diego and San Francisco, California, Seattle, Washington and Portland, Oregon;



•

daily service on our interisland routes among the six major islands of the State of Hawaii; and



•

weekly service on our south pacific routes as the sole direct provider of air transportation from Hawaii to each of Pago Pago, American Samoa, and Papeete, Tahiti in the South Pacific.

        We also provide charter service daily from Honolulu, Hawaii to Las Vegas, Nevada and two to three times weekly from Honolulu, Hawaii to Anchorage, Alaska.

5

Aircraft

        In 1999, we announced our plans to modernize our narrow-body interisland aircraft fleet with new Boeing 717s. In 2001, we completed the replacement of our entire fleet of 15 DC-9-50 aircraft used on interisland routes with 13 new Boeing 717-200 aircraft. Also, in 2001 we announced plans to replace all of our wide-body DC-10 aircraft utilized on the transpacific and south pacific routes with Boeing 767-300ERs. We took delivery of three new Boeing 767-300ER aircraft in the fourth quarter of 2001; two additional Boeing 767-300ER aircraft were delivered in March 2002 and we have plans for 11 additional Boeing 767-300ER aircraft to be delivered in 2002 and 2003. Upon completion of our fleet modernization plan in 2003, we expect to have one of the youngest fleets of any U.S. national or major carrier. Refer to Part I, Item 2, Properties of this Form 10-K for further discussion on our aircraft.

Maintenance

        We developed extensive maintenance programs, which consist of a series of phased or continuous checks for each aircraft type. These checks are performed at specified intervals measured either by time flown or by the number of takeoffs and landings, or "cycles," performed. In addition, from time to time, we perform inspections, repairs and modifications of our aircraft in response to FAA directives. Checks range from daily "walk around" inspections, to more involved overnight maintenance checks, to exhaustive and time consuming overhauls. Aircraft engines are subject to phased maintenance programs designed to detect and remedy potential problems before they occur. The service lives of certain parts and components of both airframes and engines are time or cycle controlled. Parts and other components are replaced or overhauled prior to the expiration of their time or cycle limits.

Code Sharing and Other Alliances

        We have marketing alliances with other airlines that provide reciprocal frequent flyer mileage accrual and redemption privileges and code sharing on certain flights. We have code sharing agreements with Alaska Airlines, Inc. ("Alaska"), American Airlines, Inc. ("American"), American Eagle Airlines, Inc. ("American Eagle"), Continental Airlines, Inc. ("Continental"), and Northwest Airlines, Inc. ("Northwest"). We also participate in the frequent flyer programs of Alaska, American, Continental, Northwest, Air Tahiti Nui, Inc. ("Air Tahiti Nui") and Virgin Atlantic Airlines, Inc. ("Virgin Atlantic"). These programs enhance our revenue opportunities by

•

providing our customers more value by offering more travel destinations and better mileage accrual/redemption opportunities,



•

gaining access to more connecting traffic from other airlines, and



•

providing members of our alliance partners' frequent flyer program an opportunity to travel on our system while earning mileage credit in the alliance partners' program.

        Although these programs and services increase our ability to be more competitive, they also increase our reliance on third parties. Refer to "Risk Factors, Reliance on Third Parties".

Marketing

        As with other airlines, most of our ticket sales are generated by travel agents. Travel agents generally receive commissions measured by a certain percentage of the price of tickets sold. In an effort to reduce our reliance on travel agencies and lower our distribution costs, we continue to expand and pursue e-commerce initiatives.

        Electronic tickets or e-tickets, result in lower distribution costs to us while providing increased customer convenience. In 2001, we recorded over $153.1 million in e-ticket revenue representing approximately 31% of total passenger revenue. Our website, <www.hawaiianair.com>, offers customers

6

information on our flight schedules, our frequent flyer program, HawaiianMiles, booking reservations on our flights or connecting flights with any of our code share partners, the status of our flights as well as the ability to purchase tickets or travel packages. We also publish fares with web-based travel services such as ORBITZ, Travelocity, Expedia, Cheap Tickets, Trip, Hotwire, and Priceline. These comprehensive travel planning websites provide customers with convenient online access to airline, hotel, car rental, and other travel services. In 2001, we recorded $27.5 million in ticket sales from web-based travel services compared with $18.1 million in 2000.

        We expect to continue our promotion of e-ticket usage and growth in e-commerce in order to improve service to our customers and to reduce our distribution costs.

Frequent Flyer Program

        Our HawaiianMiles frequent flyer program was initiated in 1983 to encourage and develop a customer loyalty base. The HawaiianMiles program allows passengers to earn mileage credits by flying on Hawaiian and other carriers, particularly Alaska, Northwest and Virgin Atlantic. We also credit members with mileage credits for patronage of other businesses, including hotels, car rental firms, credit cards and long distance telephone companies, pursuant to our exchange partnership agreements. We also sell mileage credits to other companies participating in the program.

        HawaiianMiles members are entitled to a choice of various awards based on accumulated mileage, with a majority of the awards being free air travel. Travel awards available in the HawaiianMiles program range from a 5,000 mile award, which are redeemable for a one-way interisland flight, to 60,000 and 75,000 mile awards, which are redeemable for a roundtrip first class transpacific flight and a roundtrip first class south pacific flight, respectively.

        We have increased our frequent flyer membership to 1.08 million members as of December 31, 2001 from 0.91 million members as of December 31, 2000. Active membership increased to 0.75 million as of December 31, 2001 from 0.63 million as of December 31, 2000.

Competition

Transpacific

        We face multiple competitors on our transpacific routes, including major carriers such as American, Continental, Northwest, Delta Airlines, Inc. ("Delta"), United Airlines, Inc. ("United") and charter carriers. We believe that transpacific competition is primarily based on fare levels, flight frequency, on-time performance and reliability, name recognition, affiliations, frequent flyer programs, customer service, aircraft type and in-flight service.

South Pacific

        We are the only provider of direct service between Honolulu and each of Pago Pago, American Samoa and Papeete, Tahiti.

Interisland

        While there are several small commuter and "air taxi" companies that provide air transportation to Hawaii airports that cannot be served by large aircraft, the interisland routes are serviced primarily by Hawaiian and Aloha. We operate approximately 129 daily interisland flights subject to seasonality, representing about 40% of total flights operated by the two carriers. We believe that interisland competition is primarily based on fare levels, flight frequency, on-time performance and reliability, name recognition, affiliations, frequent flyer programs, customer service and aircraft type.

7

Employees

        As of December 31, 2001, we had 3,069 active employees, of which 2,572 were employed on a full-time basis. The majority of our employees are covered by labor agreements with the following unions: the International Association of Machinists and Aerospace Workers (AFL-CIO) ("IAM"), the Air Line Pilots Association, International ("ALPA"), the Association of Flight Attendants ("AFA"), the Transport Workers Union ("TWU") and the Employees of the Communications Section ("Communications Section"). All contracts, other than the contract with the seven-member Communications Section, were renegotiated in 2000 and 2001 and are subject to renegotiation again in 2004 and 2005. We are currently in direct negotiations with the Communications Section. We expect to continue to develop and execute our business strategy of ongoing good relations with our employees.

Regulation

        Our business is subject to extensive and evolving federal, state, local and transportation laws and regulations. These laws and regulations are administered by federal, state and local agencies in the United States. Many of these agencies regularly examine our operations to monitor compliance with these laws and regulations. Governmental authorities have the power to enforce compliance with these laws and regulations and to obtain injunctions or impose civil or criminal penalties in case of violations.

        We cannot guarantee that we will be able to obtain or maintain necessary governmental approvals. Once obtained, operating permits are subject to modification and revocation by the issuing agency. Compliance with these and any future regulatory requirements could require us to make significant capital and operating expenditures. However, most of these expenditures are made in the normal course of business and do not place us at any competitive disadvantage. The primary U.S. federal statutes affecting our business are summarized below:

Industry Regulations

        As a certificated air carrier, we are subject to the regulatory jurisdiction of the Department of Transportation ("DOT") and the Federal Aviation Administration ("FAA"). The DOT has jurisdiction over certain aviation matters such as the carriers' certificate of public convenience and necessity, international routes and fares, consumer protection policies including baggage liability and denied-boarding compensation and unfair competitive practices as set forth in the Transportation Act. Hawaiian and all other domestic airlines are subject to regulation by the FAA under the Transportation Act. The FAA has regulatory jurisdiction over flight operations generally, including equipment, ground facilities, security systems, maintenance and other safety matters. To assure compliance with its operational standards, the FAA requires air carriers to obtain operations, airworthiness and other certificates, which may be suspended or revoked for cause. The FAA also conducts safety audits and has the power to impose fines and other sanctions for violations of aviation safety and security regulations. Like other carriers, we are subject to inspections by the FAA in the normal course of business on a routine ongoing basis. We operate under a Certificate of Public Convenience and Necessity issued by the DOT (authorizing us to provide commercial aircraft service) as well as a Part 121 Scheduled Carrier Operating Certificate issued by the FAA.

Maintenance Directives and Other Regulations

        The FAA approves all airline maintenance programs, including changes to the programs. In addition, the FAA licenses the mechanics who perform the inspections and repairs, as well as the inspectors who monitor the work.

        The FAA frequently issues air worthiness directives, often in response to specific incidents or reports by operators or manufacturers, requiring operators of specified equipment to perform prescribed inspections, repairs or modifications within stated time periods or numbers of take off and

8

landing cycles. In the last several years, the FAA has issued a number of maintenance directives and other regulations relating to, among other things, cargo compartment fire detection/suppression systems, collision avoidance systems, airborne windshear avoidance systems, noise abatement and increased inspection requirements. We cannot predict what new air worthiness directives will be issued and what new regulations will be adopted or how our businesses will be affected by any such directives or regulations. We expect that we may from time to time incur expenses to comply with new airworthiness directives and regulations.

        Additional laws and regulations are proposed from time to time, which could significantly increase the cost of airline operations by imposing additional requirements or restrictions. Laws and regulations also have been considered from time to time that would prohibit or restrict the ownership and/or transfer of airline routes or takeoff and landing slots. Also, the award of international routes to U.S. carriers (and their retention) is regulated by treaties and related agreements between the U.S. and foreign governments, which are amended from time to time. We cannot predict what laws and regulations will be adopted or what changes to international air transportation treaties will be effected, if any, or how we will be affected.

        We believe that we are in compliance with all requirements necessary to maintain in good standing our respective operating authorities granted by the DOT and our respective air carrier operating certificates issued by the FAA. A modification, suspension or revocation of any of our DOT or FAA authorizations or certificates would have a material adverse effect on our operations.

        Several aspects of airline operations are subject to regulation or oversight by federal agencies other than the FAA and the DOT. The U.S. Department of Defense regulates Civil Reserve Air Fleet and government charters. The federal antitrust laws are enforced by the U.S. Department of Justice. The U.S. Postal Service has jurisdiction over certain aspects of the transportation of mail and related services provided by our cargo services. Labor relations in the air transportation industry are generally regulated under the Railway Labor Act. Hawaiian and other airlines certificated prior to October 24, 1978 are also subject to preferential hiring rights granted by the Transportation Act to certain airline employees who have been furloughed or terminated (other than for cause).

Security

        On November 19, 2001, President Bush signed into law the Security Act. This Security Act federalizes substantially all aspects of civil aviation security, creating a new Transportation Security Administration (the "TSA") under the Under Secretary of Transportation for Security of the DOT. Under the Security Act, all screeners at airports will be federal employees, and substantially all elements of airline and airport security will be overseen and performed by federal employees, including federal security managers, federal law enforcement officers, federal air marshals and federal security screeners. The law, among other matters, mandates numerous changes for the airline industry and its passengers. These mandates include improved flight deck security, deployment of federal air marshals on board flights, improved airport perimeter access security, airline crew security training, enhanced security screening of passenger baggage, cargo, mail, employees, vendors and enhanced training and qualifications of security screening personnel. In addition, airlines will be responsible for providing additional passenger data to U.S. Customs and enhanced background checks. Funding for the costs of these new airline and airport security measures under the law is provided by a new $2.50 per enplanement ticket fee (up to a maximum fee of $5.00 per one-way trip). Beginning on February 1, 2002, air carriers were required to begin collecting the new ticket fee from passengers. The law requires that, beginning February 18, 2002, the TSA will assume all civil aviation security functions and responsibilities. Also, the TSA may assume existing contracts for the provision of passenger screening services at U.S. airports for up to 270 days, after which all security screeners must be federal employees. In accordance with the Security Act, effective January 18, 2002, all checked baggage are

9

required to be screened at all airports in the U.S. Also, all U.S. airports are required to have sufficient explosive detecting systems in place to screen all checked baggage by December 31, 2002.

Risk Factors

Terrorist Attacks

        The terrorist attacks of September 11, 2001 adversely affected our financial condition and results of operations as well as the airline industry in general. Those effects continue, although they have been mitigated somewhat by increased traffic, the Stabilization Act and our cost-cutting measures. Moreover, additional terrorist attacks, even if not made directly on the airline industry, or the fear of such attacks, could further negatively impact us and the airline industry. Among the effects we experienced from the September 11, 2001 terrorist attacks were significant flight disruption costs caused by the FAA-imposed grounding of the U.S. airline industry's fleet, significantly increased security, insurance and other costs, and lower yields. Due in part to the lack of predictability of future traffic, business mix and yields, we are currently unable to estimate the long-term impact on us of the events of September 11, 2001 and the sufficiency of our financial resources to absorb that impact. However, given the magnitude of these unprecedented events and their potential subsequent effects, the adverse impact on our financial condition, results of operations and prospects may continue to be material.

September 11, 2001 Related Regulation

        Implementation of the requirements of the Security Act will result in increased costs for our passengers. In addition, we may not be able to meet the requirements of the law regarding this screening while maintaining current service levels, thus these requirements may result in service disruptions and delays.

        The law also requires air carriers to honor tickets for suspended service on other air carriers that are insolvent or have declared bankruptcy within 18 months of the passage of the Security Act. To be eligible, a passenger must make arrangements with the air carrier within 60 days after the date on which the passenger's air transportation was suspended. Because this provision of the Security Act was recently enacted, it is difficult to determine its impact. If a major U.S. air carrier were to declare bankruptcy and cease operations, this feature of the Security Act could have a significant impact on our operations. To the extent we are not reimbursed for honoring such tickets, the impact could be adverse.

Fuel Costs

        Aircraft fuel is a significant expense for any air carrier and even marginal changes in fuel prices can greatly impact a carrier's profitability. The following table sets forth statistics about our aircraft fuel consumption and cost for each of the last three years (including the impact of our fuel hedging program):

Year		Gallons consumed (in thousands)	Total cost, including taxes (in thousands)		Average cost per gallon		% of operating expenses
2001	*	129,208	$	111,717	86.5	¢	18.8	%
2000		141,429	$	126,962	89.8	¢	20.4	%
1999		120,894	$	76,148	63.0	¢	14.4	%

*

The amounts for 2001 reflect the January 1, 2001 adoption of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133); the 2000 and 1999 amounts do not. See the further discussion of the impact of SFAS 133 in Note 3 to our consolidated financial statements.

10

        The single most important factor affecting petroleum product prices, which includes the price of aircraft fuel, continues to be the actions of the major oil producing countries in setting targets for the production and pricing of crude oil. In addition, the markets for heating oil, diesel fuel, automotive gasoline and natural gas can affect aircraft fuel prices. All petroleum product prices continue to be subject to unpredictable economic, political and market factors. Also, the balance among supply, demand and price has become more reactive to world market conditions. Accordingly, the price and availability of aviation fuel, as well as other petroleum products, continues to be unpredictable. A fuel supply shortage resulting from a disruption of oil imports or otherwise, could result in higher fuel prices or curtailment of scheduled service which could have a material adverse effect on our operations.

        A one-cent change in the cost per gallon of fuel has an impact on our operating expenses of approximately $108,000 per month (based on 2001 consumption). We have realized savings in fuel expense in 2001 as a result of our introduction of 13 new Boeing 717-200 aircraft to our aircraft fleet replacing less fuel-efficient aircraft. We expect further savings in fuel expense in 2002 and thereafter with the introduction to our aircraft fleet of Boeing 767-300ER aircraft replacing older DC-10 aircraft. Significant changes in fuel prices or availability would materially affect our operating results.

        We utilize heating oil forward contracts to manage market risks and hedge our financial exposure to fluctuations in our aircraft fuel costs. We employ a strategy whereby heating oil contracts may be used to hedge up to 50% of our anticipated aircraft fuel needs. Our fuel hedging strategy may limit our ability to benefit from declines in fuel prices and expose us to losses in the event of crude oil price fluctuations. Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of this Form 10-K for further discussion on aircraft fuel expense and the financial instruments that we use to manage market risks and hedge our financial exposure resulting from fluctuations in our aircraft fuel costs.

Seasonality and Cyclicality

        Our profitability and liquidity are sensitive to seasonal volatility primarily due to leisure and holiday travel patterns. Hawaii is a popular vacation destination for travelers. Traffic levels are typically weaker in the first quarter of the year and stronger travel periods occur during June, July, August and December. During weaker travel periods, we may adjust our flight availability or utilize aggressive fare pricing strategies, in order to increase our traffic volume, which may involve higher ticket discounts during these periods.

        Even without the events of September 11, 2001, the airline industry is subject to substantial cyclical volatility. Airlines frequently experience higher fluctuating short-term cash requirements caused by seasonal fluctuations in traffic, that often deplete cash during off-peak periods, and by other factors that are not necessarily seasonal. These factors include the extent and nature of fare changes and competition from other airlines, changing levels of operations, national and international events, fuel prices and general economic conditions, including inflation. Because a substantial portion of both personal and business airline travel is discretionary, the industry tends to experience adverse financial results in general economic downturns. Accordingly, airlines require substantial liquidity to sustain continued operations under most conditions.

        The nature of the airline industry requires substantial financial and operating leverage. The airline industry operates on low gross profit margins and revenues that vary substantially in relation to fixed operating costs. Due to high fixed costs, the expenses of each flight do not vary proportionately with the number of passengers carried, but the revenues generated from a particular flight are directly related to the number of passengers carried. Accordingly, while a decrease in the number of passengers carried would cause a corresponding decrease in revenue (if not offset by higher fares), it may result in a disproportionately greater decrease in profits. An increase in the number of passengers carried would have the opposite effect.

11

Dependence on Tourism

        Our principal base of operations is in Hawaii with our revenue linked primarily to the number of travelers to, from and among the Hawaiian Islands. Tourists constitute a majority of the travelers to and from Hawaii, as well as between the islands. Tourism levels are affected by, among other things, the strength of the local Hawaii economy, the popularity of Hawaii as a tourist destination in general and other global factors, including the political and economic climate in the areas from which tourists to Hawaii typically originate. From time to time, various events and industry-specific problems such as strikes have had a negative impact on tourism in Hawaii. In addition, the terrorist attacks that occurred on September 11, 2001 have had a material adverse effect on Hawaii tourism.

        According to statistics published by the State of Hawaii's Department of Business, Economic Development and Tourism, for the year ended December 31, 2001, visitors arriving on domestic flights to Hawaii totaled approximately 4.2 million, a decrease of 5.1% from 2000. During the same period, visitors arriving on international flights totaled approximately 2.1 million, a decrease of 16.2% from 2000. Overall visitor arrivals for the last three months of 2001 totaled approximately 1.3 million, a decrease of 24.4% from the same period in 2000.

        No assurance can be given that the level of passenger traffic to Hawaii will not further decline in the future. A decline in the level of Hawaii passenger traffic could have a material adverse effect on our operations and profitability.

Competition

        The airline industry is highly competitive, primarily due to the effects of the Airline Deregulation Act of 1978, recodified into the Transportation Act. The Transportation Act substantially eliminated government authority to regulate domestic routes and fares and has increased the ability of airlines to compete with respect to destination, flight frequencies and fares. Airline profit levels are highly sensitive to, and can be severely impacted by, among other things, adverse changes in fuel costs, average yield (seat pricing) and passenger demand. After September 11, 2001, we reduced fares in certain markets to attract customers, as did most airlines.

        The U.S. airline industry has consolidated in recent years as a result of mergers and liquidations, and further consolidation may occur in the future. The consolidations have, among other things, enabled certain carriers to expand their international operations and increase their presence in the United States. In recent years, the airline industry has experienced alliances among U.S. carriers and between large U.S. and foreign carriers, allowing the carriers that are parties to these alliances to strengthen their overall operations. Conversely, the industry has also seen in recent years the emergence and growth of low-cost, low-fare domestic carriers, which has further intensified competitive pressures. Aircraft, skilled labor and gates at most airports continue to be available to start-up carriers. In some cases, the new entrants have initiated or triggered price discounting.

        Many of our competitors are larger and have substantially greater financial resources than we do. The commencement of or increase in service on our routes by existing or new carriers could negatively impact our operating results. Competing airlines have, from time to time, reduced fares and increased capacity beyond market demand on routes served by us in order to maintain or generate additional revenues. Further fare reductions and capacity increases by competing airlines could cause us to reduce fares or adjust our capacity to levels that may adversely affect our operations and profitability. Many of our competitors have larger customer bases, greater brand recognition in other airline markets and significantly greater financial and marketing resources than we do. Either aggressive marketing tactics or a prolonged fare war initiated by these competitors could impact our limited financial resources and affect our ability to compete in these markets.

12

        Vigorous price competition exists in the airline industry, with competitors frequently offering reduced discount fares and other promotions to stimulate traffic during weaker travel periods, generate cash flow or increase relative market share in selected markets. The introduction of broadly available, deeply discounted fares by a U.S. airline could result in lower yields for the entire industry and could have a material adverse effect on our operating results.

Reliance on Third Parties

        We have agreements with contractors, including The Boeing Company and its affiliates ("Boeing"), Alaska, American, Continental, Delta, Northwest and certain other contractors, to provide certain facilities and services required for our operations. These facilities and services include aircraft leasing and maintenance, code sharing, reservations, computer services, frequent flyer programs, passenger processing, ground facilities, baggage and cargo handling and personnel training. Our reliance on these third parties to continue to provide these important aspects of our business may impact our ability to conduct our business effectively.

        Maintenance on the DC-10 aircraft leased from Continental is provided by Continental. Line maintenance including daily routine and nonroutine work up to and including B-checks on the DC-10 aircraft leased from American is performed by us in Honolulu and by various contracted vendors at our U.S. mainland stations. American is responsible for all other maintenance on the DC-10 aircraft leased from American. The maintenance agreement with American provides for access to spare parts, engines and rotables for the maintenance of these aircraft. As a result, we do not maintain large inventories of spare engines or parts to support the operation of the DC-10 aircraft. We pay American a minimum contractual per hour charge for maintenance services, monthly in arrears. During 2001, we incurred approximately $80.8 million of lease and maintenance expenses under the American leases and aircraft maintenance agreements. If American, Continental or other maintenance vendors terminates the respective maintenance arrangements, we would have to seek an alternate source of maintenance service or undertake to maintain these DC-10s ourselves. No assurance can be given that we would be able to do so on a basis that is as cost-effective as the current maintenance arrangements.

        We have an agreement with the Pratt & Whitney division of United Technologies Corporation to provide comprehensive power by the hour overhaul and maintenance services as needed for the Pratt & Whitney engines utilized on our fleet of Boeing 767-300ER aircraft. We also have a contract with Delta for maintenance on our Boeing 767-300ER aircraft at stations on the U.S. mainland. For our Boeing 717 interisland fleet, we have agreements with Rolls Royce entities to provide power by the hour maintenance and spare engine and parts pooling. If Pratt & Whitney, Delta or Rolls Royce terminates or fails to perform under these arrangements, we would have to seek an alternative source for these services or undertake to maintain these engines and aircraft ourselves. No assurance can be given that we would be able to do so on a basis that is as cost-effective as these agreements.

        We have code sharing agreements with Alaska, American, American Eagle, Continental and Northwest. We also participate in the frequent flyer programs of Air Tahiti Nui, American, Continental, Northwest, and Virgin Atlantic. Although these agreements increase our ability to be more competitive, they also increase our reliance on third parties.

        In 2001 and 2000, passenger ticket sales from one Hawaii-based wholesaler constituted approximately 21% and 17% of our total operating revenues, respectively. Travel agents generally have a choice between one or more airlines when booking a customer's flight. Accordingly, any effort by travel agencies to favor another airline or to disfavor the Company could adversely affect our revenues. Although management intends to continue to offer competitive incentives, and to maintain favorable relations with travel agencies, there can be no assurance that travel agencies will continue to do business with us. The loss of any one or several travel agencies may have a material adverse affect on our operations.

13

Insurance

        We are exposed to potential losses that may be incurred in the event of an aircraft accident. Any such accident could involve not only the repair or replacement of a damaged aircraft and its consequential temporary or permanent loss of service, but also significant potential claims of injured passengers and others. We are required by the DOT to carry liability insurance on each of our aircraft. We currently maintain commercial airline insurance with a major group of independent insurers that regularly participate in world aviation insurance markets including public liability insurance and coverage for losses resulting from the physical destruction or damage to our aircraft which management believes is adequate and consistent with current industry practice. However, there can be no assurance that the amount of such coverage will not be changed or that we will not bear substantial losses from accidents. We could incur substantial claims resulting from an accident in excess of related insurance coverage that could have a material adverse effect on our operations and revenue.

        After the events of September 11, 2001, independent insurers canceled all war risk insurance coverage for the airline industry. Our war risk insurance coverage was subsequently reinstated to a limit of $100 million from the independent insurers at increased premiums. We also purchased from the U.S. government, through the DOT, third-party war risk insurance coverage above $100 million, up to a cap of twice the previous limit. This coverage has been extended to May 18, 2002, after which it is anticipated that the federal policy will be extended unless insurance for war risk coverage in necessary amounts is available from independent insurers or a group insurance program is instituted by the U.S. carriers and the DOT. There can be no assurance that the amount of such coverage will not be changed or that we will not bear additional increased premiums or substantial losses from accidents or other events. Substantial claims in excess of related insurance coverage could have a material adverse effect on our operations and profitability.

        The Stabilization Act provides for reimbursement to air carriers and their vendors or subcontractors for increases in the cost of war risk insurance for the first 30 days of reinstated coverage, over the premium in effect prior to September 10, 2001. We were reimbursed for the excess cost of war risk insurance above that previously incurred for the first 30-day period of this interim war risk insurance period, but have not received reimbursement for premiums beyond that period. As of December 31, 2001, we received reimbursement of approximately $500,000. Due in part to the events of September 11, 2001, we expect the annual cost of our aviation insurance programs to increase from approximately $3.6 million to approximately $12.4 million.

Employees

        As of December 31, 2001, Hawaiian had 3,069 active employees, of which 2,572 were employed on a full-time basis. Approximately 86% of our employees are covered by labor agreements with the IAM, ALPA, AFA, TWU and Communications Section.

14

        All contracts, other than the contract with the seven-member Communications Section, were renegotiated in 2000 and 2001 and are subject to renegotiation again in 2004 and 2005. Future negotiations of these agreements could result in increases in compensation and benefit costs. We are currently in direct negotiations with the Communications Section. If an agreement is not reached in direct negotiations, federally-mandated mediation will occur and could last for an unspecified period of time. Although the overwhelming majority of labor negotiations in the airline industry are resolved in mediation, there can be no assurance that the discussions will result in an agreement and ratification. The time required to negotiate a contract under the Railway Labor Act varies. Therefore, management cannot currently estimate the time frame or results of these negotiations. Should Hawaiian and the Communications Section be unable to reach an agreement, we could be adversely affected. If we are unable to reach an agreement with any unionized work group, we may be subject to future work interruptions and/or stoppages, which may hamper or halt operations.

ITEM 2. PROPERTIES.

Aircraft

        As of December 31, 2001, our operating fleet consisted of three Boeing 767-300ER aircraft, 13 Boeing 717-200 aircraft and 15 DC-10 aircraft. The following table summarizes our aircraft fleet currently in service as of December 31, 2001 as well as our commitments and options for additional aircraft:

Aircraft Type	Leased	Commitments	Options	Seating Capacity (Per Aircraft)	Average Age (In Years)
B767-300ER	3	13	—	252	Less Than One
B717-200	13	—	7	123	Less Than One
DC-10-10	10	—	—	304	28.1
DC-10-30	2	—	—	314	24.9
DC-10-30	3	—	—	282	22.8
Total	31	13	7

Boeing 767-300ER Aircraft

        We executed lease agreements for 16 Boeing 767-300ER aircraft, including three new Boeing 767-300ER aircraft under 15-year operating leases with Ansett Worldwide Aviation that were delivered in the fourth quarter of 2001. The first two of four Boeing 767-300ER aircraft under seven-year operating leases with International Lease Finance Corporation were received in March 2002, and the remaining two are scheduled to be delivered during the first half of 2002. Nine new Boeing 767-300ER aircraft under 18-year lease financing arranged through Boeing Capital Corporation and Ansett Worldwide Aviation are scheduled to be delivered during the second half of 2002 and the first half of 2003. On November 6, 2001, the FAA granted Hawaiian's application for extended-range twin-engine operations certification for Boeing 767-300ER aircraft. The Boeing 767-300ER aircraft have been introduced on our transpacific routes.

Boeing 717-200 Aircraft

        During 2001, we took delivery of and introduced into service on our interisland routes 13 new Boeing 717-200 aircraft, all under 18-year leveraged lease financing provided by Boeing affiliates. These aircraft replaced the DC-9-50 fleet previously utilized on our interisland routes.

15

DC-10 Aircraft

        The DC-10 aircraft are currently utilized on our transpacific and south pacific routes. Of the 15 DC-10 aircraft, 10 are leased from American on long-term operating leases expiring at various times in 2002 and the first half of 2003. One of the 10 DC-10 aircraft was returned to American in January 2002 and one in March 2002. Three DC-10-30 aircraft were leased from Continental, two of which were returned in January 2002 and the remaining aircraft is on a lease which expires in May 2002. We operate two DC-10-30 aircraft under operating leases with BCI Aircraft Leasing, which expire in January 2004.

DC-9-50 Aircraft

        Our fleet of 15 McDonnell Douglas DC-9-50 aircraft, previously utilized on our interisland routes, has been retired from service. Fourteen of the DC-9-50 aircraft have been placed for storage with Avtel Services in Mojave, California, pending return to lessors or sale. Two of these aircraft have been returned to the respective lessors, by way of lease terminations, but are still parked at Avtel Services under our agreement with Avtel Services. One DC-9-50 aircraft remains in Honolulu.

Ground Facilities

        Our principal terminal facilities, cargo facilities, hangar and maintenance facilities are located at the Honolulu International Airport. The facilities at Honolulu International Airport (except for the terminal facilities) are leased on a month-to-month basis. We also occupy terminal facilities in the terminal buildings at the airports owned by the State of Hawaii in Hilo and Kona on the island of Hawaii, in Kahului on the island of Maui, in Lanai City on the island of Lanai, in Hoolehua on the island of Molokai, and in Lihue on the island of Kauai. All of our terminal facilities, including gates and holding rooms, are considered by the State of Hawaii Department of Transportation/Airports to be common areas and thus are not exclusively controlled by Hawaiian.

        Our corporate headquarters are located in leased premises of 129,667 square feet in a complex adjacent to the Honolulu International Airport. The lease for this office expires in 2013. We lease four ticket offices in Hawaii: three on the island of Oahu and one on the island of Hawaii. We also lease sales offices in San Francisco, Seattle (cargo), Los Angeles, Papeete and Tokyo. The leases for these offices expire on various dates from May 30, 2002 to December 31, 2003. We have a signatory agreement with the Port of Portland for terminal space, and operating agreements with the Port of San Diego and McCarren International Airport in Las Vegas, Nevada. We have a right of entry agreement with the Anchorage International Airport and also have sublease agreements for terminal space with LAX Two in Los Angeles, Northwest Airlines in Seattle and San Diego, US Airways (which will change to Delta effective April 1, 2002) in San Francisco, and the Government of American Samoa in Pago Pago. We also have agreements in place for alternate landing sites with the Port of Moses Lake, King County (Boeing Field) in Seattle, Ontario Airport in California and Fairbanks International Airport in Alaska. The aggregate rent for all facilities in the year ended December 31, 2001 was approximately $12.6 million consisting of $11.4 million for space rentals and $1.2 million for parking stalls.

ITEM 3. LEGAL PROCEEDINGS.

        Hawaiian and/or its directors are parties to four lawsuits filed by our shareholders and one demand for arbitration filed by an optionholder, challenging the proposed merger with Aloha that was announced on December 19, 2001. We believe that these actions which are described below are without merit and intend to defend them vigorously. We expect that these legal proceedings will become moot because the proposed merger is not expected to be consummated.

        On January 11, 2002, Crandon Capital Partners filed an action in the First Circuit Court of the State of Hawaii titled CRANDON CAPITAL PARTNERS v. JOHN W. ADAMS, ET AL. against

16

Hawaiian, the directors of Hawaiian, and Airline Investors Partnership, L.P. ("AIP"), the majority shareholder of Hawaiian. The purported class-action suit alleges that the merger and the related transactions provide unfair preferential treatment to AIP and Mr. Adams, who is Chairman of Hawaiian's Board and an affiliate of AIP, and that the director defendants breached their fiduciary duty to Hawaiian's shareholders by approving the proposed merger and the related transactions. Plaintiff seeks to enjoin the proposed merger and the related transactions and obtain unspecified damages. On January 24, 2002, the First Circuit Court denied plaintiff's motion for a temporary restraining order enjoining the proposed merger because, according to the Court, plaintiff did not show that the balance of irreparable damage favored the issuance of a temporary restraining order. By stipulation, plaintiff has agreed to defer moving for a preliminary injunction against the proposed merger until after we have provided 28-days notice that a shareholder vote on the proposed merger has been scheduled. This case has been tendered for defense under our directors' and officers' insurance policy.

        On January 17, 2002, three separate but virtually identical actions titled MOCARSKI v. CASEY, ET AL., MOORE V. CASEY, ET AL., and WHITE V. CASEY, ET AL., were filed in First Circuit Court of the State of Hawaii. Defendants in each of the purported class-action lawsuits are Hawaiian directors Paul J. Casey, Joseph P. Hoar, Sharon L. Soper, Thomas J. Trzanowski, Reno F. Morella, John W. Adams, Robert G. Coo, Edward Z. Safady, Todd G. Cole and Samson Poomaihealani. Plaintiffs Joseph J. Mocarski, Ted Moore and Richard A. White allege that defendants had a self-interest in approving the proposed merger as a result of the change-of-control provisions in their Hawaiian stock options and employment agreements, and that they breached their fiduciary duties to Hawaiian's shareholders by approving the proposed merger. The actions seek, among other relief, to enjoin the proposed merger. Subsequently, Mr. Mocarski filed an amended complaint in his action. The amended complaint asserts purported derivative claims on behalf of Hawaiian, which is named as a nominal plaintiff, and adds as defendants AIP and director William Weisfield. The amended complaint asserts five claims, including breach of fiduciary duty, waste, abuse of control, and unjust enrichment. In addition, counsel for plaintiffs Mocarski, Moore and White sought our assurance that we would not pay any termination fees or other similar pay-outs to any party involved in the proposed merger, and threatened unspecified legal action if our intentions were otherwise. We replied that we did not believe the payment of a termination fee was a proper subject of plaintiffs' lawsuits, but that, in any event, we have no present intention to pay a termination fee to any party to the merger agreements. These cases have been tendered for defense under our directors' and officers' insurance policy.

        On February 7, 2002, John L. Garibaldi, a former Chief Financial Officer of Hawaiian, filed a demand for arbitration with the Arbitration Tribunals of Dispute Prevention and Resolution, Inc. in Honolulu, Hawaii titled GARIBALDI v. HAWAIIAN AIRLINES, INC. The respondent in the action is Hawaiian. Mr. Garibaldi alleges that Hawaiian has repudiated its obligations in regard to the vesting and exercise date of stock options granted to him under his release and separation agreement with Hawaiian. The demand seeks, among other relief, to enjoin the proposed merger as well as unspecified damages.

        Hawaiian is not a party to any other litigation that is expected to have a significant effect on the operations or business of Hawaiian.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

        None.

PART II

ITEM 5. MARKET PRICE AND DIVIDEND INFORMATION.

        In the table below, we present the range of the reported high and low sales prices on the American Stock Exchange of our common stock for the calendar quarters indicated. The shares of our

17

common stock are listed on the American Stock Exchange and the Pacific Exchange under the symbol "HA."

		Price Range
		High	Low
2001
	First Quarter	3.2500	1.8125
	Second Quarter	3.3000	2.3000
	Third Quarter	3.5000	1.7000
	Fourth Quarter	4.0500	2.0600
2000
	First Quarter	2.5000	1.7500
	Second Quarter	2.8750	2.0625
	Third Quarter	2.7500	2.2500
	Fourth Quarter	2.5000	1.9500

        On March 26, 2002, the closing price per share of our common stock was $3.08. Past price performance is not necessarily indicative of future price performance.

        There were approximately 1,026 holders of record of our common stock as of March 18, 2002, including record owners holding shares for an indeterminate number of beneficial owners.

        We paid no dividends in 2001 or 2000. Under the terms of the financing arrangement with CIT Group/Business Credit, Inc. ("CIT"), we are restricted from paying any cash or stock dividends.

        As part of the collective bargaining agreement negotiated with ALPA in December 2000, we agreed to distribute 1,685,380 shares of our common stock on a quarterly basis to the individual 401(k) accounts of ALPA pilots in our employment during 2001 and 2002. The first distribution of 259,541 shares, representing the number of shares required to be distributed in respect of the first and second quarter of 2001, was made on September 11, 2001 to Vanguard Group, Inc. as trustee for the Hawaiian Airlines, Inc. Pilots' 401(k) Plan. The distribution for the quarter ended September 30, 2001, consisting of 259,369 shares, was made on November 9, 2001, and the distribution for the quarter ended December 31, 2001, consisting of 313,515 shares, was made on February 13, 2002 to Vanguard Group, Inc, as trustee.

        In March 2000, our Board of Directors approved a stock repurchase program authorizing the repurchase of up to 5 million shares of our common stock from time to time. In August 2000, the Board of Directors increased the authorization to 10 million shares. Including the effect of the repurchase of certain warrants and stock repurchased in 2000, the total number of shares of common stock repurchased under the stock repurchase program amounted to 9,333,508 as of December 31, 2001. In March 2002, our Board of Directors approved a stock repurchase program authorizing the repurchase of up to 5 million shares of our common stock from time to time in the open market or privately negotiated transactions, to be implemented in the event that the proposed merger is formally terminated.

        The Transportation Act prohibits non-U.S. citizens from owning more than 25% of the voting interest of a U.S. air carrier or controlling a U.S. air carrier. Our restated articles of incorporation prohibit the ownership or control of more than 25% (to be increased or decreased from time to time, as permitted under the laws of the United States) of issued and outstanding voting capital stock of Hawaiian by persons who are not "citizens of the United States." As of January 31, 2002, we believe that less than 13% of the voting stock of Hawaiian is held by non-United States citizens.

18

ITEM 6. SELECTED FINANCIAL DATA.

        The Selected Financial and Statistical Data should be read in connection with the accompanying Financial Statements of Hawaiian and the notes related thereto and Part II, Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.

Hawaiian Airlines, Inc.
Selected Financial and Statistical Data
(in thousands, except per share data)

		2001			2000			1999			1998			1997
Summary of Operations:
	Operating revenues	$	611,582		$	607,220		$	488,877		$	426,415		$	404,216
	Operating expenses	$	594,921		$	621,022		$	529,414		$	409,010		$	401,714
	Operating income (loss)	$	16,661		$	(13,802	)	$	(40,537	)	$	17,405		$	2,502
	Net income (loss)	$	5,069		$	(18,615	)	$	(29,267	)	$	8,205		$	(1,022	)
Net Income (Loss) per Common Stock Share:
	Basic	$	0.15		$	(0.48	)	$	(0.72	)	$	0.20		$	(0.03	)
	Diluted	$	0.15		$	(0.48	)	$	(0.72	)	$	0.19		$	(0.03	)
Weighted Average Shares Outstanding:
	Basic		33,811			38,537			40,997			40,921	*		40,361	*
	Diluted		33,947			39,038			40,997			42,205	*		40,361	*
Shareholders' Equity Per Share (Without Dilution)		$	(0.62	)	$	0.54		$	1.61		$	2.22		$	2.12
Shares Outstanding at End of Period			34,151			33,708			40,997			40,997	*		40,889	*
* Includes shares reserved for issuance under the Consolidated Plan of Reorganization dated September 21, 1993, as amended.
Balance Sheet Items:
	Total assets	$	305,294		$	256,968		$	241,937		$	221,911		$	200,824
	Property and equipment, net	$	45,256		$	83,743		$	65,272		$	84,922		$	66,243
	Long-term debt, excluding current portion	$	1,673		$	10,763		$	23,858		$	14,454		$	3,991
	Capital lease obligations, excluding current portion	$	3,308		$	2,067		$	2,790		$	5,966		$	10,580
	Shareholders' equity	$	(21,210	)	$	18,259		$	66,126		$	90,887		$	86,873
Scheduled Operations:
	Revenue passengers		5,478			5,886			5,425			5,010			4,964
	Revenue passenger miles		4,295,479			4,492,395			4,076,576			3,649,024			3,479,056
	Available seat miles		5,587,566			5,967,810			5,468,589			4,940,001			4,699,609
	Passenger load factor		76.9	%		75.3	%		74.5	%		73.9	%		74.0	%
	Passenger revenue per passenger mile		11.4	¢		10.6	¢		9.8	¢		9.7	¢		9.5	¢
Overseas Charter Operations:
	Revenue passengers		367			382			283			250			253
	Revenue passenger miles		1,097,069			1,165,436			803,524			689,578			683,384
	Available seat miles		1,218,734			1,279,749			852,155			733,735			739,619
Total Operations:
	Revenue passengers		5,845			6,268			5,708			5,260			5,217
	Revenue passenger miles		5,392,548			5,657,831			4,880,100			4,338,602			4,162,440
	Available seat miles		6,806,300			7,247,559			6,320,744			5,673,736			5,439,228
	Passenger load factor		79.2	%		78.1	%		77.2	%		76.5	%		76.5	%
	Revenue Per ASM		8.99	¢		8.38	¢		7.73	¢		7.52	¢		7.43	¢
	Cost Per ASM		8.74	¢		8.57	¢		8.38	¢		7.21	¢		7.39	¢

19

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

        This discussion analyzes our operations for the fiscal years ended December 31, 2001, 2000 and 1999. The following information should be read together with our audited financial statements and the accompanying notes included elsewhere in this report.

Effects of September 11, 2001 Events

        As a result of reduced travel demand due to the events of the September 11, 2001 terrorist attacks, during the quarter ended December 31, 2001, we reduced our total capacity by approximately 17.0% as measured by available seat miles. The total number of passengers we carried during the quarter ended December 31, 2001 declined by approximately 12.0%, as compared to the quarter ended December 31, 2000. As a result of the reduced level of operations, we furloughed approximately 12.0% of our total workforce during the quarter ended December 31, 2001. In addition to the reductions in our operations, we incurred significant additional expenses since September 11, 2001. During the quarter ended December 31, 2001, we experienced increased security screening costs that we expect to continue incurring for an indefinite period of time, and the annual costs of our aviation insurance program, commencing with the fourth quarter of 2001, have increased by approximately $9.0 million.

        The trends evidenced during the quarter ended December 31, 2001 may continue to affect us to an extent that cannot yet be fully measured. We are unable to estimate the full impact of the terrorist attacks of September 11, 2001. We are also unable to predict the full effect of subsequent events that may adversely affect the entire airline industry, including related vendors and suppliers, and which may result in increased costs caused by several factors, including additional security requirements and increased government oversight. Total airline industry traffic and operational efficiencies have been severely impacted by the events of September 11, 2001, and it is not possible to project the length of time and the future economic impact on the industry of recovering from these events and the extent to which we will follow the industry pattern.

Results of Operations

2001 Compared to 2000

        For the year ended December 31, 2001, we reported operating income of $18.8 million and net income of $5.1 million. For the year ended December 31, 2000, we reported an operating loss of $13.8 million and a net loss of $18.6 million.

        For the year ended December 31, 2001, overall revenues and expenses were unfavorably impacted by the events of September 11, 2001. That impact was mitigated by relief received under the Stabilization Act, which resulted in a credit to operating expenses of $30.8 million. Except for this item, it is not practicable to determine the impact of those events on individual elements of our operations, and the disussion that follows makes no attempt to set forth what would have been our 2001 operating results had the events of September 11, 2001 not occurred.

        Operating Revenue.    Operating revenues totaled $611.6 million for the year ended December 31, 2001, compared to $607.2 million for the year ended December 31, 2000, an increase of $4.4 million, or 0.7%. Significant year-to-year variances were as follows:

•

Scheduled passenger revenues totaled $488.3 million during the year ended December 31, 2001, an increase of $12.8 million, or 2.7%, over the year ended December 31, 2000. During 2001, we experienced higher average revenue per passenger ticket issued compared to 2000. Year-to-year

20

changes in revenue, passengers and resulting yields on our transpacific, interisland and south pacific flights were as follows:

	Net Change in Revenue (in millions)		Net Change in Revenue Passengers		Net Change in Yields
Transpacific	$	8.6	-4.7	%	+7.0	%
Interisland	$	5.5	-7.7	%	+11.8	%
South Pacific	-$	1.3	-8.2	%	+1.2	%

•

Overseas charter revenues decreased by $6.7 million, or 8.2%. On September 25, 2001, a major source of our overseas charter revenues, Renaissance Cruises, Inc. filed for bankruptcy under Chapter 11 and ceased operations, resulting in the termination of our Los Angeles to Papeete, Tahiti charter service. The loss of revenues from this charter service was partially offset by small increases in our Honolulu to Las Vegas and Honolulu to Anchorage charter service.



•

Cargo revenue decreased $5.6 million, or 20.1%, due to a decrease in cargo pounds carried.



•

Other operating revenues increased by $3.8 million, or 17.8%, primarily due to an increase in the recognition of frequent flyer miles revenue, ground handling revenue and ticket cancellation penalty revenue.

        Operating Expenses.    Operating expenses, including restructuring charges and the special credit resulting from federal financial assistance received under the Stabilization Act, totaled $594.9 million for the year ended December 31, 2001 compared to $621.0 million for the year ended December 31, 2000, a decrease of $26.1 million, or 4.2%. Significant year to year variances were as follows:

•

Wages and benefits increased by $28.4 million, or 17.7%, primarily due to certain one-time payments, non-cash charges and salary and wage increases related to the new collective bargaining agreements with our pilots, flight attendants and IAM employees that went into effect during 2001, and an overall increase in employee benefits.



•

Aircraft fuel costs, including taxes and oil, decreased $15.3 million, or 12.1%. Due to the 6.1% decrease in available seat miles year over year and the introduction of the more fuel-efficient Boeing 717-200 aircraft on interisland routes and three Boeing 767-300ER aircraft on transpacific routes, aircraft fuel consumption decreased 8.6%, resulting in a decrease in fuel cost of $12.0 million. The average cost of aircraft fuel per gallon decreased 13.2%, resulting in a $16.7 million decrease in fuel cost. Our fuel-hedging program increased fuel expense by $1.7 million in 2001, compared to a decrease of $11.7 million in 2000.



•

Maintenance materials and repairs decreased $12.2 million, or 11.0%, primarily due to a decrease of $21.4 million in DC-9-50 maintenance resulting from the reduction of the DC-9-50 fleet, offset by increases of $5.7 million in Boeing 717-200 maintenance expense resulting from the introduction of Boeing 717-200 aircraft in 2001, and $3.0 million in DC-10 maintenance expense due to additional DC-10 aircraft hours flown and increased maintenance rates.



•

Rentals and landing fees increased by $22.3 million, or 56.5%, mainly due to an increase in aircraft rent resulting from the addition of one DC-10 aircraft in April 2000, one DC-10 aircraft in December 2000, a sale-leaseback arrangement on two other DC-10 aircraft in January 2001 and the addition of 13 Boeing 717-200 aircraft, offset by rental reductions associated with the retirement of certain DC-9-50 aircraft.



•

Sales commissions increased by $6.0 million, or 40.6%, primarily due to an increase in wholesaler incentive commissions.

21

•

Other expenses increased by $4.0 million, or 3.1%. In 2001, we incurred approximately $3.2 million in legal and consulting fees and other services related to the proposed merger. Additionally, increases in insurance and security were offset by decreases in interrupted trips and passenger food expense.



•

In the year ended December 31, 2000, we recorded approximately $14.9 million of restructuring charges related to excess or obsolete DC-9-50 inventory parts and the disposition of five DC-9-50 aircraft under operating leases. The year ended December 31, 2001 includes a $3.6 million favorable adjustment to the restructuring charge recorded in 2000 due to a change in estimated airframe return provisions related to the DC-9-50 aircraft operating leases.



•

In January 2001, we completed the sale-leaseback of two DC-10 aircraft. We recorded a $7.6 million loss on assets held for sale in the year ended December 31, 2000, to reduce the book value of two DC-10 aircraft to net realizable value.



•

In the year ended December 31, 2001, we recognized $30.8 million as a special credit to operating expenses for the estimated allocation of proceeds from the federal government under the Stabilization Act.

2000 Compared to 1999

        For the year ended December 31, 2000, we incurred operating losses and net losses of $13.8 million and $18.6 million, respectively. As discussed below, in 2000 we recorded $14.9 million in pretax restructuring charges in conjunction with our intent to replace our narrow-body DC-9 interisland fleet and a $7.6 million pretax loss on assets held for sale on the two DC-10 aircraft sold in January 2001. Excluding the effects of the restructuring charges and the loss on assets held for sale, we generated operating income and net income of $8.7 million and $5.5 million, respectively. Our total operating revenues increased by $118.3 million, or 24.2%, primarily the result of increased passenger and charter revenues. Our operating expenses, net of impairment loss, restructuring charges and the loss on assets held for sale, also increased by $116.1 million, or 24.1%, of which $50.8 million related to year over year increases in fuel expense. In response to our increased flight operations, available seat mile growth of 14.7% and investments in infrastructure to support our growth strategies, operational cost increases were incurred in wages and benefits, maintenance, aircraft fuel and certain general and administrative expense categories.

        Operating Revenues.    Operating revenues totaled $607.2 million in 2000 compared to $488.9 million in 1999, an increase of $118.3 million, or 24.2%. Significant year-to-year variances were as follows:

•

Scheduled passenger revenues totaled $475.5 million for the year ended December 31, 2000; an increase of $75.2 million, or 18.8%, over the year ended December 31, 1999. The increase resulted from the introduction of additional DC-10 capacity, efforts to improve fare and passenger mix and initiation and maintenance of general price increases. Year-to-year changes in revenue, passengers and resulting yields on our transpacific, interisland and south pacific flights were as follows:

	Net Change in Revenue (in millions)		Net Change in Revenue Passengers		Net Change in Yields
Transpacific	$	50.5	+9.6	%	+9.7	%
Interisland	$	22.9	+8.1	%	+7.3	%
South Pacific	$	1.8	+9.0	%	+0.5	%

22

•

Overseas charter revenues increased by $35.8 million, or 76.8%, in 2000. The increase is primarily associated with the commencement of charters between Los Angeles and Tahiti on August 31, 1999 and operation of additional ad hoc charters year over year.



•

Cargo and other operating revenues in 2000 totaled $49.4 million, an increase of $7.3 million, or 17.4%, over cargo and other operating revenues in 1999. The increase is primarily due to additional capacity and increased cargo rates resulting in increased cargo revenues, general increases in our contract services and revenue from expanded promotion of our frequent flyer program.

        Operating Expenses.    Operating expenses totaled $621.0 million in 2000, an increase of $91.6 million, or 17.3%, from total operating expenses of $529.4 million in 1999. All fluctuations in operating expenses per available seat mile were affected by an overall increase in available seat miles of approximately 14.7% in 2000 from 1999. Significant year to year variances were as follows:

•

Wages and benefits totaled $160.5 million in 2000 versus $138.4 million in 1999, an increase of $22.1 million, or 16.0%. The increase is substantially attributable to a 3% wage increase effective January 1, 2000 and additional wages and benefits due to implementation of our growth strategies which resulted in increased flying operations. We had 3,313 active employees at the end of 2000 versus 3,091 active employees at the end of 1999.



•

Maintenance materials and repairs increased by $9.4 million, or 9.3%. We incurred $15.9 million more DC-10 maintenance expense in 2000 than 1999 as a result of increases in the maintenance rates charged by American, the addition of three DC-10 aircraft serviced by Continental, and the number of DC-10 aircraft hours flown. The increase was offset by the reduction of DC-9-50 airframe and engine maintenance of $6.5 million in 2000.



•

Aircraft fuel totaled $127.2 million in 2000 versus $76.4 million in 1999. Year over year, aircraft fuel expense increased by $50.8 million, or 66.5%, primarily due to a 17.0% increase in gallons consumed and a 58.7% increase in the average cost of aircraft fuel per gallon (exclusive of taxes and the impact of Hawaiian's fuel hedging program). The average price per gallon rose continuously throughout the year, with the October, November and December prices each more than $1.00 per gallon. This brought the average purchase price for 2000 to $.90 per gallon. Our fuel hedging program offset more than $11.7 million of the cost increase and reduced the net fuel cost per gallon by more than $.08 to less than $.82.



•

Rentals and landing fees in 2000 increased by $7.8 million, or 24.7%, compared to 1999. The increase is a net of $4.8 million of additional landing fees incurred in 2000, as the two-year moratorium placed on landing fees at all airports in the State of Hawaii ended September 1, 1999, less $1.1 million in landing fees refunded in 2000, $3.7 million in lease rent paid for the three additional DC-10s placed into service between December 1999 and December 2000 and $0.5 million in additional space rentals.



•

Depreciation and amort ization totaled $16.3 million in 2000 compared to $17.1 million in 1999. The decrease is due to the reduction in DC-9-50 property as a result of the impairment loss recorded in December 1999, offset by the additional depreciation incurred from property placed into service in 2000.



•

Sales commissions in 2000 increased $2.3 million, or 18.7%, compared to 1999. The increase is due to an increase in commissionable sales offset by a decrease in the commission rate.



•

Other operating expenses increased by $24.4 million, or 23.3%, in 2000 compared to 1999. The increase is due to a combination of additional expenses incurred in 2000, including $1.4 million in advertising and promotion costs, $4.2 million in food and beverage expenses, $3.4 million in general and administrative costs (including credit card processing fees, booking fees, and third

23

party services), $4.5 million in aircraft and passenger service related expenses, $1.1 million in personnel expenses primarily relating to crew accommodations, $4.7 million in interrupted trips and denied boarding expenses, $1.3 million in aircraft damages and $3.3 million in adjustments to assets held for sale inventory.

•

On December 31, 1999, we signed a definitive agreement to acquire thirteen new Boeing 717-200 aircraft. On March 2, 2000, we announced that our board of directors had approved this purchase. In connection with this decision to replace our entire interisland DC-9 fleet with Boeing 717 aircraft, we performed an evaluation to determine, in accordance with the Financial Accounting Standards Board SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," whether future cash flows (undiscounted and without interest charges) expected to result from the use and eventual disposition of these aircraft would be less than the aggregate carrying amounts of these aircraft and the related assets. As a result of the evaluation, we determined that the estimated future cash flows expected to be generated by these aircraft would be less than their carrying amount, and therefore these aircraft were impaired as defined by SFAS No. 121. Consequently, the original cost basis of these aircraft and related items was reduced to reflect the fair market value as of December 31, 1999. In determining the fair market value of these assets, we considered recent transactions involving sales of similar aircraft and market trends in aircraft dispositions. The evaluation performed under the guidelines of SFAS No. 121 resulted in a $47 million pre-tax, non-cash impairment loss being recorded in fourth quarter 1999. We also recorded a $14.9 million pre-tax restructuring charge in 2000, of which $6.8 million was related to estimated costs to comply with the return condition provisions and early termination provisions of the five DC-9-50 aircraft under operating leases, and $8.1 million was recorded to reduce the DC-9-50 expendable inventory to fair market value as of December 31, 2000.

        Cumulative Effect of Change in Accounting Principle.    Under our HawaiianMiles frequent flyer program, we sell mileage credits to participating partners such as hotels, car rental agencies and credit card companies. During 1999, we changed our method of accounting for the sale of these mileage credits in accordance with the SEC's Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements". This change, applied retroactively to January 1, 1999, totaled approximately $772,000, net of income tax benefit of approximately $515,000 and is reflected as a cumulative effect of change in accounting principle in the accompanying statements of operations. Under the new accounting method, revenue from the sale of mileage credits is deferred and recognized when transportation is provided. Previously, the resulting revenue was recorded in the period in which the credits were sold. We believe the new method is preferable as it results in a better matching of revenues with the period in which services are provided.

Liquidity and Capital Resources

Liquidity

        Our cash and cash equivalents totaled $102.9 million at December 31, 2001. In addition to the cash and cash equivalents, we had restricted cash of $26.9 million at December 31, 2001. Restricted cash includes $26.3 million in escrow deposits held by a credit card processor and a $0.6 million deposit securing outstanding letters of credit. We also had $0.2 million available under our revolving credit facility with CIT (the "Credit Facility").

        For the year ended December 31, 2001, cash flows from operating activities provided $56.8 million, of which approximately $35.7 million was generated through increases in advance ticket sales. Our operating cash flow reflects our net earnings for the year including approximately $24.9 million received from the federal government under the Stabilization Act, offset by an increase in restricted cash withheld by a credit card processor of $26.3 million. Also, under the Stabilization Act, we deferred

24

approximately $10.0 million in federal transportation taxes, which was subsequently paid in January 2002.

        For the year ended December 31, 2001, our investing activities used $8.5 million of cash. Our principal cash outflow from investing activities was $21.4 million for the acquisition and improvements of our new Boeing 717-200 aircraft delivered in 2001. Our cash inflow from investing activities was approximately $12.9 million received from the sale-leaseback of two DC-10 aircraft.

        For the year ended December 31, 2001, financing activities used $13.3 million in cash. Our primary cash outflow from financing activities included $7.1 million used in the early payoff of long-term notes that were secured by the two DC-10 aircraft involved in the sale-leaseback transaction and $4.6 million in principal repayments on our Credit Facility.

        After adjusting for federal financial assistance and deferred federal transportation taxes, we did not generate positive cash flow during the quarter ended December 31, 2001. Excluding approximately $22.3 million of federal financial assistance recorded during the fourth quarter of 2001, we experienced operating losses of $22.4 million during the quarter ended December 31, 2001, as compared to operating losses of $17.9 million during the quarter ended December 31, 2000. During the quarter ended December 31, 2000, we recorded restructuring charges of $2.1 million and a loss on assets held for sale of $7.6 million. Excluding these one-time charges, the operating loss for the fourth quarter ended 2000 would have been $8.2 million.

        We have also incurred significant additional expenses since September 11, 2001. During the quarter ended December 31, 2001, we experienced increased security costs that we expect to continue to incur for an indefinite period of time. Also, the cost of our aviation insurance program has increased at the annual rate of approximately $9 million commencing in the fourth quarter of 2001. However, our costs for fuel decreased as a result of reduced fuel consumption resulting from the significant reduction in capacity and the introduction of more fuel efficient new aircraft in the quarter ended December 31, 2001.

        Although our current average daily cash flow from operations has improved to some extent since September 11, 2001, our negative daily cash flow from operations, excluding the impact of federal financial assistance and deferred federal transportation taxes, was between $75,000 and $100,000 during the quarter ended December 31, 2001. Based on the current trends we cannot determine at this time the continuing effects of the September 11, 2001 terrorist attacks and the resulting impact on our future profitability.

        Debt Covenants.    On January 10, 2002, we received a "notice of acceleration" from one of our lenders with respect to a loan in the amount of approximately $2.3 million. The lender claims that a default exists under the loan because of a late payment made by Hawaiian two days after the applicable cure period. The loan is secured by a DC-9-50 aircraft that has been retired from service. We are exploring our options with respect to the alleged default. In addition to making the late payment of $70,000, we continued, and intend to continue, to make our monthly payments of $70,000 under the loan. We reclassified the loan as a current obligation for financial statement purposes as of December 31, 2001.

        The acceleration of the loan resulted in a cross default under our Credit Facility, which has been waived. In addition, CIT notified us of a default under a specified financial covenant, which also has been waived. In connection with the waivers, CIT extended the final maturity of the Credit Facility to April 30, 2002 and reduced the amount available under the Credit Facility from $4.1 million to $2.7 million. Aggregate loans and letters of credit outstanding as of December 31, 2001 under the Credit Facility were $2.5 million and $1.0 million, respectively.

        Available Sources of Funds.    Other than the Credit Facility, we do not currently have any lines of credit. Under the Stabilization Act, we are eligible for loan guarantees, subject to federal guidelines.

25

We cannot guarantee, however, that we will seek or be able to obtain any commercial financing or federal loan guarantees under the Stabilization Act. We also anticipate other sources for short-term credit which may be obtained through the pledging of our unencumbered assets. We estimate that if needed, these alternative methods of short-term financing may be available.

        Aircraft and Other Commitments.    In 2001, we entered commitments to take delivery of 16 Boeing 767-300 aircraft. We took delivery of three in the fourth quarter of 2001. As of December 31, 2001, we had commitments for the additional 13 Boeing 767-300 aircraft to be delivered in 2002 and 2003. These aircraft are expected to replace our entire DC-10 fleet on our transpacific and south pacific routes. In addition to the delivery of the Boeing 767-300 aircraft, we will take delivery of two Pratt & Whitney spare aircraft engines in September 2002 and one in March 2003. Our current aircraft, engines, and ground service equipment are financed under operating leases and we have entered operating leases for the 2002 and 2003 Boeing 767-300 aircraft deliveries. We lease our corporate headquarters and ticket and sales offices in the locations we serve. The following table summarizes the effect these significant obligations are expected to have on our cash flow in future periods (in thousands):

	Payments Due by Period (in thousands)
Contractual Obligations	Total	Less Than 1 Year		1-3 Years	4-5 Years	After 5 Years
Long-Term Debt	7,905	4,252		2,883	770	—
Capital Lease Obligations	6,086	1,889		2,393	726	1,078
Operating Leases—Aircraft and Related	851,228	77,567	(a)	124,996	109,748	538,917
Operating Leases—Non-Aircraft	37,149	3,212		6,389	6,122	21,426
Aircraft Commitments	1,312,239	25,545		163,812	168,192	954,690
Total Contractual Cash Obligations	2,214,607	112,465		300,473	285,558	1,516,111

(a)

Includes $20 million for advance rents paid prior to December 31, 2001 related to B717 operating leases.

        We estimate that our capital expenditures for the year 2002 are anticipated to be approximately $15.5 million. Approximately $8.7 million is related to aircraft improvements and modifications, mainly for 767 aircraft, and $2.8 million is for improvements in software and related hardware. The remaining $4.0 million represents facility improvements, purchase of ground equipment and other assets. These expenditures will be funded through the use of available cash and cash equivalents, cash flow from operations and leasing arrangements.

        Stock and Warrant Repurchases.    In March 2000, our Board of Directors approved a stock repurchase program authorizing the repurchase of up to 5 million shares of our common stock from time to time. In August 2000, the Board of Directors increased the authorization to 10 million shares. Including the effect of the repurchase of certain warrants and stock repurchased in 2000, the total number of shares of common stock repurchased under the stock repurchase program amounted to 9,333,508 as of December 31, 2001. In March 2002, our Board of Directors approved a stock repurchase program authorizing the repurchase of up to 5 million shares of our common stock from time to time in the open market or privately negotiated transactions, to be implemented in the event that the proposed merger is formally terminated.

Deferred Tax Assets

        As of December 31, 2001, we had net deferred tax assets aggregating $5.9 million based on gross deferred tax assets of $62.9 million less a valuation allowance of $54.1 million and deferred tax

26

liabilities of $2.9 million. As of December 31, 2000, we had net deferred tax assets aggregating $15.7 million based on gross deferred tax assets of $56.4 million less a valuation allowance of $28.6 million and deferred tax liabilities of $12.1 million. Utilization of these deferred tax assets is predicated on Hawaiian being profitable in future years. We will continually assess the adequacy of its financial performance in determination of its valuation allowance which, should there be an adjustment required, may result in an adverse effect on its income tax provision.

Derivative Financial Instruments

        We utilize heating oil forward contracts to manage market risks and hedge our financial exposure to fluctuations in our aircraft fuel costs. We employ a strategy whereby heating oil contracts may be used to hedge up to 50% of our anticipated aircraft fuel needs. The contracts are exchange traded with counterparties of high credit quality. Therefore, the risk of nonperformance by the counterparties is considered to be small.

        As of January 1, 2001, we adopted Financial Accounting Standards Board Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments and hedging activities. SFAS No. 133 requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. We measure fair value of our derivatives based on quoted market prices. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivatives will be either offset against the change in the fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings.

        We are required to account for our fuel-hedging program under SFAS No. 133. For the year ended December 31, 2001, realized net losses on liquidated contracts of $1.7 million are included as a component of aircraft fuel cost. Based upon our derivative positions, realized losses of $1.2 million, net of taxes of $0.5 million, and unrealized losses of $3.5 million have been recognized as other comprehensive losses on the balance sheet as of December 31, 2001 related to hedging instruments included in the assessment of hedge effectiveness. We expect to reclassify losses on derivative instruments from accumulated other comprehensive losses to operations during the next twelve months when the hedged fuel expenses are recognized. A realized net gain on liquidated contracts amounting to $11.7 million is included as a component of aircraft fuel cost for the year ended December 31, 2000.

Landing Fees and Ticket Taxes

        On September 1, 1999, landing fees at all airports in the State of Hawaii were reinstated after a two-year moratorium. After September 11, 2001, the State of Hawaii suspended collection of landing fees at all airports in Hawaii. We paid approximately $4.8 million and $7.1 million in landing fees for all airports in the State of Hawaii for the years ended December 31, 2001 and 2000, respectively. The State of Hawaii has announced that landing fees will be reinstated, effective April 1, 2002.

        In 1997, legislation was enacted to, among other things, gradually reduce the federal passenger excise tax from 10% to 7.5% and phase-in a $3.00 "head tax" per domestic flight segment by the year 2002. On October 1, 1999, the passenger excise tax decreased from 8% to 7.5%, with a corresponding increase in the "head tax" from $2.00 to $2.25 per domestic flight segment. The "head tax" has increased incrementally over the past three years, with corresponding decreases in the excise tax. As of January 1, 2002 the excise tax was 7.5% and the head tax was $3.00 per domestic flight segment. The federal passenger excise tax is exempt for the pro-rata portion of the ticket price flown over international waters. Under the Security Act, a new $2.50 per enplanement ticket fee (up to a

27

maximum of $5.00 per one-way trip) took effect on February 1, 2002. The Security Act also imposes additional fees on air carriers.

Frequent Flyer Program

        Refer to Business, Frequent Flyer Program contained in Part I, Item 1 of this Form 10-K for discussion on our frequent flyer program.

        As of December 31, 2001 and 2000, HawaiianMiles members had accumulated approximately 6.9 and 5.1 billion miles, representing liabilities totaling approximately $6.9 million and $2.7 million, respectively. Our accruals assume full redemption of mileage points. During the years ended December 31, 2001, 2000 and 1999, approximately 2.2, 2.1 and 1.7 billion award miles were redeemed, respectively.

        We believe that the usage of free travel awards will not result in the displacement of revenue customers and, therefore, such usage will not materially affect our liquidity or operating results. The use of free travel awards is subject to review by Hawaiian, to limit the possibility of displacing revenue passengers. HawaiianMiles travel redemption accounted for approximately 3.4%, 4.0% and 4.8% of interisland traffic, 3.8% of transpacific traffic in 2001 and a negligible percentage of transpacific traffic in 2000 and 1999, and a negligible percentage of south pacific traffic in 2001, 2000 and 1999, respectively.

28

Critical Accounting Policies

        The preparation of our financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We believe our estimates and assumptions are reasonable; however, actual results and the timing of the recognition of such amounts could differ from those estimates. We believe that our critical accounting policies are limited to those described below. For a detailed discussion on the application of these and other accounting policies, see Note 3 in the notes to the financial statements.

Air Traffic Liability.    Passenger ticket sales are initially recorded as a component of air traffic liability. Revenue derived from ticket sales is recognized at the time service is provided. However, due to various factors, including the complex pricing structure and interline agreements throughout the industry, certain amounts are recognized in revenue using estimates regarding both the timing of the revenue recognition and the amount of revenue to be recognized. These estimates are generally based upon the evaluation of historical trends and other methods to model the outcome of future events based on our historical experience. Due to the uncertainties surrounding the impact of the September 11, 2001 events on our business, historical trends may not be representative of future results.

Accounting for Long-Lived Assets.    In accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS 121), we record impairment charges on long-lived assets used in operations when events and circumstances indicate that the assets may be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The net carrying value of assets not recoverable is reduced to fair value. Our estimates of fair value represent our best estimate based on industry trends and reference to market rates and transactions. See Note 8 to the financial statements for additional information regarding impairment and restructuring charges.

Frequent Flyer Accounting.    We utilize a number of estimates in accounting for our frequent flyer program. Changes to the percentage of the amount of revenue deferred, deferred recognition period, cost per mile estimates or the minimum award level accrued could have a significant impact on our revenues or incremental cost accrual in the year of the change as well as in future years. In addition, the Emerging Issues Task Force of the Financial Accounting Standards Board is currently reviewing the accounting for both multiple-deliverable revenue arrangements and volume-based sales incentive offers, but has not yet reached a consensus that would apply to programs such as ours. The issuance of new accounting standards could have a significant impact on our liability in the year of change as well as in future years.

Pension and Other Postretirement Benefits.    Our pension and other postretirement benefit costs and liabilities are calculated using various actuarial assumptions and methodologies prescribed under Statements of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions" and No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." We utilize certain assumptions including, but not limited to, the selection of the discount rate, expected return on plan assets and expected health care cost trend rate. The discount rate assumption is based upon the review of high quality corporate bond rates and the change in these rates during the year. The expected return on plan assets and health care cost trend rates are based upon an evaluation of our historical trends and experience taking into account current and expected market conditions. See Note 10 to the financial statements for additional information regarding our pension and other postretirement benefits.

29

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        We are subject to market risks related to aircraft fuel. Refer to Business, Fuel contained in Part I, Item 1 of this Form 10-K and Derivative Financial Instruments, as described above for further discussion on aircraft fuel and related financial instruments. An immediate ten percent increase or decrease in underlying fuel-related commodity prices from the December 31, 2001 prices would correspondingly change the fair value of the commodity derivative instruments in place by approximately $2 million. Changes in the related commodity derivative instrument cash flows may change by more or less than this amount based upon further fluctuations in future prices as well as related income tax effects. The sensitivity analysis does not consider the effects that such adverse changes may have on overall economic activity nor does it consider additional actions management may take to mitigate our exposure to such change. Actual results may differ.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

        Our financial statements, accompanying notes, Report of Independent Auditors, Independent Auditors' Report and Selected Financial and Statistical Data are contained in this Annual Report on Form 10-K beginning on page F-1 and are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

        None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.

Refer to our Proxy Statement for the 2002 Annual Meeting of Shareholders or any amendment to this Form 10-K to be filed on our before April 30, 2002.

ITEM 11. EXECUTIVE COMPENSATION.

Refer to our Proxy Statement for the 2002 Annual Meeting of Shareholders or any amendment to this Form 10-K to be filed on our before April 30, 2002.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Refer to our Proxy Statement for the 2002 Annual Meeting of Shareholders or any amendment to this Form 10-K to be filed on our before April 30, 2002.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

        From July 17, 2000 through February 28, 2001, William F. Loftus served as executive vice president, chief financial officer and treasurer of Hawaiian. During this period, Hawaiian paid Mr. Loftus a base salary of $152,000. During this same period, Hawaiian paid The Loftus Group, a financial and management consulting firm of which more than ten percent (10%) is owned by Mr. Loftus, $638,535 in fees for financial consulting services, plus expenses.

        Since May 19, 2000, Hawaiian has invested $3.0 million in certificates of deposit with Liberty Bank, SSB, of Austin, Texas. Liberty Bank is majority owned by John W. Adams and another individual. John W. Adams is an employee of Hawaiian, Chairman of Hawaiian's board of directors and the sole shareholder of AIP General Partner, Inc., the general partner of Airline Investors Partnership, L.P., which is the majority shareholder of Hawaiian. Current directors of Hawaiian include Edward Z.

30

Safady and Thomas J. Trzanowski, both of whom are also employees and/or directors of Liberty Bank, SSB.

        On December 19, 2001, Hawaiian executed an Advisory Services Agreement with Smith Management LLC and John W. Adams, pursuant to which Hawaiian or its successor would pay, upon the completion of the proposed merger, $4 million in cash to John W. Adams and $1 million in cash, one million shares of Holdco common stock and Holdco notes with an aggregate principal amount of $2 million to Smith Management. The Advisory Services Agreement provides that it will be terminated automatically upon the formal termination of the Merger Agreement. John W. Adams is an affiliate of Smith Management.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)

Financial Statements.

(1)

Report of Ernst & Young LLP, Independent Auditors.

(2)

Statements of Operations for the Years ended December 31, 2001, 2000, and 1999.

(3)

Balance Sheets, December 31, 2001 and 2000.

(4)

Statements of Shareholders' Equity and Comprehensive Income for the Years ended December 31, 2001, 2000, and 1999.

(5)

Statements of Cash Flows for the Years ended December 31, 2001, 2000, and 1999.

(6)

Notes to Financial Statements.

        Financial Statement Schedule.

(1)

Report of Independent Auditors of Ernst & Young LLP on Financial Statement Schedule for the Years Ended December 31, 2001, 2000 and 1999.



(2)

Schedule of Valuation and Qualifying Accounts.

Schedules not listed above are omitted because of the absence of the conditions under which they are required or because the required information is included in the financial statements or notes thereto.

(b)

Reports on Form 8-K.

(1)

Current Report on Form 8-K dated December 19, 2001 reporting Item 5, "Other Events."

(2)

Current Report on Form 8-K dated February 14, 2002 reporting Item 5, "Other Events."

(c)

Exhibits.

        Exhibit 3—Articles of Incorporation, Bylaws.

(1)

Restated Articles of Incorporation of the Company filed as Exhibit 3(a) to the Company's Registration Statement on Form S-3 as filed December 31, 1998 is incorporated herein by reference.



(2)

Amended and Restated Bylaws of the Company filed as Exhibit 3.1 to the Company's Current Report on Form 8-K as filed September 14, 1998 is incorporated herein by reference.

        Exhibit 4—Instruments Defining the Rights of Security Holders Including Indentures.

31

(1)

Rights Agreement dated December 23, 1994 filed as Exhibit (1) to the Company's current report on Form 8-K during the fourth quarter of 1994 (date of report—December 23, 1994) is incorporated herein by reference.



(2)

The following Agreements filed as Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 are incorporated herein by reference:



(a)

Amendment No. 1 dated as of May 4, 1995 to Rights Agreement dated as of December 23, 1994 by and between Hawaiian Airlines, Inc. and Chemical Trust Company of California;



(b)

Amendment No. 1 to 1994 Stock Option Plan dated as of May 4, 1995;



(c)

Amendment No. 1 dated as of May 4, 1995 to Warrants Nos. 1-10.




(3)

1994 Stock Option Plan, as amended, filed as Exhibit 4 to the Company's Registration Statement on Form S-8 as filed November 15, 1995 is incorporated herein by reference.



(4)

The following Agreements filed as Exhibit 4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995 are incorporated herein by reference:



(a)

Rightsholders Agreement dated as of January 31, 1996, by and among Hawaiian Airlines, Inc., Airline Investors Partnership, L.P., AMR Corporation, Martin Anderson and Robert Midkiff;



(b)

Amendment No. 2 to the Rights Agreement, as amended, dated as of January 31, 1996 by and between Hawaiian Airlines, Inc. and Chemical Trust Company of California;



(c)

Amendment No. 2 to 1994 Stock Option Plan, as amended, dated as of December 8, 1995.




(5)

1996 Stock Incentive Plan, as amended, filed as Exhibit 4 to the Company's Amendment No. 1 to Registration Statement on Form S-2 as filed July 12, 1996 is incorporated herein by reference.



(6)

Amendment No. 3 to the Rights Agreement, as amended, dated as of May 21, 1998, by and between Hawaiian Airlines, Inc. and ChaseMellon Shareholder Services, L.L.C., as successor to Chemical Trust Company of California, filed as Exhibit 4 to the Company's Amendment No. 2 to Registration Statement on Form 8-A as filed May 22, 1998 is incorporated herein by reference.



(7)

Amendment No. 4 to the Rights Agreement, as amended, dated as of August 28, 1998, by and between Hawaiian Airlines, Inc. and ChaseMellon Shareholder Services, L.L.C., as successor to Chemical Trust Company of California, filed as Exhibit 5 to the Company's Amendment No. 3 to Registration Statement on Form 8-A as filed September 14, 1998 is incorporated herein by reference.

The Company agrees to provide the Securities and Exchange Commission, upon request, copies of instruments defining the rights of security holders of long-term debt of the Company.

        Exhibit 10—Material Contracts.

(1)

Aircraft Loan Agreement, dated March 29, 1999, between Bank of Hawaii and Hawaiian Airlines, Inc. filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999, and in redacted form since confidential treatment has been requested pursuant to Rule 24.b-2 for certain portions thereof, is incorporated herein by reference.

32

(2)

The following contracts filed as Exhibit 10 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 are incorporated herein by reference:



(a)

Sublease Agreement 060 dated as of October 26, 1999 between Continental Micronesia, Inc. and the Company, in redacted form since confidential treatment has been requested pursuant to Rule 24.6-2 for certain portions thereof.



(b)

Sublease Agreement 061 dated as of October 26, 1999 between Continental Micronesia, Inc. and the Company, in redacted form since confidential treatment has been requested pursuant to Rule 24.6-2 for certain portions thereof.



(c)

Aircraft Maintenance Services Agreement dated as of October 26, 1999 by and between the Company and Continental Airlines, Inc., in redacted form since confidential treatment has been requested pursuant to Rule 24.6-2 for certain portions thereof.



(d)

Agreement between U.S. Bank National Association and the Company, effective date December 31, 1999, in redacted form since confidential treatment has been requested pursuant to Rule 24.6-2 for certain portions thereof.



(e)

Aircraft General Terms Agreement AGTA-HWI between The Boeing Company and the Company, dated as of December 31, 1999, in redacted form since confidential treatment has been requested pursuant to Rule 24.6-2 for certain portions thereof.



(f)

Purchase Agreement Number 2252 between McDonnell Douglas Corporation and the Company relating to Model 717-22A Aircraft and the following Letter Agreements, dated as of December 31, 1999, in redacted form since confidential treatment has been requested pursuant to Rule 24.6-2 for certain portions thereof:

(a) Customer Services Matters;
(b) Spares Initial Provisioning;
(c) Aircraft Performance Guarantees;
(d) Promotional Support;
(e) Business Matters;
(f)  Purchase Rights Aircraft and Aircraft Model Substitution;
(g) Liquidated Damages-Non-Excusable Delay;
(h) Guarantee Agreement;
(i) Other Matters;
(j) Financing Matters;
(k) Spares Commitments;
(l) Board Approval.

(5)

Further Letter Agreements relating to Purchase Agreement Number 2252 filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 are incorporated herein by reference: (a) Supplemental Agreement No. 1; (b) Other Matters.



(6)

The following contracts filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 are incorporated herein by reference:



(a)

Loan agreement dated May 26, 2000 between Hawaiian as Borrower and Kreditanstalt fur Wiedaraufbau as Lender and the related Secured Reimbursement Agreement dated as of May 26, 2000 between Hawaiian as Borrower and Rolls-Royce Deutschland GmbH as Guarantor, filed as Exhibit 99-1, in redacted form since confidential treatment has been requested pursuant to Rule 24.6.2 for certain portions thereof;



(b)

Commercial Cooperation Agreement between Northwest Airlines, Inc. (NW) and Hawaiian, the Partner Agreement between NW and Hawaiian, and the Multilateral

33

Prorate Agreement among Hawaiian, NW, and KLM Royal Dutch Airways, all dated May 17, 2000, filed as Exhibit 99-2, in redacted form since confidential treatment has been requested pursuant to Rule 24.6.2 for certain portions thereof;

(c)

Employment Agreement for Robert W. Zoller, Jr. as Executive Vice President-Operations and Service, effective as of December 1, 1999, filed as Exhibit 99-3;



(d)

"Deferred Advance Payments" Letter Agreement relating to Purchase Agreement Number 2252 filed as Exhibit 99-4, in redacted form since confidential treatment has been requested pursuant to Rule 24.6.2 for certain portions thereof.




(7)

Sublease Agreement 084 dated as of December 8, 2000 between Continental Airlines, Inc. and the Company, filed as Exhibit 10 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, and filed in redacted form since confidential treatment has been requested pursuant to Rule 24.6.2 for certain portions thereof, is incorporated herein by reference.



(8)

The following contracts filed as exhibits to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 are incorporated herein by reference:



(a)

Employment Agreement for Christine Deister as Executive Vice President—Chief Financial Officer—Treasurer, effective as of March 1, 2001.



(b)

Lease Agreement N475HA dated February 28, 2001, between First Security Bank, N.A. and the Company, for one Boeing 717-200 aircraft, filed in redacted form since confidential treatment has been requested pursuant to Rule 24.b-2 for certain provisions thereof. The Company also entered into Lease Agreement N476HA dated March 14, 2001, Lease Agreement N477HA dated April 30, 2001, Lease Agreement N478HA dated May 25, 2001, Lease Agreement N479HA dated June 21, 2001, Lease Agreement N480HA dated June 28, 2001, Lease Agreement N481HA dated July 26, 2001, Lease Agreement N482HA dated August 13, 2001, Lease Agreement N483HA dated August 27, 2001, Lease Agreement N484HA dated September 12, 2001, Lease Agreement N485HA dated October 29, 2001, Lease Agreement N486HA dated November 20, 2001, and Lease Agreement N487HA dated December 20, 2001, between Wells Fargo Bank, Northwest, N.A. (successor to First Security Bank, N.A.) and the Company, each for an additional Boeing 717-200 aircraft. The leases are substantially identical to Lease Agreement N475HA filed in redacted form with the Company's Form 10-Q for the first quarter of 2001, except with respect to the aircraft information, delivery dates and certain other information as to which the Company is requesting confidential treatment pursuant to Rule 24.b-2. Pursuant to S-K Item 601, Instruction 2, Lease Agreement N476HA, Lease Agreement N477HA, Lease Agreement N478HA, Lease Agreement N479HA, Lease Agreement N480HA, Lease Agreement N481HA, Lease Agreement N482HA, Lease Agreement N483HA, Lease Agreement N484HA, Lease Agreement N485HA, Lease Agreement N486HA and Lease Agreement N487HA are not being filed herewith.




(9)

Lease Agreement between AWMSI and the Company, dated as of June 8, 2001, for one Boeing Model 767-33AER aircraft, Manufacturer's Serial Number 28140 ("Lease Agreement 28140"), filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, and filed in redacted form since confidential treatment has been requested pursuant to Rule 24.b-2 for certain provisions thereof, is incorporated herein by reference. The Company has also entered into that Lease Agreement between AWMSI and the Company, dated as of June 8, 2001 for one Boeing Model 767-33AER aircraft, Manufacturer's Serial Number 28141 ("Lease Agreement 28141") and that Lease Agreement between AWMSI and the Company, dated as of June 8, 2001 for one Boeing Model

34

767-33AER aircraft, Manufacturer's Serial Number 28139 ("Lease Agreement 28139"), which lease agreements are substantially identical to Lease Agreement 28140 except with respect to aircraft information, delivery date and certain other information as to which the Company is requesting confidential treatment pursuant to Rule 24.b-2. Pursuant to S-K Item 601, Lease Agreement 28141 and Lease Agreement 28139 are not being filed herewith.

(10)

The following contracts filed as exhibits to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 are incorporated herein by reference:



(a)

Lease Agreement between International Lease Finance Corporation ("ILFC") and the Company, dated as of July 16, 2001, for one Boeing Model 767-3G5ER aircraft, Manufacturer's Serial Number 24257 ("Lease Agreement 24257"), filed in redacted form since confidential treatment has been requested pursuant to Rule 24.b-2 for certain provisions thereof. The Company has also entered into that Lease Agreement between ILFC and the Company, dated as of July 16, 2001 for one Boeing Model 767-3G5ER aircraft, Manufacturer's Serial Number 24258 ("Lease Agreement 24258"), that Lease Agreement between ILFC and the Company, dated as of July 16, 2001, for one Boeing Model 767-3G5ER aircraft, Manufacturer's Serial Number 25531 ("Lease Agreement 25531"), and that Lease Agreement between ILFC and the Company, dated as of July 16, 2001, for one Boeing Model 767-3G5ER aircraft, Manufacturer's Serial Number 24259 ("Lease Agreement 24259"), which lease agreements are substantially identical to Lease Agreement 24257 except with respect to aircraft information, delivery date and certain other information as to which the Company is requesting confidential treatment pursuant to Rule 24.b-2. Pursuant to S-K Item 601, Lease Agreement 24258, Lease Agreement 25531, and Lease Agreement 24259 are not being filed herewith.



(b)

Lease Agreement between AWMSI and the Company, dated as of September 20, 2001, for one Boeing Model 767-33AER aircraft, Manufacturer's Serial Number 33421 ("Lease Agreement 33421"), filed in redacted form since confidential treatment has been requested pursuant to Rule 24.b-2 for certain provisions thereof. The Company has also entered into that Lease Agreement between AWMSI and the Company, dated as of September 20, 2001 for one Boeing Model 767-33AER aircraft, Manufacturer's Serial Number 33422 ("Lease Agreement 33422"), that Lease Agreement between AWMSI and the Company, dated as of September 20, 2001, for one Boeing Model 767-33AER aircraft, Manufacturer's Serial Number 33423 ("Lease Agreement 33423"), that Lease Agreement between AWMSI and the Company, dated as of September 20, 2001, for one Boeing Model 767-33AER aircraft, Manufacturer's Serial Number 33424 ("Lease Agreement 33424"), and that Lease Agreement between AWMSI and the Company, dated as of September 20, 2001, for one Boeing Model 767-33AER aircraft, Manufacturer's Serial Number 33425 ("Lease Agreement 33425"), which lease agreements are substantially identical to Lease Agreement 33421 except with respect to aircraft information, delivery date and certain other information as to which the Company is requesting confidential treatment pursuant to Rule 24.b-2. Pursuant to S-K Item 601, Lease Agreement 33422, Lease Agreement 33423, Lease Agreement 33424, and Lease Agreement 33425 are not being filed herewith.



(c)

Lease Agreement between BCC Equipment Leasing Corporation ("BCC") and the Company, dated as of September 20, 2001, for one Boeing Model 767-33AER aircraft, Manufacturer's Serial Number 33426 ("Lease Agreement 33426"), filed in redacted form since confidential treatment has been requested pursuant to Rule 24.b-2 for certain provisions thereof. The Company has also entered into that Lease Agreement between BCC and the Company, dated as of September 20, 2001 for one Boeing Model 767-33AER aircraft, Manufacturer's Serial Number 33427 ("Lease Agreement 33427"),

35

that Lease Agreement between BCC and the Company, dated as of September 20, 2001, for one Boeing Model 767-33AER aircraft, Manufacturer's Serial Number 33428 ("Lease Agreement 33428"), and that Lease Agreement between BCC and the Company, dated as of September 20, 2001, for one Boeing Model 767-33AER aircraft, Manufacturer's Serial Number 33429 ("Lease Agreement 33429"), which lease agreements are substantially identical to Lease Agreement 33426 except with respect to aircraft information, delivery date and certain other information as to which the Company is requesting confidential treatment pursuant to Rule 24.b-2. Pursuant to S-K Item 601, Lease Agreement 33427, Lease Agreement 33428, and Lease Agreement 33429 are not being filed herewith.

(d)

CodeShare Agreement dated July 1, 2001 between the Company and Alaska Airlines, Inc. filed in redacted form since confidential treatment has been requested pursuant to Rule 24.b-2 for certain provisions thereof.




(11)

PW4060 Engine Fleet Management Program Agreement by and between United Technologies Corporation Pratt & Whitney Division and Hawaiian Airlines, Inc., dated as of October 5, 2001, filed in redacted form since confidential treatment for certain provisions thereof has been requested pursuant to Rule 24.b-2.

        Exhibit 23    Consent of experts and counsel.    

(1) Consent of Ernst & Young LLP.

        Exhibit 24    Power of Attorney.    

36

EXHIBIT INDEX

Exhibit Number	Description
10-1	PW4060 Engine Fleet Management Program Agreement by and between United Technologies Corporation Pratt & Whitney Division and Hawaiian Airlines, Inc., dated as of October 5, 2001, filed in redacted form since confidential treatment for certain provisions thereof has been requested pursuant to Rule 24.b-2.

37

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) 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 AIRLINES, INC.
April 1, 2002	By:	/s/  CHRISTINE R. DEISTER Christine R. Deister Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

38

Report of Independent Auditors

The Board of Directors
Hawaiian Airlines, Inc.

        We have audited the accompanying balance sheets of Hawaiian Airlines, Inc. (the "Company") as of December 31, 2001 and 2000, and the related statements of operations, shareholders' equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hawaiian Airlines, Inc. as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.

        As discussed in Note 3 to the financial statements, effective January 1, 1999, the Company changed its method of accounting for the sale of mileage credits to participating partners in its frequent flyer program.

Honolulu, Hawaii
March 25, 2002

F-1

Hawaiian Airlines, Inc.
Statements of Operations (in thousands)
For the Years ended December 31, 2001, 2000, and 1999

			2001			2000			1999
Operating Revenues:
	Passenger		$	488,300		$	475,475		$	400,251
	Charter			75,632			82,358			46,570
	Cargo			22,214			27,791			22,836
	Other			25,436			21,596			19,220
		Total		611,582			607,220			488,877
Operating Expenses:
	Wages and benefits			188,813			160,459			138,418
	Aircraft fuel, including taxes and oil			111,876			127,221			76,382
	Maintenance materials and repairs			99,043			111,240			101,801
	Rentals and landing fees			61,767			39,458			31,640
	Sales commissions			20,812			14,798			12,471
	Depreciation and amortization			13,983			16,321			17,139
	Impairment loss			—			—			46,958
	Restructuring charges			(3,600	)		14,927			—
	Loss on assets held for sale			—			7,575			—
	Special credit (Stabilization Act)			(30,780	)		—			—
	Other			133,007			129,023			104,605
		Total		594,921			621,022			529,414
Operating Income (Loss)				16,661			(13,802	)		(40,537	)
Nonoperating Income (Expense):
	Interest and amortization of debt expense			(2,212	)		(3,034	)		(3,448	)
	Interest income			3,865			4,291			2,377
	Loss on disposition of equipment			(32	)		(85	)		(1,013	)
	Other, net			557			305			2,708
		Total		2,178			1,477			624
Income (Loss) Before Income Taxes and Cumulative Effect of Change in Accounting Principle				18,839			(12,325	)		(39,913	)
Income Tax Benefit (Provision)				(13,770	)		(6,290	)		11,418
Net Income (Loss) Before Cumulative Effect of Change in Accounting Principle				5,069			(18,615	)		(28,495	)
Cumulative Effect of Change in Accounting Principle, Net of Income Taxes				—			—			(772	)
Net Income (Loss)			$	5,069		$	(18,615	)	$	(29,267	)

See accompanying Notes to Financial Statements

F-2

Hawaiian Airlines, Inc.
Statements of Operations (in thousands, except per share data)
For the Years ended December 31, 2001, 2000, and 1999

		2001		2000			1999
Net Income (Loss) Per Common Stock Share:
Basic
	Before cumulative effect of change in accounting principle	$	0.15	$	(0.48	)	$	(0.70	)
	Cumulative effect of change in accounting principle, net of income taxes		—		—			(0.02	)
Net Income (Loss) Per Common Stock Share		$	0.15	$	(0.48	)	$	(0.72	)
Diluted
	Before cumulative effect of change in accounting principle	$	0.15	$	(0.48	)	$	(0.70	)
	Cumulative effect of change in accounting principle, net of income taxes		—		—			(0.02	)
Net Income (Loss) Per Common Stock Share		$	0.15	$	(0.48	)	$	(0.72	)
Weighted Average Number of Common Shares Outstanding:
	Basic		33,811		38,537			40,997
	Diluted		33,947		39,038			40,997

The following table shows a reconciliation of the weighted average shares outstanding used in computing basic and diluted net income (loss) per Common Stock share:

Weighted average Common Stock Shares outstanding	33,811	38,537	40,997
Incremental Common Stock shares issuable upon exercise of outstanding warrants and stock options (treasury stock method)	136	501	—
Weighted average Common Stock Shares and Common Stock Share equivalents	33,947	39,038	40,997

See accompanying Notes to Financial Statements

F-3

Hawaiian Airlines, Inc.
Balance Sheets (in thousands)
December 31, 2001 and 2000

			2001			2000
ASSETS
Current Assets:
	Cash and cash equivalents		$	102,860		$	67,832
	Restricted cash			26,910			—
	Accounts receivable, net of allowance for doubtful accounts of $1,305 and $500 in 2001 and 2000			35,010			25,195
	Inventories			4,675			4,432
	Assets held for sale			—			12,805
	Deferred tax assets, net			3,000			7,125
	Prepaid expenses and other			6,877			10,132
		Total current assets		179,332			127,521
Property and Equipment:
	Flight equipment			27,218			16,895
	Progress payments on flight equipment			1,068			47,079
	Ground equipment, buildings and leasehold improvements			50,129			41,940
		Total		78,415			105,914
	Accumulated depreciation and amortization			(33,159	)		(22,171	)
		Property and equipment, net		45,256			83,743
Other Assets:
	Long-term prepayments and other			49,482			5,530
	Deferred tax assets, net			2,904			8,585
	Reorganization value in excess of amounts allocable to identifiable assets, net			28,320			31,589
		Total other assets		80,706			45,704
		Total Assets	$	305,294		$	256,968

See accompanying Notes to Financial Statements

F-4

Hawaiian Airlines, Inc.
Balance Sheets (in thousands, except share data)
December 31, 2001 and 2000

				2001			2000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
	Accounts payable			$	71,926		$	55,083
	Air traffic liability				110,641			74,989
	Other accrued liabilities				59,824			36,530
	Current portion of long-term debt				5,469			30,510
	Current portion of capital lease obligations				1,516			723
		Total current liabilities			249,376			197,835
Long-Term Debt					1,673			10,763
Capital Lease Obligations					3,308			2,067
Other Liabilities and Deferred Credits:
	Accumulated pension and other postretirement benefit obligations				63,451			20,715
	Other				8,696			7,329
		Total other liabilities and deferred credits			72,147			28,044
Shareholders' Equity:
	Common Stock—$.01 par value, 60,000,000 shares authorized, 34,150,809 and 33,707,599 shares issued and outstanding in 2001 and 2000, respectively				415			410
	Special Preferred Stock—$.01 par value, 2,000,000 shares authorized, seven shares issued and outstanding				—			—
	Capital in excess of par value				84,592			83,418
	Notes receivable from Common Stock sales				(1,560	)		(1,581	)
	Accumulated deficit				(48,820	)		(53,889	)
	Accumulated other comprehensive loss—
		Minimum pension liability adjustment			(51,600	)		(10,099	)
		Unrealized loss on hedge instruments			(4,237	)		—
			Shareholders' equity (deficiency)		(21,210	)		18,259
	Commitments and Contingent Liabilities
			Total Liabilities and Shareholders' Equity	$	305,294		$	256,968

See accompanying Notes to Financial Statements

F-5

Hawaiian Airlines, Inc.

Statements of Shareholders' Equity (Deficiency) and Comprehensive Income (in thousands)

For the Years ended December 31, 2001, 2000, and 1999

	Common Stock		Special Preferred Stock		Capital in excess of par value			Warrants			Notes receivable from Common Stock sales			Accumulated deficit			Accumulated comprehensive income (loss)			Total
Balance at December 31, 1998	$	410	$	—	$	99,418		$	3,153		$	(1,581	)	$	(6,007	)	$	(4,506	)	$	90,887
Net loss		—		—		—			—			—			(29,267	)		—			(29,267	)
Minimum pension liability adjustment		—		—		—			—			—			—			4,506			4,506
Comprehensive loss																					(24,761	)
Balance at December 31, 1999		410		—		99,418			3,153			(1,581	)		(35,274	)		—			66,126
Net loss		—		—		—			—			—			(18,615	)		—			(18,615	)
Minimum pension liability adjustment		—		—		—			—			—			—			(10,099	)		(10,099	)
Comprehensive loss																					(28,714	)
Repurchase of warrants to acquire 1,949,338 shares of Common Stock		—		—		522			(3,153	)		—			—			—			(2,631	)
Repurchase of 7,293,470 shares of Common Stock		—		—		(16,522	)		—			—			—			—			(16,522	)
Balance at December 31, 2000		410		—		83,418			—			(1,581	)		(53,889	)		(10,099	)		18,259
Net income		—		—		—			—			—			5,069			—			5,069
Minimum pension liability adjustment		—		—		—			—			—			—			(41,501	)		(41,501	)
Unrealized loss on hedge instruments		—		—		—			—			—			—			(4,237	)		(4,237	)
Comprehensive loss																					(40,669	)
Exercise of options to acquire 15,000 shares of Common Stock		—		—		24			—			21			—			—			45
Distribution to Pilots' 401(k) Plan of 518,910 shares of Common Stock		5		—		1,335			—			—			—			—			1,340
Repurchase of 90,700 shares of Common Stock		—		—		(185	)		—			—			—			—			(185	)
Balance at December 31, 2001	$	415	$	—	$	84,592		$	—		$	(1,560	)	$	(48,820	)	$	(55,837	)	$	(21,210	)

See accompanying Notes to Financial Statements

F-6

Hawaiian Airlines, Inc.

Statements of Cash Flows (in thousands)

For the Years ended December 31, 2001, 2000 and 1999

		2001			2000			1999
Cash Flows From Operating Activities:
Net income (loss)		$	5,069		$	(18,615	)	$	(29,267	)
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation			10,813			12,137			12,591
Amortization			3,170			4,184			4,548
Net periodic postretirement benefit cost			1,555			914			752
Impairment loss			—			—			46,958
Restructuring charges (credit)			(3,600	)		14,927			—
Loss on assets held for sale			—			7,575			—
Loss on disposition of equipment			32			85			1,013
Decrease (increase) in restricted cash			(26,910	)		—			6,432
Decrease (increase) in accounts receivable			(9,815	)		(274	)		5,074
Decrease (increase) in inventories			166			1,453			(5,419	)
Increase in prepaid expenses and other			(982	)		(2,461	)		(598	)
Decrease (increase) in deferred taxes, net			9,806			6,290			(22,000	)
Increase in accounts payable			16,843			10,419			15,781
Increase in air traffic libability			35,652			24,563			27,076
Increase in other accrued liabilities			28,234			8,763			5,622
Other, net			(13,229	)		(6,640	)		3,567
Net cash provided by operating activities			56,804			63,320			72,130
Cash Flows From Investing Activities:
Additions to property and equipment			(16,147	)		(13,261	)		(34,776	)
Progress payments on flight equipment			(5,256	)		(39,921	)		(7,158	)
Net proceeds from disposition of equipment			12,888			233			260
Net cash used in investing activities			(8,515	)		(52,949	)		(41,674	)
Cash Flows From Financing Activities:
Long-term borrowings			1,426			22,839			12,704
Repayment of long-term debt			(13,000	)		(9,277	)		(2,979	)
Repayment of capital lease obligations			(1,547	)		(3,379	)		(4,761	)
Repurchase of warrants			—			(2,631	)		—
Issuance of Common Stock			24			—			—
Repurchase of Common Stock			(185	)		(16,522	)		—
Proceeds on notes receivable from Common Stock sales			21			—			—
Net cash provided by (used in) financing activities			(13,261	)		(8,970	)		4,964
Net increase in cash and cash equivalents			35,028			1,401			35,420
Cash and cash equivalents—Beginning of Year			67,832			66,431			31,011
Cash and cash equivalents—End of Year		$	102,860		$	67,832		$	66,431

See accompanying Notes to Financial Statements

F-7

Hawaiian Airlines, Inc.

Statements of Cash Flows (in thousands)

For the Years ended December 31, 2001, 2000, and 1999

		2001		2000			1999
Supplemental Cash Flow Information:
	Interest paid	3,237		$	1,273		$	3,197
	Income taxes paid	—			332			163
Supplemental Schedule of Noncash Activities:
	Minimum pension liability adjustment	(41,501	)		(10,099	)		4,506
	Property and equipment financed through capital lease	3,172			—			350

See accompanying Notes to Financial Statements

F-8

HAWAIIAN AIRLINES, INC.

NOTES TO FINANCIAL STATEMENTS

1.    BUSINESS AND ORGANIZATION

        Hawaiian Airlines, Inc. ("Hawaiian" or the "Company") was incorporated in January 1929 under the laws of the Territory of Hawaii and, based on operating revenues, is the largest airline headquartered in Hawaii. The Company is engaged primarily in the scheduled transportation of passengers, cargo and mail. The Company's passenger airline business is its chief source of revenue.

        The Company provides daily passenger and cargo service from Hawaii, principally Honolulu to Las Vegas, Nevada and the five key United States ("U.S.") West Coast gateway cities of Los Angeles, San Diego and San Francisco, California, Seattle, Washington and Portland, Oregon ("transpacific"). The Company also provides daily service among the six major islands of the State of Hawaii ("interisland"), and weekly service to each of Pago Pago, American Samoa and Papeete, Tahiti in the South Pacific ("south pacific"). Charter service is provided from Honolulu to Las Vegas and Anchorage, Alaska ("overseas charter"). The Company provided overseas charter service from Los Angeles to Papeete for Renaissance Cruises, Inc. until September 25, 2001, when Renaissance Cruises, Inc. filed for Chapter 11 bankruptcy protection and ceased cruise operations.

        During 2001, the Company transitioned from a fleet of DC-9-50 aircraft to a fleet of Boeing 717-200 aircraft for its interisland routes. The Company operates DC-10 aircraft on its transpacific, south pacific and overseas charter routes. In the third quarter of 2001 and March of 2002, the Company took delivery of the first five of sixteen Boeing 767-300ER aircraft which will replace the DC-10 aircraft on the transpacific, south pacific and overseas charter routes. Revenue service on the Boeing 767-300ER aircraft began in November 2001.

2.    AIR TRANSPORTATION SAFETY AND SYSTEM STABILIZATION ACT

        On September 22, 2001, President Bush signed into law the Air Transportation Safety and System Stabilization Act ("the Stabilization Act"), which, for all U.S. airlines and air cargo carriers (collectively, air carriers), provides for, among other things: (i) $5 billion in compensation for direct losses (including lost revenues) incurred as a result of the federal ground stop order and for incremental losses incurred through December 31, 2001 as a direct result of the attacks; (ii) subject to certain conditions, the availability of up to $10 billion in federal government guarantees of certain loans made to air carriers for which credit is not reasonably available as determined by a newly established Air Transportation Stabilization Board; (iii) the authority of the Secretary of Transportation to reimburse air carriers (which authority expires 180 days after the enactment of the Stabilization Act) for the increase in the cost of war risk insurance coverage for the first 30 days of reinstated coverage over the premium in effect prior to September 10, 2001; (iv) at the discretion of the Secretary of Transportation, a $100 million limit on the liability of any air carrier to third parties with respect to acts of terrorism committed on or to such air carrier during the 180-day period following the enactment of the Stabilization Act; and (v) the extension of the due date for the payment by air carriers of certain excise taxes and payroll taxes until January 2002.

        Under the Stabilization Act, each air carrier is entitled to receive the lesser of (i) its direct and incremental losses for the period September 11, 2001 to December 31, 2001 or (ii) its available seat mile allocation of the $5 billion compensation available under the Act. As of December 31, 2001, the Company received $24.9 million from the U.S. Government under the Stabilization Act and anticipates receiving an additional $5.9 million in early 2002. In addition, subject to federal guidelines, the Stabilization Act includes federal loan guarantees for airlines for which the Company expects to be eligible to apply. As of December 31, 2001, the Company recognized $30.8 million as a special credit to operating expenses for the estimated allocation of proceeds from the federal government under the Stabilization Act.

F-9

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

        The Company considers all investments purchased with an original maturity of three months or less to be cash equivalents.

RESTRICTED CASH

        As of December 31, 2001, approximately $26.9 million of cash was restricted as to withdrawal and is classified as restricted cash in the accompanying balance sheets. Restricted cash of $26.3 million serves as collateral to support a credit card holdback for advance ticket sales which funds are made available as air travel is provided. The remaining $0.6 million serves as collateral for outstanding letters of credit in the same amount.

INVENTORIES

        Inventories consists primarily of expendable parts for flight equipment and supplies which are stated at average cost, less an allowance for obsolescence.

PROPERTY AND EQUIPMENT

        Owned property and equipment are stated at cost, except for assets determined to be impaired which are stated at fair market value. Costs of major improvements are capitalized. Depreciation and amortization are provided on a straight-line basis over the following estimated useful lives:

Flight equipment	2-15 years, 15% residual value
Ground equipment	5-15 years
Airport terminal facility	30 years
Buildings	15-20 years
Leasehold improvements	Shorter of lease term or useful life

        Maintenance and repairs on B717-200, B767-300 and DC-10 aircraft are charged to operations as incurred, except that maintenance and repairs under "power by the hour" maintenance contract agreements are accrued on the basis of hours flown.

        Maintenance and repairs on DC-9 aircraft were charged to operations as incurred, except that costs of overhauling engines were charged to operations in the year the engines were removed for overhaul and scheduled heavy airframe overhauls and major structural modifications on DC-9 aircraft were recorded under the deferral method whereby the cost of overhaul was capitalized and amortized over the shorter of the period benefited or the lease term. Additionally, provisions were made for the estimated cost of scheduled heavy airframe overhauls required to be performed on leased DC-9 aircraft prior to their return to lessors. Commencing January 1, 2000, due to the Company's intentions to replace its DC-9 fleet in 2001 and the resultant reduction of DC-9 flight equipment and related assets to fair market value as of December 31, 1999, heavy airframe overhauls and major structural modifications on DC-9 aircraft were expensed.

REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO IDENTIFIABLE ASSETS

        The Company emerged from Chapter 11 bankruptcy on September 12, 1994 (the "Effective Date") with Hawaiian Airlines being the sole surviving corporation. Under fresh start reporting, the reorganization value of the entity was allocated to the Company's assets and liabilities on a basis substantially consistent with the purchase method of accounting. The portion of reorganization value not attributable to specific tangible or identifiable intangible assets of the Company is reflected as reorganization value in excess of amounts allocable to identifiable assets ("Excess Reorganization

F-10

Value") in the accompanying balance sheets. Excess Reorganization Value is amortized on a straight-line basis over 20 years. Accumulated amortization at December 31, 2001 and 2000 totaled approximately $22.4 million and $20.1 million, respectively. The estimated income tax benefit from the expected utilization of net operating loss carryforwards arising prior to the Effective Date has also been applied as a reduction to Excess Reorganization Value.

AIR TRAFFIC LIABILITY

        Passenger fares are recorded as operating revenues when the transportation is provided. The value of unused passenger tickets is included as air traffic liability. The Company performs periodic evaluations of this estimated liability, and any adjustments resulting therefrom, which can be significant, are included in results of operations for the periods in which the evaluations are completed.

FREQUENT FLYER PROGRAM

        The Company sponsors a frequent flyer program and records an estimated liability for the incremental cost associated with providing the related free transportation during the period a free travel award is earned. Incremental costs primarily include fuel and catering.

        Hawaiian recognizes a liability in the period in which members have accumulated sufficient mileage points under its HawaiianMiles frequent flyer program to qualify for award redemption. The liability is adjusted based on net mileage earned and utilized for award redemption on a monthly basis. The incremental cost method is used, computed primarily on the basis of fuel and catering costs, exclusive of any overhead or profit margin. In estimating the amount of such incremental costs to be accrued in the liability for potential future HawaiianMiles free travel, a current average cost per award mile is determined. Incremental fuel expended per passenger is based on engineering formulas to determine the quantity used for the weight of each added passenger and baggage. Such incremental quantity of fuel is priced at current levels. Catering is based on average cost data per passenger for the most recent 12-month period.

        The Company also sells mileage credits to participating partners such as hotels, car rental agencies and credit card companies. During 1999, the Company changed the method it uses to account for the sale of these mileage credits in accordance with the Securities and Exchange Commission's Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements". Under the new accounting method, revenue from the sale of mileage credits is deferred and recognized when transportation is provided. Previously, the resulting revenue was recorded in the period in which the credits were sold. The Company believes the new method is preferable as it results in a better matching of revenues with the period in which services are provided. This change, applied retroactively to January 1, 1999, totaled approximately $772,000, net of income tax benefit of approximately $515,000 and is reflected as a cumulative effect of change in accounting principle in the accompanying statements of operations. This change also increased the Company's net loss for the year ended December 31, 1999 by $1.0 million, pre-tax. The amounts resulting from the change being applied retroactively to January 1, 1998 and 1997 were not material.

DERIVATIVE FINANCIAL INSTRUMENTS

        The Company utilizes heating oil forward contracts to manage market risks and hedge its financial exposure to fluctuations in its aircraft fuel costs. The Company employs a strategy whereby heating oil contracts may be used to hedge up to 50% of Hawaiian's anticipated aircraft fuel needs. At December 31, 2001, the Company held forward contracts to purchase barrels of heating oil in the aggregate amount of $22.9 million through January 2003.

        As of January 1, 2001, the Company adopted Financial Accounting Standards Board Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging

F-11

Activities," which establishes accounting and reporting standards for derivative instruments and hedging activities. SFAS No. 133 requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company measures fair value of its derivatives based on quoted market prices. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivatives will be either offset against the change in the fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings.

        The Company is required to account for its fuel hedging program under SFAS No. 133. For the year ended December 31, 2001, realized net losses on liquidated contracts of $1.7 million are included as a component of aircraft fuel cost. Based upon the Company's derivative positions, realized losses of $1.2 million, net of taxes of $0.5 million, and unrealized losses of $3.5 million have been recognized as other comprehensive losses on the balance sheet as of December 31, 2001 related to hedging instruments included in the assessment of hedge effectiveness. Hawaiian expects to reclassify losses on derivative instruments from accumulated other comprehensive losses to operations during the next twelve months when the hedged fuel expenses are recognized. A realized net gain on liquidated contracts amounting to $11.7 million is included as a component of aircraft fuel cost for the year ended December 31, 2000.

SALES COMMISSIONS

        Commissions from the sale of passenger traffic are recognized as expense when the transportation is provided and the related revenue is recognized. The amount of sales commissions not yet recognized as expense is included in prepaid expenses and other current assets in the accompanying balance sheets.

ADVERTISING COSTS

        The Company expenses the costs of advertising as incurred. Advertising expense was $6.3 million, $5.3 million and $5.7 million for the years ended December 31, 2001, 2000 and 1999, respectively.

INCOME TAXES

        Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

STOCK OPTION PLANS

        The Company applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board ("APB") No. 25, "Accounting for Stock Issued to Employees," in accounting for its fixed stock options. As such, compensation cost is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price.

EARNINGS (LOSS) PER SHARE

        Basic earnings (loss) per share represents income (loss) available to common shareholders divided by the weighted average number of Common Stock shares outstanding for the period. Diluted earnings

F-12

per share reflects the potential dilution that could occur if securities or other contracts to issue Common Stock shares were exercised or converted into Common Stock shares or resulted in the issuance of Common Stock shares that then shared in the earnings of the Company. Outstanding rights, warrants and options to purchase shares of the Company's Common Stock are not included in the computation of diluted earnings per share if inclusion of these rights, warrants and options is antidilutive. Options and warrants to purchase approximately 1.3 million, 2.5 million, and 1.4 million shares of Common Stock in 2001, 2000, and 1999, respectively, were outstanding, but not included in the computation of diluted earnings per share as inclusion of these options and warrants would be antidilutive. See Note 9.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates.

        Material estimates that are particularly susceptible to significant change relate to the determination of asset impairment, air traffic liability, frequent flyer liability and the amounts reported for accumulated pension and other postretirement benefit obligations. Management believes that such estimates have been appropriately established in accordance with accounting principles generally accepted in the United States.

SEGMENT INFORMATION

        Principally all operations of the Company either originate or end in the State of Hawaii. The management of such operations is based on a system-wide approach due to the interdependence of the Company's route structure in its various markets. The Company operates as a matrix form of organization as it has overlapping sets of components for which managers are held responsible. Managers report to the Company's chief operating decision-maker on both the Company's geographic components and the Company's product and service components, resulting in the components based on products and services constituting one operating segment. As the Company offers only one service (i.e., air transportation), management has concluded that it has only one segment.

RECLASSIFICATIONS

        Certain prior year amounts were reclassified to conform to the 2001 presentation. Such reclassifications had no effect on previously reported financial condition and/or results of operations.

NEW ACCOUNTING PRONOUNCEMENTS

        In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, "Business Combinations", and No. 142, "Goodwill and Other Intangible Assets", effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives.

        The Company will apply the new rules on accounting for goodwill and other intangible assets deemed to have indefinite lives beginning in the first quarter of 2002 and will perform the required impairment tests of goodwill and indefinite lived intangible assets as of January 1, 2002. The Company has not yet determined what the effect of these tests will be on its net earnings and financial position. Application of the non-amortization provisions of the Statement is expected to result in an increase in net earnings of $2.3 million per year.

F-13

4.    FINANCIAL INSTRUMENTS AND FAIR VALUES

        The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities approximate fair value due to the short maturity of those instruments. The carrying amount of notes receivable from Common Stock sales approximates fair value as the terms of such instruments are reflective of terms offered for similar instruments of comparable maturities.

        The estimated fair value of our long-term debt at December 31, 2001 was as follows, in thousands:

	Carrying Value		Fair Value
Secured notes payable through 2006	$	4,527	$	4,487
Floating rate notes		2,509		2,509
Other		106		106

        The fair values of the secured notes payable were estimated based on the discounted future cash flows using our current incremental rate of borrowing for a similar liability. All other debt carrying values was estimated to be their fair value.

5.    FLIGHT EQUIPMENT

        At December 31, 2001 and 2000, the Company's aircraft fleet in service was as follows:

	2001		2000
Aircraft Type
	Leased	Owned	Leased	Owned
B-767	3	—	—	—
B-717	13	—	—	—
DC-10	15	—	13	2
DC-9	—	—	6	9
Total	31	—	19	11

        The fleet of 15 McDonnell Douglas DC-9-50 aircraft, previously utilized by the Company on its interisland routes, has been replaced by the B717 aircraft and retired from service. Fourteen of the DC-9-50 aircraft have been placed for storage with Avtel Services in Mojave, California, pending negotiations for return to lessors or sale. Two of these aircraft have been returned to the respective lessors, by way of lease terminations, but are still parked at Avtel Services under Hawaiian's agreement with Avtel Services. One DC-9-50 aircraft remains in Honolulu.

6.    LEASES

AIRCRAFT LEASES

        BOEING 767-300ER AIRCRAFT. The Company has executed lease agreements for 16 Boeing 767-300ER aircraft, including three new Boeing 767-300ER aircraft under 15-year operating leases with Ansett Worldwide Aviation that were delivered in the fourth quarter of 2001. The first two of four Boeing 767-300ER aircraft under seven-year operating leases with International Lease Finance Corporation were received in March 2002, and the remaining two are scheduled to be delivered during the first half of 2002. Nine new Boeing 767-300ER aircraft under 18-year lease financing arranged through Boeing Capital Corporation and Ansett Worldwide Aviation are scheduled to be delivered during the second half of 2002 and the first half of 2003. On November 6, 2001, the FAA granted the Company's application for extended-range twin-engine operations certification for Boeing 767-300ER aircraft. The Boeing 767-300ER aircraft have been introduced in the Company's transpacific routes.

        BOEING 717-200 AIRCRAFT. During 2001, the Company took delivery of and introduced into service on its interisland routes 13 new Boeing 717-200 aircraft, all under 15-year leveraged lease

F-14

financing provided by Boeing affiliates. These aircraft replaced the DC-9-50 fleet previously utilized on the interisland routes.

        DC-10 AIRCRAFT. The DC-10 aircraft are utilized in the Company's transpacific and south pacific routes. Of the 15 DC-10 aircraft, 10 are leased from American Airlines on long-term operating leases expiring at various times in 2002 and the first half of 2003. One of the 10 DC-10 aircraft was returned to American Airlines in January 2002 and another in March 2002. Three DC-10-30 aircraft were leased from Continental Airlines, two of which were returned in January 2002 and the remaining aircraft is on a lease which expires in May 2002. In January 2001, the Company completed sale-leaseback transactions on the remaining two DC-10 aircraft with BCI Aircraft Leasing, Inc. and will continue to utilize the two aircraft under operating leases expiring in early 2004. As of December 31, 2000, $7.6 million was recognized as a loss on assets held for sale to reduce the book value of these aircraft to net realizable value; the net realizable value of these aircraft of $12.8 million was included as assets held for sale on the Company's balance sheet; and the balance of the notes payable secured by the two aircraft of $7.1 million was classified as current portion of long-term debt on the Company's balance sheet. Upon closing of the transaction in January 2001, proceeds from the sale of the aircraft were used to pay off the notes.

        Lease rent for all aircraft has been expensed under the straight-line method.

OTHER LEASES

        The Company leases office space for its headquarters, airport facilities, ticket offices and certain ground equipment in varying terms through 2013.

GENERAL

        Rent expense for aircraft, office space, real property and other equipment during 2001, 2000, and 1999 was $53.2 million, $30.4 million, and $26.9 million, respectively, net of sublease rental income.

        Scheduled future minimum lease commitments under operating and capital leases for the Company as of December 31, 2001, in thousands, are as follows:

		Operating Leases		Capital Leases
2002		$	80,779	$	1,889
2003			66,210		1,289
2004			65,175		1,103
2005			57,935		484
2006			57,935		242
Thereafter			560,343		1,079
	Total minimum lease payments	$	888,377	$	6,086
	Less amount representing interest (rates ranging from 7.75% to 11.12%)				1,262
	Present value of capital lease obligations				4,824
	Less current portion of capital lease obligations				1,516
	Capital lease obligations, excluding current portion			$	3,308

        The above table does not include the minimum payments resulting from leasing the 13 767-300ER aircraft which are scheduled to be delivered during 2002 and 2003. Additionally, the minimum lease payments for 2002 includes $20 million for advance rents paid prior to December 31, 2001 related to B717 operating leases.

F-15

        The net book value of property held under capital leases as of December 31, 2001 and 2000 totaled $4.3 million and $2.1 million, respectively. Amortization of property held under capital leases is included in depreciation and amortization expense in the accompanying statements of operations.

7.    DEBT

        At December 31, 2001 and 2000, the Company's long-term debt consisted of the following, in thousands:

		2001			2000
Secured obligations due 2002-2006		$	7,142		$	41,273
Current portion			(5,469	)		(30,510	)
	Long-term debt obligations, excluding current portion	$	1,673		$	10,763

Secured obligations due 2002-2006 are as follows:

(1)

A promissory note executed in 1999 for the acquisition of a used DC-9-50 aircraft. The note is secured by first priority liens on the aircraft and other collateral as described in the security agreement. The note is due in 2005 and is payable in monthly installments of principal and interest ranging from $70,000 to $61,857. Interest accrues at 9.95% per annum. At December 31, 2001 and 2000, $2.2 million and $2.8 million was outstanding, respectively.
   

On January 10, 2002, the Company received a notice of acceleration from the lender. The lender claims that a default exists under the loan because of a late payment made by the Company two days after the applicable cure period. In addition to making the late payment of $70,000, the Company has continued to make its monthly payments of $70,000 under the loan. The loan has been classified as a current obligation for financial statement purposes as of December 31, 2001.

(2)

A promissory note executed in 1998 for the acquisition of a used DC-9-50 aircraft. The note is secured by first priority liens on the aircraft, other collateral as described in the security agreement and a $1.0 million letter of credit issued under the Credit Facility defined below. The note is due in 2005 and is payable in monthly installments of principal and interest ranging from $78,039 to $34,677. Interest accrues at 8.95% per annum. At December 31, 2001 and 2000, $2.3 million and $3.0 million was outstanding, respectively.

(3)

The Company maintains a Credit Facility with CIT Group/Business Credit, Inc. (the "Credit Facility"). Interest accrues at prime (4.75% at December 31, 2001) plus 2.0%. At December 31, 2001, aggregate loans and letters of credit outstanding under the Credit Facility were $2.5 million and $1.0 million, respectively. Principal repayments of approximately $4.6 million were made in the fourth quarter of 2001. The maximum credit under the facility was reduced from $4.1 million to $2.7 million and the final maturity of this facility has been extended to April 30, 2002.
   

The Credit Facility is secured by a first lien on substantially all of the Company's property, excluding the Company's owned and leased aircraft, the Company's aircraft engines while installed on aircraft and certain security deposits. In addition, terms of the Credit Facility restrict the Company from paying any cash or stock dividends on its Common Stock.
   

The acceleration of the DC-9-50 loan in January 2002 resulted in a cross default under the Company's Credit Facility. In addition, the Company was not in compliance with a specified financial covenant in the Credit Facility. The Company notified CIT of the cross default and default of the financial covenant which have been waived.

F-16

        Maturities of long-term debt for the Company, including those estimated for the Credit Facility, as of December 31, 2001, in thousands, are as follows:

2002	$	5,469
2003		849
2004		384
2005		419
2006		21
Thereafter		—

8.    IMPAIRMENT LOSS AND RESTRUCTURING CHARGES

        In connection with its decision to replace the present interisland DC-9-50 fleet with the Boeing 717-200s, the Company performed an evaluation to determine, in accordance with the Financial Accounting Standards Board (the "FASB") Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," whether future cash flows (undiscounted and without interest charges) expected to result from the use and eventual disposition of these aircraft would be less than the aggregate carrying amounts of these aircraft and the related assets. As a result of the evaluation, management determined that the estimated future cash flows expected to be generated by these aircraft would be less than their carrying amount, and therefore these aircraft are impaired as defined by SFAS No. 121. Consequently, the original cost basis of these aircraft and related items was reduced to reflect the fair market value as of December 31, 1999. In determining the fair market value of these assets, the Company considered recent transactions involving sales of similar aircraft and market trends in aircraft dispositions. The evaluation performed under the guidelines of SFAS No. 121 resulted in a $47 million pre-tax, non-cash impairment loss being recorded in fourth quarter 1999. The Company also recorded a $14.9 million pre-tax restructuring charge in 2000, of which $6.8 million was related to estimated costs to comply with the return condition provisions and early termination provisions of the five DC-9-50 aircraft under operating leases, and $8.1 million to reduce the DC-9-50 expendable inventory to fair market value as of December 31, 2000. During the year ended December 31, 2001, the Company recorded a $3.6 million credit to restructuring charges related to a change in estimate on the return condition provisions and early termination provisions of the five DC-9-50 aircraft under operating leases. The change in estimate is based on renegotiation of the return provisions with the respective lessors. In addition, during 2001, the Company completed an impairment analysis of its DC-10 fleet which did not result in any additional impairment charges.

9.    INCOME TAXES

        Income tax expense is based on an estimated annual effective tax rate, which differs from the federal statutory rate of 35% in 2001, 2000 and 1999, primarily due to state income taxes and certain nondeductible expenses. The Company's reorganization and the associated implementation of fresh

F-17

start reporting gave rise to significant items of expense for financial reporting purposes that are not deductible for income tax purposes.

		2001		2000		1999
Deferred taxes
	Federal	$	9,762	$	5,095	$	(9,249	)
	State		1,474		1,195		(2,169	)
			11,236		6,290		(11,418	)
Current payable
	Federal		1,683		—		—
	State		851		—		—
			2,534		—		—
	Provision (benefit) for income taxes	$	13,770	$	6,290	$	(11,418	)

        The estimated income tax benefit from the expected utilization of net operating loss carryforwards arising prior to the Effective Date has been, and will continue to be, applied as a reduction to Excess Reorganization Value, not as a reduction to income tax expense. While accounting principles generally accepted in the United States require that a provision for income tax be recorded, a majority of the provision for 2001 and 2000 did not require cash outlay as it was offset by net operating loss carryforwards available to the Company. In 2001 and 1999, approximately $1.0 million and $1.3 million, respectively, of estimated income tax benefit from the expected utilization of these net operating loss carryforwards has been applied as a reduction to Excess Reorganization Value.

        Income tax expense in 2001, 2000, and 1999 differs from the "expected" tax expense (benefit) for that year computed by applying the respective year's U.S. federal corporate income tax rate to income (loss) before income taxes and cumulative effect of change in accounting principle as follows:

	2001			2000			1999
Computed "expected" tax expense (benefit)	$	6,594		$	(4,314	)	$	(13,969	)
Amortization of Excess Reorganization Value		807			807			983
State income taxes, net of federal income tax benefit		1,067			(478	)		(2,096	)
Change in deferred tax valuation allowance		5,331			10,579			3,569
Other		(29	)		(304	)		95
	$	13,770		$	6,290		$	(11,418	)

F-18

        The tax effects of temporary differences that give rise to significant portions of the Company's deferred tax assets and deferred tax liabilities at December 31, 2001 and 2000 are presented below, in thousands:

			2001			2000
Deferred tax assets:
	Net operating loss carryforwards		$	5,381		$	11,976
	Impairment loss			3,429			22,199
	Accumulated pension and other postretirement benefit obligations			26,980			5,846
	Section 467 rent			2,696			—
	Accrued vacation			3,878			3,372
	Airframe return provision			2,060			6,151
	Excise tax			5,360			—
	Merger costs			1,280			—
	Unrealized loss on hedge			1,416			—
	Accounts receivable, principally due to allowance for doubtful accounts			522			200
	Alternative minimum tax credit			2,352			758
	Other			7,553			5,945
		Total gross deferred tax assets		62,907			56,447
		Less valuation allowance allocated to pre-reorganization deferred tax assets		(12,289	)		(13,255	)
				50,618			43,192
		Less valuation allowance allocated to post-reorganization deferred tax assets		(41,762	)		(15,341	)
	Net deferred tax assets			8,856			27,851
Deferred tax liabilities:
	Plant and equipment, principally due to differences in depreciation			(2,952	)		(12,141	)
		Total deferred tax liabilities		(2,952	)		(12,141	)
		Net deferred taxes	$	5,904		$	15,710

F-19

        As of December 31, 2001, the Company had net deferred tax assets aggregating $5.9 million, based on gross deferred tax assets of $62.9 million less a valuation allowance of $54.1 million and deferred tax liabilities of $2.9 million. The valuation allowance for deferred tax assets as of December 31, 2001, 2000, and 1999 was $54.1 million, $28.6 million, and $18.0 million, respectively.

        The net change in the total valuation allowance was an increase of $25.5 million and $10.6 million for the years ended December 31, 2001 and 2000, respectively, and a decrease of $6.5 million for the year ended December 31, 1999. For 2001, a component of deferred tax assets was increased, along with an equal amount of increase in the valuation allowance, due to other comprehensive losses. Any reduction to the pre-reorganization valuation allowance presented above will result in a reduction of Excess Reorganization Value.

        Utilization of the Company's deferred tax assets is predicated on the Company being profitable 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 deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company will continually assess the adequacy of its financial performance in determination of its valuation allowance which, should there be an adjustment required, may result in a positive effect on the Company's income tax provision. An adjustment was made to the deferred tax assets in 2001, which resulted in a negative impact on the Company's income tax provision.

        The Company underwent an ownership change in January 1996, as defined under Section 382 of the Internal Revenue Code ("IRC Section 382"). IRC Section 382 places an annual limitation on the amount of income that can be offset by net operating loss carryforwards generated in pre-ownership change years. The ownership change resulted in an IRC Section 382 limitation of approximately $1.7 million plus certain "built-in" income items. This new limitation applies to all net operating losses incurred prior to the ownership change. As of December 31, 2001, the Company has total net operating loss carryovers of approximately $13.4 million to offset future taxable income. If not utilized to offset future taxable income, the net operating loss carryforwards will expire between the years 2003 and 2009. Utilization of approximately $1.4 million of net operating loss carryforwards will first result in a $0.4 million reduction of deferred tax assets. Utilization of the remaining $12 million of net operating loss carryforwards will result in a $5 million reduction in Excess Reorganization Value.

10.  BENEFIT PLANS

DEFINED BENEFIT PENSION PLANS

        The Company sponsors three defined benefit pension plans covering its Air Line Pilots Association, International, International Association of Machinists and Aerospace Workers (AFL-CIO) and other personnel (salaried, Transport Workers Union, Employees of the Communications Section). The plans for the IAM and other employees were frozen effective October 1, 1993. As a result of the freeze, there will be no further benefit accruals. The pilots plan is funded based on minimum Employee Retirement Income Security Act of 1974 (ERISA) requirements, but not less than the normal cost plus the 20-year funding of the past service liability. Funding for the ground personnel plans is based on minimum (ERISA) requirements. Plan assets consist primarily of common stocks, government and convertible securities, insurance contract deposits and cash management and mutual funds.

        In addition to providing pension benefits, the Company sponsors two unfunded defined benefit postretirement medical and life insurance plans. Employees in the Company's pilot group are eligible for certain medical, dental and life insurance benefits under one plan if they become disabled or reach normal retirement age while working for the Company. Employees in the Company's non-pilot group

F-20

are eligible for certain medical benefits under another plan if they meet specified age and service requirements at the time of retirement.

        The following tables summarize changes to benefit obligations, plan assets, funded status and amounts included in the accompanying balance sheets as of December 31, 2001 and 2000, in thousands:

	Pension Benefits						Other Benefits
	2001			2000			2001			2000
Change in benefit obligation
Benefit obligation at beginning of year	$	205,441		$	182,573		$	16,406		$	14,548
Service cost		6,166			4,400			973			739
Interest cost		15,296			13,626			1,213			1,076
Amendments		—			—			1,588			506
Actuarial (gain) loss		10,268			14,320			2,207			183
Benefits paid		(10,014	)		(9,478	)		(733	)		(646	)
Benefit obligation at end of year		227,157			205,441			21,654			16,406
Change in plan assets
Fair value of assets at beginning of year		178,723			178,640			—			—
Actual return on plan assets		(9,796	)		1,316			—			—
Employer contribution		5,004			8,245			733			646
Benefits paid		(10,014	)		(9,478	)		(733	)		(646	)
Fair value of assets at end of year		163,917			178,723			—			—
Funded status		(63,240	)		(26,718	)		(21,654	)		(16,406	)
Unrecognized actuarial net (gain) loss		75,172			39,062			(8,089	)		(11,061	)
Unrecognized prior service cost		—			—			1,960			506
Prepaid (accrued) benefit cost at end of year	$	11,932		$	12,344		$	(27,783	)	$	(26,961	)
Amounts recognized in the accompanying balance sheets	$	—		$	19,697		$	—		$	—
Prepaid benefit cost Accrued benefit liability		(39,668	)		(17,452	)		(27,783	)		(26,961	)
Accumulated other comprehensive loss		51,600			10,099			—			—
Prepaid (accrued) benefit cost at end of year	$	11,932		$	12,344		$	(27,783	)	$	(26,961	)
Weighted average assumptions at end of year
Discount rate		7.25	%		7.5	%		7.25	%		7.5	%
Expected return on plan assets		9.0	%		9.0	%		Not applicable			Not applicable
Rate of compensation increase		Various*			Various*			Not applicable			Not applicable

*

Compensation for pilots was assumed to increase 9.8% in 2002, 3.5% in 2003, 4.5% in 2004 and after. The rate of compensation increase is not applicable to the frozen plans.

        At December 31, 2001, the health care cost trend rate was assumed to increase by 9.0% for 2002 and decrease gradually to 4.25% over 7 years and remain level thereafter. At December 31, 2000, the health care cost trend rate was assumed to increase by 7.0% for 2001 and decrease gradually to 4.0% over 6 years and remain level thereafter.

        The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for plans with accumulated benefit obligations in excess of plan assets were $227.2 million, $203.6 million and $163.9 million, respectively, as of December 31, 2001, and $147.7 million, $128.0 million and $110.5 million, respectively, as of December 31, 2000.

F-21

        The following table sets forth the net periodic benefit cost for the years ended December 31, 2001, 2000, and 1999:

		Pension Benefits									Other Benefits
Components of Net Periodic Benefit Cost
		2001			2000			1999			2001			2000			1999
Service cost		$	6,166		$	4,400		$	4,172		$	973		$	739		$	730
Interest cost			15,296			13,626			12,656			1,213			1,075			950
Expected return on plan assets			(16,802	)		(15,830	)		(14,342	)		—			—			—
Amortization of prior service cost			—			—			—			134			—			—
Recognized net actuarial (gain) loss			758			—			544			(765	)		(900	)		(928	)
	Net periodic benefit cost	$	5,418		$	2,196		$	3,030		$	1,555		$	914		$	752

        Assumed health care cost trend rates have a significant impact on the amounts reported for other benefits. A one-percentage point change in the assumed health care cost trend rates would have the following effects:

	1-Percentage- Point Increase		1-Percentage- Point Decrease
Effect on total of service and interest cost components	$	323,000	$	(265,000	)
Effect on postretirement benefit obligation	$	2,803,000	$	(2,348,000	)

OTHER BENEFIT PLANS

        The Company sponsors separate deferred compensation plans (401(k)) for its pilots, flight attendants and ground and salaried personnel. Participating employer cash contributions are not required under the terms of the pilots' plan. The Company is required to contribute up to 7.0% of defined compensation pursuant to the terms of the flight attendants' plan. Contributions to the flight attendants' plan are funded currently and totaled approximately $2.1 million, $1.7 million, and $1.4 million in 2001, 2000, and 1999, respectively. The Company is also required to contribute 4.04% of eligible earnings to the ground and salaried plan for eligible employees as defined by the plan. Contributions to the ground and salaried 401(k) plan totaled $2.5 million, $2.3 million, and $2.1 million in 2001, 2000, and 1999, respectively.

11.  CAPITAL STOCK, WARRANTS, RIGHTS AND OPTIONS

AUTHORIZED CAPITAL STOCK

        As of December 31, 2001 and 2000, the authorized capital stock of the Company consists of 60,000,000 shares of Common Stock, par value $.01 per share, and 2,000,000 shares of Special Preferred Stock, par value $.01 per share.

        Under the terms of the Credit Facility, the Company is restricted from paying any cash or stock dividends. No dividends were paid by the Company in 2001 or 2000.

        In March 2000, the Company announced that its Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to 5 million shares of its Common Stock. In August 2000, the Board of Directors increased the authorization to 10 million shares. Under the approved stock repurchase plan, the Company may repurchase Common Stock from time to time in the open market and in private transactions. Including the effect of the repurchase of certain warrants, as of December 31, 2001, 9,333,508 shares of Common Stock had been repurchased by the Company for approximately $19.3 million. In March 2002, the Board of Directors approved a stock repurchase program authorizing the repurchase of up to 5 million shares of the Company's Common Stock from time to time in the open market or privately negotiated transactions, to be implemented in the event

F-22

that the proposed merger is formally terminated. The amount and timing of any repurchases will be subject to a number of factors, including the "trading practices rules" promulgated under the Securities Exchange Act of 1934, the price and availability of the Company's stock and general market conditions. See Note 17—Subsequent Events regarding discussion of the proposed merger.

SPECIAL PREFERRED STOCK

        Four shares of Series B Special Preferred Stock are owned by Airline Investors Partnership, L.P. ("AIP") with such shares entitling AIP to nominate directors. The Association of Flight Attendants ("AFA"), IAM and ALPA each hold one share of Series C Special Preferred Stock, Series D Special Preferred Stock and Series E Special Preferred Stock, respectively, (collectively the "Special Preferred Stock") which entitle each union to nominate one director. The holders of each series of the Special Preferred Stock are entitled to fill a vacancy on the Board of Directors caused by the removal, resignation or death of a director nominated by that series if the Board fails to fill such vacancy within 30 days. AIP has agreed with each of IAM, ALPA and AFA that so long as the right to have a representative on the Board is in its respective collective bargaining agreement, AIP will vote its shares in favor of such union's nominee for the Board of Directors. In addition to the rights described above, the Special Preferred Stock (1) is senior to Common Stock and each series is PARI PASSU with each other with respect to rights on liquidation, dissolution and winding up and will be entitled to receive $.01 per share, and no more, before any payments are made to holders of any stock ranking junior to the Special Preferred Stock; (2) has no dividend rights other than at any time that a dividend is declared and paid on the Common Stock dividends in an amount per share equal to twice the dividend per share paid on the Common Stock will be paid on the Special Preferred Stock; (3) is entitled to one vote per share and votes with the Common Stock as a single class on all matters submitted to the shareholders of the Company; (4) automatically converts into one share of Common Stock upon the transfer of such share from the person to whom originally issued to any person that is not an affiliate of such person; and (5) does not have preemptive rights in connection with future issuances of the Company's capital stock.

SHAREHOLDER RIGHTS PLAN

        In December 1994, the Board of Directors of the Company authorized adoption of a shareholder rights plan (the "Rights Plan") pursuant to which there would be attached to each share of Common Stock of the Company one preferred stock purchase right (a "PSP Right"). The Rights Plan, as amended, provides that in the event any person (with certain exceptions) becomes the beneficial owner of 15.0% or more of the outstanding common shares, each PSP Right (other than a PSP Right held by the 15.0% shareholder) will be exercisable, on and after the close of business on the tenth business day following such event, to purchase Hawaiian Airlines Common Stock at 50% of the market value of such stock. The Rights Plan further provides that if, on or after the occurrence of such event, the Company is merged into any other corporation or 50.0% or more of the Company's assets or earning power are sold, each PSP Right (other than a PSP Right held by the 15.0% shareholder) will be exercisable to purchase common shares of the acquiring corporation at 50% of the market value of such stock. The PSP Rights expire on December 1, 2004 (unless previously triggered) and are subject to redemption by the Company at $0.01 per PSP Right at any time prior to the first date upon which they become exercisable.

WARRANTS

        In January 1996, due to its participation in certain recapitalization efforts of the Company, American's parent company, AMR Corporation ("AMR"), received, among other things, warrants (the "AMR Warrants") which, subject to certain conditions, entitled AMR to purchase up to 1,949,338 shares of the Company's Common Stock at $1.07 per share, as adjusted pursuant to applicable

F-23

anti-dilution provisions. One-half of the warrants were exercisable immediately and the remaining one-half were to become exercisable only if American and the Company entered into a code sharing arrangement. In July 1997, the Company consummated the code share marketing agreement with American. All of the warrants became exercisable upon implementation of the code share agreement with American on March 2, 1998. On June 20, 2000, the Company repurchased from AMR all of the outstanding warrants for approximately $2.6 million. The 1,949,338 shares associated with the warrants have been counted toward the 10 million shares of Common Stock that the Company was authorized to repurchase under the stock repurchase program in 2000. The estimated fair value of the codeshare agreement and the underlying warrants approximated $2.3 million and has been reflected in the accompanying balance sheets as other assets. The amount included in other assets is being amortized on a straight-line basis over five years from the implementation date of the code share agreement.

STOCK COMPENSATION

        As part of the collective bargaining agreement negotiated with ALPA in December 2000, the Company agreed to distribute 1,685,380 shares of its common stock to the individual 401(k) accounts of ALPA pilots in the Company's employment during 2001 and 2002. The Company distributed 832,425 shares to Vanguard Group, Inc. as trustee for the Hawaiian Airlines, Inc. Pilots' 401(k) Plan between September 2001 and February 2002 for pilots employed during 2001. The Company recognized compensation expense related to the stock distribution of $2.6 million for the year ended December 31, 2001.

STOCK OPTION PLANS

        Under the 1994 Stock Option Plan, 600,000 shares of Common Stock were reserved for grants of options to officers and key employees of the Company. Under the 1996 Stock Incentive Plan, As Amended, 4,500,000 shares of Common Stock have been reserved for issuance of discretionary grants of options to the Company's employees. The Company also has a 1996 Nonemployee Director Stock Option Plan under which 500,000 shares of Common Stock were reserved for issuance and grants of options to nonemployee members of the Board of Directors. Stock options are granted with an exercise price equal to the Common Stock's fair market value at the date of grant, generally vest over a period

F-24

of four years and expire, if not previously exercised, 10 years from the date of grant. Stock option activity during the periods indicated is as follows:

			Shares of Common Stock				Weighted average of exercise price of shares under plan
			Available for options		Under plan
Balance at December 31, 1998			2,977,500		1,495,000		$	3.49
	Granted
		1996 Stock Incentive Plan	(200,000	)	200,000			2.34
		1996 Nonemployee Director Stock Option Plan	(32,000	)	32,000			2.31
	Forfeited
		1996 Stock Incentive Plan	45,000		(45,000	)		3.50
		1996 Nonemployee Director Stock Option Plan	25,000		(25,000	)		3.69
Balance at December 31, 1999			2,815,500		1,657,000		$	3.33
	Granted
		1996 Stock Incentive Plan	(975,000	)	975,000			2.63
		1996 Nonemployee Director Stock Option Plan	(56,000	)	56,000			2.63
	Forfeited
		1996 Stock Incentive Plan	35,000		(35,000	)		3.00
		1996 Nonemployee Director Stock Option Plan	24,000		(24,000	)		3.69
Balance at December 31, 2000			1,843,500		2,629,000		$	3.05
	Granted
		1996 Stock Incentive Plan	(600,000	)	600,000			2.56
	Exercised
		1994 Stock Option Plan	—		(15,000	)		1.62
	Forfeited
		1996 Stock Incentive Plan	180,000		(180,000	)		2.81
		1996 Nonemployee Director Stock Option Plan	16,000		(16,000	)		3.60
Balance at December 31, 2001			1,439,500		3,018,000		$	2.97

        As of December 31, 2001, vesting requirements and exercise periods under each respective plan are as follows:

	Vesting	Exercise Period
1994 Stock Option Plan	Fully vested	Through 2005
1996 Stock Incentive Plan	Various from 2002 through 2005	Various from 2002 through 2011
1996 Nonemployee Director Stock Option Plan	Fully vested	Various from 2002 through 2011

        At December 31, 2001, the range of exercise prices and weighted-average remaining contractual lives of outstanding options was $1.62 to $4.06 and 7.1 years, respectively.

        At December 31, 2001, 2000, and 1999, the number of options exercisable was 1,738,000, 1,143,000, and 646,500, respectively, with weighted-average exercise prices of $3.16, $3.38, and $3.42, respectively.

F-25

        The Company applies APB Opinion No. 25 in accounting for stock options. Had the Company determined compensation cost based on the fair value at the grant date of the respective options under SFAS No. 123, the Company's net income (loss) would have been reduced or increased to the pro forma amounts indicated below:

		2001		2000			1999
Net income (loss)
	As reported	$	5,069	$	(18,615	)	$	(29,267	)
	Pro forma	$	4,002	$	(19,475	)	$	(29,933	)
Basic earnings per share
	As reported	$	0.15	$	(0.48	)	$	(0.72	)
	Pro forma	$	0.12	$	(0.51	)	$	(0.73	)
Diluted earnings per share
	As reported	$	0.15	$	(0.48	)	$	(0.72	)
	Pro forma	$	0.12	$	(0.50	)	$	(0.73	)

        The per share weighted-average fair value of stock options granted during 2001, 2000, and 1999 was $1.57, $1.22, and $1.22, respectively, on the date of grant using a Black Scholes option-pricing model with the following weighted-average assumptions:

	2001	2000	1999
Expected dividend yield	0.00%	0.00%	0.00%
Expected volatility	55.00%	34.00%	34.00%
Risk-free interest rate	4.95% to 5.41%	5.19%	5.38% to 6.36%
Expected life	Up to 7 years	Up to 7 years	Up to 7 years

        Pro forma net income (loss) reflects only options granted since December 31, 1995. Therefore, the full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the pro forma net income (loss) amounts presented above because compensation cost is reflected over the various options' vesting periods and compensation cost for options granted prior to January 1, 1997 is not considered.

12.  COMMITMENTS AND CONTINGENT LIABILITIES

AIRCRAFT COMMITMENTS

        In 2001, the Company entered commitments to take delivery of 16 Boeing 767-300 aircraft, and took delivery of three in the fourth quarter of 2001. As of December 31, 2001, the Company had commitments for the additional 13 Boeing 767-300 aircraft to be delivered in 2002 and 2003. These aircraft are expected to replace the Company's DC-10 aircraft. Future payments for the additional 13 Boeing 767-300 aircraft will approximate $25 million and $78 million in 2002 and 2003, respectively, and approximately $82.0 million per year for the remainder of the lease term. In addition to the delivery of the Boeing 767-300 aircraft, the Company will take delivery of two Pratt & Whitney spare aircraft engines in September 2002 and one in March 2003. Future commitments for these engines are approximately $0.9 million and $2.1 million in 2002 and 2003 and approximately $2.1 million per year for the remainder of the lease term.

F-26

LITIGATION AND CONTINGENCIES

        From time to time, 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 would have a material effect upon the Company's financial statements.

LOS ANGELES AIRPORT OPERATING TERMINAL

        On December 1, 1985, the Company entered into an interline agreement with other airlines, which agreement was amended and restated as of September 1, 1989 for, among other things, the sharing of costs, expenses and certain liabilities related to the acquisition, construction and renovation of certain passenger terminal facilities at the Los Angeles International Airport ("Facilities"). Current tenants and participating members of LAX Two Corporation (the "Corporation"), a mutual benefit corporation, are jointly and severally obligated to pay their share of debt service payments related to Facilities Sublease Revenue Bonds issued to finance the acquisition, construction and renovation of the Facilities which totaled $111.9 million at completion. The Corporation leases the Facilities from the Regional Airports Improvement Corporation under a lease agreement. In addition, the Corporation is also obligated to make annual payments to the city of Los Angeles for charges related to its terminal ground rental. All leases of the Corporation are accounted for as operating leases with related future commitments as of December 31, 2001 amounting to approximately $215.3 million. Rent expense relating to these operating leases totaled $4.1 million, $5.6 million, and $4.7 million in 2001, 2000, and 1999, respectively.

        Member airlines pay the expenses associated with the Facilities on a prorata share basis calculated primarily upon their respective numbers of passengers utilizing the Facilities. The Company accounts for its obligation under this agreement as an operating lease and incurred $800,000, $1,068,000, and $605,000 of rent expense in 2001, 2000, and 1999, respectively.

UNION CONTRACT NEGOTIATIONS

        The majority of Hawaiian's employees are covered by labor agreements with the International Association of Machinists and Aerospace Workers (AFL-CIO), the Air Line Pilots Association International, the Association of Flight Attendants, the Transport Workers Union and the Employees of the Communications Section. All contracts, other than the contract with the seven-member Employees of the Communications Section, were renegotiated in 2001 and Hawaiian is currently in direct negotiations with the Employees of the Communications Section. If an agreement is not reached in direct negotiations, federally-mandated mediation will occur and could last for an unspecified period of time. Although the overwhelming majority of labor negotiations in the airline industry are resolved in mediation, there can be no assurance that the discussions will result in an agreement and ratification. The time required to negotiate a contract under the Railway Labor Act varies. Therefore, management cannot currently estimate the time frame or results of these negotiations. Should Hawaiian and the Employees of the Communications Section be unable to reach an agreement, the Company could be adversely affected.

13.  RELATED PARTY TRANSACTIONS

        From July 17, 2000 through February 28, 2001, William F. Loftus served as Executive Vice President, Chief Financial Officer and Treasurer of the Company. During this period, the Company paid Mr. Loftus a base salary of $152,000. During this same period, the Company paid The Loftus Group, a financial and management consulting firm of which more than ten percent (10%) is owned by Mr. Loftus, $638,535 in fees for financial consulting services, plus expenses.

        Since May 19, 2000, the Company has invested $3.0 million in certificates of deposit with Liberty Bank, SSB, of Austin, Texas. Liberty Bank is majority owned by John W. Adams and another individual.

F-27

John W. Adams is an employee of the Company, Chairman of the Company's board of directors and the sole shareholder of AIP General Partner, Inc., the general partner of Airline Investors Partnership, L.P., which is the majority shareholder of the Company. Current directors of the Company include Edward Z. Safady and Thomas J. Trzanowski, both of whom are also employees and/or directors of Liberty Bank, SSB.

        On December 19, 2001, the Company executed an Advisory Services Agreement with Smith Management LLC and John W. Adams, pursuant to which the Company or its successor will pay, upon the completion of the proposed merger, $4 million in cash to John W. Adams and $1 million in cash, one million shares of Holdco common stock and Holdco notes with an aggregate principal amount of $2 million to Smith Management. The Advisory Services Agreement provides that it will be terminated automatically upon the formal termination of the Merger Agreement. John W. Adams is an affiliate of Smith Management.

14.  CONCENTRATION OF BUSINESS RISK

        The Company's scheduled service operations are primarily focused on providing air transportation service to, from, or throughout the Hawaiian Islands. Therefore, the Company's operations, including its ability to collect its outstanding receivables, are significantly affected by economic conditions in the State of Hawaii and by other factors affecting the level of tourism in Hawaii. In 2001 and 2000, one particular Hawaii-based wholesaler constituted approximately 21% and 17% of the Company's total operating revenues, respectively.

15.  SEGMENT INFORMATION

        The Company operates as a matrix form of organization and offers only one service (i.e., air transportation), resulting in management concluding that it operates one industry segment. The Company's principal line of business, the scheduled and chartered transportation of passengers, constitutes more than 90% of its operating revenues. The following table delineates scheduled and chartered passenger revenue of the Company, in thousands:

	2001		2000		1999
Transpacific	$	295,391	$	286,765	$	236,234
Interisland		172,584		167,048		144,131
South Pacific		20,325		21,662		19,886
Overseas Charter		75,632		82,358		46,570
	$	563,932	$	557,833	$	446,821

16.  SUBSEQUENT EVENTS

        On December 19, 2001, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") among the Company, Aloha Airgroup, Inc. ("Aloha"), TurnWorks Acquisition III, Inc. ("Holdco") and TurnWorks, Inc. ("TurnWorks"), pursuant to which each of the Company and Aloha has agreed to become a wholly owned subsidiary of Holdco and the existing shareholders of the Company and Aloha would become, along with TurnWorks, shareholders of Holdco (the "proposed merger"). On February 14, 2002, Holdco and its subsidiaries filed a Registration Statement on Form S-4 with the Securities and Exchange Commission with respect to the proposed merger.

        When it became clear to the parties that the April 18, 2002 outside date agreed to by the parties in the Merger Agreement would not be satisfied due to the expected timing of regulatory approvals and reviews and other matters, TurnWorks requested that the Company extend the outside date. After considering the request, the Company announced on March 16, 2002 that it had determined not to

F-28

extend the outside date. The parties conducted discussions with respect to potential revisions to the Merger Agreement and a potential formal termination of the Merger Agreement, but no resolution was reached. As the parties have now publicly announced their intentions to pursue other courses of action, the Company has treated the Merger Agreement as having been effectively terminated. The Company believes the other parties are taking the same position. In 2001, the Company recognized $3.2 million in expenses related to the proposed merger.

17.  SUPPLEMENTAL FINANCIAL INFORMATION

Unaudited Quarterly Financial Information (in thousands, except for per share data)

			First Quarter		Second Quarter		Third Quarter		Fourth Quarter
As Reported
2001:
	Operating revenues		$	148,045	$	156,038	$	166,425	$	141,074
	Operating income (loss)			725		1,259		14,784		(107	)
	Net income (loss)			216		2,964		12,046		(10,157	)
	Net income (loss) per Common Stock share:
		Basic		0.01		0.09		0.36		(0.30	)
		Diluted		0.01		0.09		0.35		(0.30	)

        In connection with reviewing the results of the first full year of operating its new revenue accounting system, the Company did an extensive year-end analysis of all activity and reconciliation of air traffic liability as of December 31, 2001. The results of this analysis showed that ticket spoilage occurred in prior quarters and that additional revenue needed to be recognized in the first three quarters. At year end, the Company also analyzed its excise taxes and with all data available determined that an additional accrual was necessary. The impact of these adjustments is shown below:

	First Quarter			Second Quarter			Third Quarter
Increase in operating revenues	$	4,205		$	3,257		$	5,119
Increase in operating expenses		—			(1,959	)		(660	)
Decrease in nonoperating income		—			(3,213	)		(5,758	)
Change in income before taxes		4,205			(1,915	)		(1,299	)
Income tax effect		(1,893	)		862			584
Change in net income		2,312			(1,053	)		(715	)

			First Quarter			Second Quarter		Third Quarter			Fourth Quarter
2000:
	Operating revenues		$	136,033		$	154,557	$	169,901		$	146,729
	Operating income (loss)			(4,455	)		7,509		1,020			(17,876	)
	Net income (loss)			(2,598	)		4,618		(218	)		(20,417	)
	Net income (loss) per Common Stock share:
		Basic		(0.06	)		0.11		(0.01	)		(0.59	)
		Diluted		(0.06	)		0.11		(0.01	)		(0.58	)

F-29

The Board of Directors
Hawaiian Airlines, Inc.

        We have audited the financial statements of Hawaiian Airlines, Inc. (the "Company") as of December 31, 2001 and 2000, and for each of the three years in the period ended December 31, 2001, and have issued our report thereon dated March 25, 2002 (included elsewhere in this Form 10-K). Our audits also included the financial statement schedule for these related periods listed in item 14(a) (Schedule of Valuation and Qualifying Accounts) of this Form 10-K. This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statement schedule based on our audit.

        In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

Honolulu, Hawaii
March 25, 2002

S-1a

Hawaiian Airlines, Inc.

Valuation and Qualifying Accounts (in thousands)

Years Ended December 31, 2001, 2000 and 1999

COLUMN A		COLUMN B		COLUMN C ADDITIONS			COLUMN D		COLUMN E
Description		Balance at Beginning of Year		(1) Charged to Costs and Expenses		(2) Charged to Other Accounts	Deductions		Balance at End of Year
Allowance for Doubtful Accounts:
	2001	$	500	1,320		—	515	(a)	$	1,305
	2000	$	500	795		—	795	(a)	$	500
	1999	$	500	1,060		—	1,060	(a)	$	500
Allowance for Obsolescence of Flight Equipment Expendable Parts and Supplies:
	2001	$	8,004	—		—	503		$	7,501
	2000	$	120	8,080	(b)	—	196		$	8,004
	1999	$	120	—		—	—		$	120

(a)

Doubtful accounts written off, net of recoveries

(b)

Restructuring charge related to the write-down of DC-9 expendable parts

S-2

QuickLinks

TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
PART I

ITEM 1. BUSINESS.

ITEM 2. PROPERTIES.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

PART II

ITEM 5. MARKET PRICE AND DIVIDEND INFORMATION.
ITEM 6. SELECTED FINANCIAL DATA.

Hawaiian Airlines, Inc. Selected Financial and Statistical Data (in thousands, except per share data)

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

EXHIBIT INDEX
SIGNATURES
Report of Independent Auditors
Hawaiian Airlines, Inc. Statements of Operations (in thousands) For the Years ended December 31, 2001, 2000, and 1999
Hawaiian Airlines, Inc. Statements of Operations (in thousands, except per share data) For the Years ended December 31, 2001, 2000, and 1999
Hawaiian Airlines, Inc. Balance Sheets (in thousands) December 31, 2001 and 2000
Hawaiian Airlines, Inc. Balance Sheets (in thousands, except share data) December 31, 2001 and 2000
Hawaiian Airlines, Inc. Statements of Shareholders' Equity (Deficiency) and Comprehensive Income (in thousands) For the Years ended December 31, 2001, 2000, and 1999
Hawaiian Airlines, Inc. Statements of Cash Flows (in thousands) For the Years ended December 31, 2001, 2000 and 1999
Hawaiian Airlines, Inc. Statements of Cash Flows (in thousands) For the Years ended December 31, 2001, 2000, and 1999
HAWAIIAN AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS
Hawaiian Airlines, Inc. Valuation and Qualifying Accounts (in thousands) Years Ended December 31, 2001, 2000 and 1999

EX-10.1

QuickLinks -- Click here to rapidly navigate through this document

PW4060 ENGINE FLEET MANAGEMENT PROGRAM AGREEMENT

BY AND BETWEEN

UNITED TECHNOLOGIES CORPORATION

PRATT & WHITNEY DIVISION

AND

HAWAIIAN AIRLINES,  INC.

DATED AS OF OCTOBER 5, 2001

This document contains proprietary information of United Technologies Corporation, Pratt & Whitney Division ("Pratt & Whitney"). Pratt & Whitney offers the information contained in this document on the express condition that you shall not disclose or reproduce the information in whole or in part without Pratt & Whitney's express written consent. Neither receipt nor possession of this document alone, from any source, constitutes Pratt & Whitney's permission. Possessing, using, copying or disclosing this document by anyone without Pratt & Whitney's express prior written consent may result in criminal and/or civil liability.

PW4060 ENGINE FLEET MANAGEMENT PROGRAM AGREEMENT

FOR

HAWAIIAN AIRLINES, INC.

        THIS PW4060 ENGINE FLEET MANAGEMENT PROGRAM AGREEMENT dated as of October 5, 2001 (this "FMP Agreement") is made by and between United Technologies Corporation, acting through its Pratt & Whitney Division ("Pratt & Whitney"), a corporation organized and existing under the laws of the state of Delaware, and having an office and place of business in East Hartford, Connecticut and Hawaiian Airlines, Inc. ("Hawaiian"), a corporation having an office and place of business in Honolulu, Hawaii.

        WHEREAS Hawaiian wishes to use Pratt & Whitney's PW4060 engine fleet management program services; and

        WHEREAS Pratt & Whitney is willing to provide PW4060 engine fleet management program services for FMP Eligible Engines, as defined below, upon the terms set forth in this FMP Agreement.

        PRATT & WHITNEY AND HAWAIIAN HEREBY AGREE AS FOLLOWS:

A.    DEFINITIONS

        In this FMP Agreement, including the attachments hereto, the capitalized terms herein shall have the respective meanings set out below. Except as otherwise provided, all references to "Attachments" refer to "Attachments" to this FMP Agreement.

        "Aircraft" means the 767 aircraft operated by Hawaiian on which FMP Eligible Engines are initially installed at the entry of such aircraft into the FMP Agreement.

        "AOG Event" occurs at the time that an Aircraft is unavailable for operational service solely because an FMP Eligible Engine installed on such Aircraft is unserviceable and incapable of continued operation after Hawaiian has performed reasonable on-wing corrective action and no replacement engine is available. An AOG Event terminates upon correction of the unserviceable condition or at the time a replacement engine becomes available for operational service, whichever occurs first.

        "Aviation Authority" means all or any of the authorities, government departments, committees or agencies which, under the laws of the State of Registration of the relevant Aircraft, may from time to time (i) have control or supervision of civil aviation in that state; or (ii) have jurisdiction over the registration, airworthiness or operation of, or other matters relating to an Aircraft.

        "AWAS" means Ansett Worldwide Aviation, USA, Ansett Worldwide Aviation Netherlands, B.V., or, subject to Pratt & Whitney approval, any division, wholly-owned subsidiary, or affiliate of Ansett Worldwide Aviation, USA.

        "Buyer Furnished Equipment" or "BFE" means the aircraft manufacturer-supplied or buyer furnished engine-mounted accessories (typically including such items as integrated drive generator, quick accessory disconnect adapter, hydraulic pumps, shut-off valve and pressure regulating valve).

        "Customized Engine Maintenance Program" or "CEMP" means the program for off-wing maintenance and engine line maintenance established for Hawaiian in accordance with Section D(1).

        "Delivery Duty Paid" or "DDP" shall have the meaning set forth in Incoterms 2000, as promulgated by the International Chamber of Commerce.

        "ECM" means engine condition monitoring.

        "Engine Flight Hour" or "EFH" means FMP Eligible Engine flight hour.

        "Engine Build-up Unit" or "EBU" means the set of engine-mounted hardware required to interface such engine with aircraft systems. These aircraft systems typically include fuel, hydraulic, pneumatic, fire detection and electrical units.

        "Extreme Environmental Conditions" means atmospheric conditions typical of a severe environment including but not limited to high temperature or high concentrations of particulates such as sand, volcanic ash, calcium sulfate or other contaminates.

        "Ex works" shall have the meanings set forth in Incoterms 2000.

        "FAA" means the Federal Aviation Administration of the United States of America or any successor agency thereto.

        "FMP Eligible Engines" means the PW4060 engines that are identified in Attachment I and Attachment II.

        "FMP Rate" has the meaning set forth in Section B.

        "FMP Spare Engine" means an engine provided by Pratt & Whitney for use by Hawaiian pursuant to this FMP Agreement.

        "FOD" means foreign object damage.

        "General Lease Agreement" means a lease agreement entered into by and between Pratt &Whitney and Hawaiian for a spare engine in accordance with Section C(1)(b) when an AOG Event occurs as the result of an "Excluded Cause" set forth in Section C(1)(b)(ii).

        "Initial Refurbishment Visit" means the first Performance Restoration Shop Visit performed on each of the eight (8) engines in Fleet No.1.

        "Life Limited Parts" or "LLPs" refer to those FMP Eligible Engine parts defined as such in the Airworthiness Limitation section of the applicable Production Approval Holders manual.

        "Parts Manufacturer Approval" or "PMA" means the authority granted to a legal entity by the FAA and described in 14 C.F.R. § 21.303, to produce modification or replacement parts for sale for installation on type certificated products.

        "Performance Restoration Shop Visit" or "PRSV" means the accomplishment of all specified disassembly, cleaning, inspection, repair or replacement of parts as required, restoration of fits and clearances, reassemble and test tasks for the purpose of attaining a full service interval of parts, modules and engines.

        "Pratt & Whitney Facility" means the Pratt & Whitney Cheshire Engine Center.

        "Production Approval Holder" or "PAH" means an entity holding a type certificate issued under the authority of the Federal Aviation Regulation, Part 21.

        "Program Manager" has the meaning set forth in Section D(2)(a).

        "Quick Engine Change" or "QEC" means the components pre-mounted on an FMP Eligible Engine to facilitate an engine change.

        "Spare Engine Lease Agreement" means a lease agreement entered into by and between Pratt & Whitney and Hawaiian for FMP Spare Engines in accordance with Section C(1)(b).

        "Specific Conditions" has the meaning set forth in Section B(2).

        "State of Registration" means the country in which the Aircraft is registered.

        "Term" has the same meaning set forth in Section B.

        "UTF" means UT Finance Corporation, a wholly owned subsidiary of United Technologies Corporation and an affiliate of Pratt & Whitney.

2

B.    TERM OF FMP AGREEMENT

        Pratt & Whitney shall provide services under this FMP Agreement for eight (8) used engines leased by Hawaiian from International Leasing Financing Corporation ("ILFC") which have completed the Initial Refurbishment Visit (the "Fleet No. 1"), for six (6) new engines leased by Hawaiian from AWAS (the "Fleet No. 2") and for eighteen (18) new engines leased by Hawaiian from AWAS, Boeing or UTF plus the four (4) new spare engines leased from AWAS (the "Fleet No. 3). Each engine in Fleet No. 1 will be covered from each engine's delivery until the seventh anniversary of each engine's delivery to Hawaiian Airlines for services described in Section C(1)(b), and each engine in Fleet No. 1 will be covered for services described in Section C(1)(a) following the Initial Refurbishment Visit until the seventh anniversary of each engine's delivery to Hawaiian. For engines in Fleet No. 1, visits which are not Performance Restoration Shop Visits, such services described in Section C(1)(a) will be covered from engine delivery to the seventh anniversary of each engine's delivery. Fleet No. 2 will be covered until the fifteenth anniversary of each engine's delivery to Hawaiian Airlines. Each engine in Fleet No. 3 will be covered until the eighteenth anniversary of each engine's delivery to Hawaiian Airlines.

1.

Pricing



a.

Pricing For Fleet No. 1

[Intentionally Omitted]

b.

Pricing For Fleet No. 2 and Fleet No. 3

[Intentionally Omitted]

2.

The FMP Rate is predicated on the following specific conditions (the "Specific Conditions"):



a.

operation and maintenance of the FMP Eligible Engines during the Term in accordance with instructions contained in Pratt & Whitney publications and other appropriate manufacturer's publications;



b.

Hawaiian accepting delivery of the firm aircraft and spare engines as described in Attachments I and II;



c.

Hawaiian operating all FMP Eligible Engines during the Term;



d.

[Intentionally Omitted]



e.

adoption of, and compliance with, the CEMP;



f.

[Intentionally Omitted]



g.

[Intentionally Omitted]



h.

[Intentionally Omitted]



i.

[Intentionally Omitted]



j.

[Intentionally Omitted]

3

3.

Pratt & Whitney reserves the right to make reasonable future and retroactive adjustments to the FMP Rate if there is a material variation in any of the Specific Conditions or if the FMP Eligible Engines are subjected to Extreme Environmental Conditions. The adjustment (credit or debit) shall not apply retroactively to more than one (1) year of operation unless significant additional information becomes available. Any adjusted FMP Rate shall be provided to Hawaiian at least thirty (30) days before its application. Once determined, the adjusted FMP Rate shall remain in effect until there is another material change in the conditions upon which this FMP Agreement is predicated.

C.    SERVICES

        Pratt & Whitney shall provide or arrange to provide the following services to Hawaiian for its FMP Eligible Engines upon the terms set forth in this FMP Agreement. The services described in Section C(1) are covered by the FMP Rate except as otherwise provided in Section C(2), which describes the services that are not covered by the FMP Rate. Excluded services set forth in Section C(2) will be invoiced at the rates set forth in Attachment VII with such invoices including only the cost of repair/overhaul that occurs as a result of excluded causes.

        1.    Services Included in the FMP Rate

        a.    Elements of off-wing maintenance provided at the Pratt & Whitney Facility (or other facilities designated by Pratt & Whitney) in accordance with the CEMP including:

            i.  [Intentionally Omitted]

          ii.  [Intentionally Omitted]

          iii.  [Intentionally Omitted]

          iv.  [Intentionally Omitted]

          v.  [Intentionally Omitted]

          vi.  [Intentionally Omitted]

        vii.  [Intentionally Omitted]

        viii.  [Intentionally Omitted]

          ix.  [Intentionally Omitted]

        b.    FMP Spare Engines

            i.  When Hawaiian requires FMP Spare Engines to replace FMP Eligible Engines covered by this FMP Agreement, which are removed for off-wing maintenance required as a result of normal FMP Eligible Engine operation, Pratt & Whitney shall provide FMP Spare Engines, including an engine removal and transport stand, under the FMP Rate except as set forth below.

          ii.  A FMP Spare Engine shall be provided at additional cost when any FMP Eligible Engine of Hawaiian's is unavailable due to any of the following Excluded Causes:

(a)  [Intentionally Omitted]

(b)  [Intentionally Omitted]

(c)  [Intentionally Omitted]

(d)  [Intentionally Omitted]

(e)  [Intentionally Omitted]

4

(f)  [Intentionally Omitted]

(g)  [Intentionally Omitted]

(h)  [Intentionally Omitted]

(i)  [Intentionally Omitted]

          iii.  If Hawaiian requires a FMP Spare Engine as a result of one (1) or more of the Excluded Causes noted above in Section C(1)(b)(ii), Hawaiian shall pay to Pratt & Whitney the then-prevailing Pratt & Whitney daily lease rate for the FMP Spare Engine thus provided. Additionally, any FMP Eligible Engine flight hours flown on a FMP Spare Engine provided due to such Excluded Cause shall be included in the total actual fleet hours applied to the FMP Rate. In the event Pratt & Whitney is unable to provide a FMP Spare Engine to Hawaiian, Pratt & Whitney shall make reasonable efforts to identify a replacement engine from a third party. The terms under which such a replacement engine is provided to Hawaiian shall be mutually established between Hawaiian and the third party.

          iv.  Pratt & Whitney's obligation to provide a FMP Spare Engine to Hawaiian shall in all circumstances be subject to the execution by Hawaiian and Pratt & Whitney of a Spare Engine Lease Agreement satisfactory to Hawaiian and Pratt & Whitney.

        2.    Services Not Included in the FMP Rate

        a.    Elements of off-wing maintenance not included in the FMP Rate:

            i.  [Intentionally Omitted]

          ii.  [Intentionally Omitted]

          iii.  [Intentionally Omitted]

          iv.  [Intentionally Omitted]

          v.  [Intentionally Omitted]

          vi.  [Intentionally Omitted]

        vii.  [Intentionally Omitted]

        viii.  [Intentionally Omitted]

          ix.  [Intentionally Omitted]

          x.  [Intentionally Omitted]

          xi.  [Intentionally Omitted]

        xii.  [Intentionally Omitted]

        xiii.  [Intentionally Omitted]

        xiv.  [Intentionally Omitted]

D.    PARTIES' RESPONSIBILITIES

        1.    Customized Engine Maintenance Program ("CEMP")

        Pratt & Whitney shall provide to Hawaiian a CEMP for the FMP Eligible Engines, consistent with Pratt & Whitney's and other PAHs' approved technical data, and shall incorporate applicable service bulletins and Aviation Authority airworthiness directive requirements.

5

        The CEMP shall establish maintenance requirements, including those related to the determination of the off-wing maintenance schedule. The CEMP shall be no less rigorous than the instructions for continued airworthiness of the Aircraft issued by the Aircraft's manufacturer and PAHs of components of the Aircraft and shall comply with all requirements of the Aviation Authority of the Aircraft, so long as such Aviation Authority imposes aircraft maintenance standards which comport with and are not materially different from those standards imposed by the FAA. The preparation of line maintenance task cards shall be the responsibility of Hawaiian or its designated line maintenance provider.

        Hawaiian shall review and approve the CEMP and shall incorporate the relevant provisions of the CEMP into its continuous airworthiness maintenance program. Hawaiian shall also obtain any and all necessary approvals of that program from the Aviation Authority and any other regulatory authority having jurisdiction. During the Term, Hawaiian shall at all times comply with the requirements of its continuous airworthiness maintenance program utilizing its presently established providers of on-wing line maintenance and Pratt & Whitney's designated off-wing maintenance facility.

        2.    Program Management

        a.    Program Manager

        Pratt & Whitney shall appoint a principal contact person from Pratt & Whitney to be the program manager (the "Program Manager") for Hawaiian under this FMP Agreement. The Program Manager shall identify Hawaiian's maintenance requirements for FMP Eligible Engines and FMP Spare Engines and schedule engine maintenance in a manner consistent with the CEMP. The Program Manager shall consult with Hawaiian and give due consideration to Hawaiian's operational requirements when scheduling FMP Eligible Engine removals (including, but not limited to time stagger removals). The Program Manager shall also coordinate any additional support required hereunder to assist Hawaiian with troubleshooting and problem resolution.

        b.    Program Coordinator

        Hawaiian shall appoint a person at Hawaiian's facility to be the principal point of contact from Hawaiian for this FMP Agreement (the "Program Coordinator").

        c.    Engine Condition Monitoring ("ECM")

            i.  Pratt & Whitney shall perform ECM of FMP Eligible Engines to identify trends in engine performance. Pratt & Whitney will work with Hawaiian to establish methods to satisfy requirements for compliance with Hawaiian's ETOPS requirements.

          ii.  Hawaiian shall provide data for ECM in accordance with Pratt & Whitney's specified parameters, format and data collection process, no less than twice per week. If Aircraft are equipped to electronically transmit ECM data, then Hawaiian shall arrange for automatic transmission of such requested ECM data to Pratt & Whitney's ground station i.d. HFDPWCR via ARINC, SITA or other routing acceptable to Pratt & Whitney.

        d.    Life Limited Parts Tracking and Management

        Pratt & Whitney shall track and manage LLPs with a view to ensuring that the replacement of LLPs is concurrent with scheduled engine maintenance visits. Pratt & Whitney shall use commercially reasonable efforts to ensure that a FMP Eligible Engine does not require a shop visit solely for the purpose of replacing LLPs.

6

        3.    Record Keeping

        While the FMP Eligible Engines are in its possession, Hawaiian shall maintain records on the accumulated hours and cycles for all LLPs and other serialized parts that Pratt & Whitney may specify. If requested by Hawaiian, Pratt & Whitney will make accessible its internal hours/cycles tracking model at no charge. As maintenance is performed on each FMP Eligible Engine over time, detailed records concerning the work performed shall be kept in the following manner: All records of the performance of maintenance tasks that are required by the applicable Aviation Authority shall be generated and maintained (i) by Pratt & Whitney or its designated maintenance provider in the case of the off-wing maintenance, and (ii) by Hawaiian in the case of line maintenance. The party generating and maintaining the records shall make such records available to the other party in order to ensure compliance with the requirements of this FMP Agreement and the applicable Aviation Authority. Records shall be in the English language and shall include FMP Eligible Engine maintenance records, configuration records, FMP Eligible Engine test cell data and FAA Form 337 or other applicable Aviation Authority approved documents. Following each off-wing maintenance visit, Pratt & Whitney or its designated maintenance provider shall provide a report identifying the service bulletins incorporated during that shop visit. The CEMP related service bulletins and airworthiness directives will be identified separately on that report. Pratt & Whitney may perform periodic audits to ensure that adequate records are maintained.

        4.    Monthly Operational Reporting

        No later than the fifth calendar day of each month throughout the Term, Hawaiian shall provide the Program Manager with a complete monthly statement of the previous month's flight data for the FMP Eligible Engines and FMP Spare Engines substantially in the form set forth in Attachment VI (the "Monthly Operational Report"). Pratt & Whitney may perform periodic audits to ensure the accuracy of such reports.

        5.    Licenses, Registrations, Etc.

        Hawaiian shall obtain, as of the Effective Date, and shall maintain or cause to be maintained, all consents, licenses, approvals, registrations and authorizations required (i) to operate the Aircraft in compliance with the laws of Hawaiian's jurisdiction of organization and the State of Registration and (ii) for the performance by Hawaiian of its obligations under this FMP Agreement.

E.    ENGINE TRANSPORTATION

        Hawaiian, or its subcontracted personnel, shall perform the engine change of FMP Eligible Engines and then transport the removed FMP Eligible Engines Ex works to Pratt & Whitney's Facility (or other facility designated by Pratt & Whitney) within five (5) days. Pratt & Whitney will provide one way return transportation of FMP Eligible Engines to Hawaiian's facility at no charge to Hawaiian. Risk of loss remains with Hawaiian both ways.

F.    AOG GUARANTEE

        Pratt & Whitney shall provide Hawaiian the following AOG Event Guarantee during the Term:

        1.    In the event the number of Hawaiian's ready spare engines falls below one (1), Pratt & Whitney will make commercially reasonable efforts to identify a replacement engine that may be made available to Hawaiian in an expedited manner should Hawaiian need spare engines pursuant to Section F(2).

        2.    [Intentionally Omitted]

        3.    In the event Hawaiian experiences an AOG Event during the Term which is the result of an Excluded Cause as defined in Section C(1)(b)(ii), Hawaiian shall pay to Pratt & Whitney the

7

then-prevailing Pratt & Whitney daily lease rate for the FMP Spare Engine thus provided. Additionally, any FMP Eligible EFH flown on a FMP Spare Engine provided due to such Excluded Cause shall be included in the total actual fleet hours applied to the FMP Rate.

        4.    Pratt & Whitney's obligation to provide any spare engine to Hawaiian shall in all circumstances be subject to the execution of a General Lease Agreement between Hawaiian and Pratt & Whitney. Following the resolution of the AOG, Hawaiian shall return to Pratt & Whitney any spare engine provided to Hawaiian pursuant to this Section F within seven (7) calendar days of the arrival date of such FMP Eligible Engine back to East Hartford, CT or other mutually agreeable location (the "Arrival Date"). Pratt & Whitney shall give Hawaiian at least seven (7) days prior notice of the Arrival Date. Spare engines shall be subject to the same installation and removal criteria as FMP Eligible Engines.

G.    THRUST CONVERSION

[Intentionally Omitted]

H.    INVOICING AND PAYMENTS

        Hawaiian shall pay to Pratt & Whitney on a monthly basis:

        1.    the FMP Rate (as escalated pursuant to the provisions of Attachment III) multiplied by the actual fleet hour utilization of the FMP Eligible Engines and FMP Spare Engines (the "Services Fee");

        2.    all other applicable fees and charges incurred during such period and any retroactive debit or credit adjustments pursuant to Section B(3) or Attachment III, as set forth below.

        Included in the monthly invoice, Pratt & Whitney will debit or credit Hawaiian's account with Pratt & Whitney (or cash if no amounts are then payable to Pratt & Whitney by Hawaiian) with such debits or credits as may be elsewhere defined in this FMP Agreement. This credit may only be applied to Hawaiian's monthly invoices issued under this FMP Agreement.

        Pratt & Whitney shall invoice Hawaiian for the Services Fee and all additional charges by the twentieth (20th) day of each month for the immediately preceding calendar month.

        All such invoiced amounts shall be due upon receipt of invoice and paid, net cash, in United States Dollars by wire transfer to:

Pratt & Whitney
Account No. 52-23725
Bank One
Routing No. 071000013

        [Intentionally Omitted]

I.    TERMS AND CONDITIONS

        1.    This FMP Agreement incorporates the Fleet Management Program Standard Terms and Conditions of Sale set out in Attachment IV. In the event of any inconsistency between the provisions of this FMP Agreement and Attachment IV, the provisions of this FMP Agreement shall govern.

        2.    Any obligation of Pratt & Whitney to station equipment or personnel at Hawaiian's facility is contingent upon Pratt & Whitney being able to do so without creating a tax presence in such jurisdiction(s).

8

        3.    The intent of this FMP Agreement is to provide the specified services to Hawaiian. Under no circumstances shall there be any duplication of benefits provided to Hawaiian under any other applicable guarantee plan, sales warranty, service policy, or any special benefit of any kind offered to Hawaiian for the benefit of Hawaiian as a result of the same condition or event.

        4.    This FMP Agreement supersedes and replaces all previous negotiations, commitments, oral or written understandings, proposals or agreements in connection with a PW4060 engine fleet management program for Hawaiian.

J.    NOTICES

        Any notice, demand, claim, notice of claim, request or communication required or permitted to be given under the provision of this FMP Agreement shall be in writing and shall be deemed to have been duly given (i) upon delivery if delivered in person, (ii) on the date of mailing if mailed by registered or certified mail, postage prepaid and return receipt requested, (iii) on the date of delivery to a national overnight courier service, or (iv) upon transmission by facsimile (if such transmission is confirmed by the addressee) if delivered through such services to the following addresses, or to such other address as any party may request by notifying in writing all of the other parties to this FMP Agreement in accordance with this Section J.

If to Pratt & Whitney to:

Pratt & Whitney
Cheshire Engine Center
500 Knotter Drive
Cheshire, Connecticut 06410

Attention: General Manager
Telephone: 203-250-4520
Fax: 203-250-4767

With a copy to:

Pratt & Whitney
400 Main Street MS 132-05
East Hartford, Connecticut 06108

Attention: Vice President, Contracts Management
Telephone: 860-565-3667
Fax: 860-565-0892

If to Hawaiian to:

Hawaiian Airlines, Inc.
3375 Koapaka St., Suite G350
Honolulu, HI 96819

Attention: Robert W. Zoller, Jr.

or in each case to such other person or addresses as either party may notify in writing to the other. Any such notice shall be deemed to have been received on the date of personal delivery, the date set forth on the Postal Service return receipt, or the date of delivery shown on the records of the overnight courier, as applicable.

9

        IN WITNESS WHEREOF, the parties have caused this FMP Agreement to be duly executed as of the day and year first above written.

Accepted:
HAWAIIAN AIRLINES, INC.
By
Typed Name
Title
Date:
HAWAIIAN AIRLINES, INC.
By
Typed Name
Title
Date
Accepted:
UNITED TECHNOLOGIES CORPORATION PRATT & WHITNEY
By
Typed Name	David Viar
Title	General Manager, The Americas — Western Region
Date

10

Table of Contents

A.	DEFINITIONS	1
B.	TERM OF FMP AGREEMENT	3
C.	SERVICES	4
D.	PARTIES' RESPONSIBILITIES	5
E.	ENGINE TRANSPORTATION	7
F.	AOG GUARANTEE	7
G.	THRUST CONVERSION	8
H.	INVOICING AND PAYMENTS	8
I.	TERMS AND CONDITIONS	8
J.	NOTICES	9
ATTACHMENT I
ATTACHMENT II PART A
ATTACHMENT II PART B
ATTACHMENT III
ATTACHMENT IV
ATTACHMENT V
ATTACHMENT VI
ATTACHMENT VII
ATTACHMENT VII APPENDIX A
ATTACHMENT VII APPENDIX B
ATTACHMENT VII APPENDIX C

ATTACHMENT I

FMP ELIGIBLE ENGINES
SERIAL NUMBERS FOR FLEET NO. 1

1.	TBD	5.	TBD
2.	TBD	6.	TBD
3.	TBD	7.	TBD
4.	TBD	8.	TBD

Aircraft Delivery Schedule
(1)	February	2002
(1)	April	2002
(1)	April	2002
(1)	May	2002

ATTACHMENT II PART A

FMP ELIGIBLE ENGINES
SERIAL NUMBERS FOR FLEET NO. 2

1.	729023
2.	729024
3.	TBD
4.	TBD
5.	TBD
6.	TBD

Aircraft Delivery Schedule
(1)	October	2001
(1)	November	2001
(1)	December	2001

ATTACHMENT II PART B

FMP ELIGIBLE ENGINES
SERIAL NUMBERS FOR FLEET NO. 3

1.	TBD	10.	TBD	Spare Engines
2.	TBD	11.	TBD	1.	TBD
3.	TBD	12.	TBD	2.	TBD
4.	TBD	13.	TBD	3.	TBD
5.	TBD	14.	TBD	4.	TBD
6.	TBD	15.	TBD
7.	TBD	16.	TBD
8.	TBD	17.	TBD
9.	TBD	18.	TBD

Aircraft Delivery Schedule
(1)	September	2002
(1)	October	2002
(1)	November	2002
(1)	December	2002
(1)	January	2003
(1)	February	2003
(1)	March	2003
(1)	May	2003

Spare Engine Delivery Schedule
(1)	November	2001	(used engine on a 10 month lease to bridge the gap from EIS to September 2002)
(2)	September	2002
(1)	March	2003
(1)	April	2003

ATTACHMENT III

ESCALATION
PERTAINING TO THE FMP RATE

[Intentionally Omitted]

ATTACHMENT IV

UNITED TECHNOLOGIES CORPORATION
Pratt & Whitney Division ("Pratt & Whitney")

PW4060 FLEET MANAGEMENT AGREEMENT

TERMS AND CONDITIONS OF SALE

ARTICLE 1—DEFINITIONS

        1.1  "Buyer" as used herein shall mean the purchaser of Fleet Management Services provided pursuant to this Agreement.

        1.2  "Equipment" as used herein shall mean the Eligible Engines, including related modules, Parts, Components, Engine Build-up Units ("EBU") and Buyer Furnished Equipment ("BFE").

        1.3  "Exchange Part" as used herein shall mean Buyer's parts and line replaceable units which are offered in exchange for Pratt & Whitney RMS parts defined below, in connection with Off-wing Maintenance.

        1.4  "Operating and Maintenance History" as used herein shall mean all information relative to the Equipment's modification level, total time, time since overhaul, time since shop repair, the date of removal and reason for removal.

        1.5  "RMS Parts" shall mean Pratt & Whitney new or serviceable Rotable Material Service modules and parts which are exchanged for Buyer's Exchange Parts in connection with Off-wing Maintenance.

        1.6  "SMS Parts" shall mean used and new serviceable parts held by Pratt & Whitney for direct sale or for use in connection with Off-wing Maintenance.

ARTICLE 2—BUYER WARRANTIES OF EQUIPMENT CONDITION

        2.1  Buyer hereby warrants that, to the best of its knowledge and belief, unless otherwise disclosed in writing before Equipment delivery to Pratt & Whitney, all articles of Equipment delivered for maintenance services, including Exchange Parts:

        2.1.1    are of proper configuration per the Engine Manual;

        2.1.2    were produced in compliance with applicable Federal Aviation Regulations and Joint Aviation Requirements;

        2.1.3    have not been involved in an accident, subjected to extreme environmental conditions or abnormal operating temperatures, or otherwise operated outside the limitations of the applicable type certificate as specified in the type certificate holder's engine manual, maintenance manual and other approved technical data;

        2.1.4    do not embody repairs or modifications not performed in full compliance with applicable regulatory requirements; and

        2.1.5    are repairable at the level of the engine within the type certificate holder's approved technical data.

        2.2  Buyer further warrants that, to the best of its knowledge and belief, no Exchange Parts contain component parts not manufactured by the type certificate holder or an authorized supplier thereof, nor any repairs or modifications not within the type certificate holder's approved technical data and performed by a repair station properly certified and rated by the United States Federal Aviation Administration. Pratt & Whitney reserves the right to reject Exchange Parts not meeting the criteria described above.

ARTICLE 3—MATERIAL SUPPORT

        3.1  Under ordinary conditions, parts removed from Buyer's engines shall be reinstalled in the same engine. If original parts cannot be reinstalled because of repair lead times, scrap condition, supersedure, or other circumstances, the following material support services will be used by Pratt & Whitney.

        3.1.1    New Parts

        New parts may be used to replace scrap, superseded and, in some instances, long lead time repair/modification material.

        3.1.2    Pratt & Whitney RMS Parts

        Pratt & Whitney reserves the right to install RMS Parts as required for maintaining engines in accordance with the Buyer's properly approved inspection and maintenance plan. When RMS Parts are used, and Exchange Parts are accepted by Pratt & Whitney as set forth below, title for title exchanges result and Buyer's repaired Exchange parts are returned to the Pratt & Whitney RMS inventory.

        Buyer's Exchange Parts shall comply with the requirements of this Agreement, including, without limitation, the Warranties of Equipment Condition stated in Article 2 entitled "Buyer Warranties of Equipment Condition". If, within sixty (60) days of receipt of Buyer's Exchange Parts ("Inspection Period"), Pratt & Whitney rightfully rejects an Exchange Part on the grounds of noncompliance with such terms, Pratt & Whitney shall at its discretion:

        1.    require that Buyer replace the Exchange Part with another repairable Exchange Part conforming to the requirements of this Agreement within thirty (30) days; or

        2.    scrap the Exchange Part and invoice Buyer for the price of a new or, if available, a used serviceable replacement part.

        Buyer will reimburse Pratt & Whitney for all labor associated with the subject Exchange Part up until the date that Pratt & Whitney rejects the Exchange Part.

        Acceptance by Pratt & Whitney occurs at the earlier of:

        1.    notice by Pratt & Whitney that it has accepted the Exchange Part; or

        2.    the expiration of the Inspection Period, provided that Pratt & Whitney has not required a replacement part or scrapped the part.

        With respect to the exchange of life limited parts, Pratt & Whitney will adjust invoice prices to reflect the differential in life limits between the RMS Part and the Exchange Part. A credit or debit will be calculated as follows:

Credit or Debit	=	Removed Part Remaining Life	- -	Installed Part Remaining Life	x	Then - Current Manufacturer's List Price
		Engine Manual Life Limit

        Title to the Exchange Part vests, and risk of loss passes, only upon Acceptance. Buyer warrants that at the time of acceptance, it transfers good title to the material to be exchanged, free and clear of liens or encumbrances of any kind.

        If Buyer fails to deliver its exchange part within thirty (30) days from the date Pratt & Whitney provides the corresponding RMS part, Pratt & Whitney, at its option, may invoice Buyer for the price of a new, or if available, used serviceable replacement part.

2

        3.1.3    Pratt & Whitney SMS Parts

        If available, SMS Parts will be used in the same manner as the new parts described in Paragraph 3.1.1 above.

        3.2  All Buyer Exchange Parts must be accompanied by life limited parts records if applicable. Such documentation shall confirm that the parts were originally manufactured or sold by Pratt & Whitney or the original equipment type certificate holder under its approved manufacturing quality assurance system.

ARTICLE 4—TITLE, DELIVERY, AND RISK OF LOSS

        4.1  The FOB point for Equipment delivered for repair, and redelivered to Buyer under this Agreement shall be Pratt & Whitney's overhaul repair facility in Cheshire, Connecticut, or such other overhaul and repair facility that Pratt & Whitney designates during this Agreement. The FOB point for Pratt & Whitney Spare Engines and LRUs provided under this Agreement shall be Pratt & Whitney's designated Spare Engine storage location. Buyer shall be responsible for all transportation cost and risk of loss associated with shipment of the Spare Engines and Equipment to the designated location.

        4.2  Before Equipment is ready for delivery FOB Pratt & Whitney's designated facility under this Agreement, Buyer shall furnish written shipping instructions in respect of such Equipment as promptly as possible. In the absence of such instructions, Pratt & Whitney may, at any time beginning ten (10) days after forwarding notice to Buyer by mail or otherwise that the Equipment is ready for shipment, arrange for shipment of Equipment by a carrier of its own selection to Buyer's place of business or other destination reasonably believed to be suitable. Buyer will hold Pratt & Whitney harmless for loss or damage attributed to negligence, either in selection of the carrier or in agreeing to contract terms on Buyer's behalf.

ARTICLE 5—INSPECTION

        If any Equipment appears not to have been serviced in accordance with this Agreement, Buyer shall, within thirty (30) days after receipt thereof, notify Pratt & Whitney of such condition and afford Pratt & Whitney a reasonable opportunity to inspect the Equipment and make an appropriate adjustment or replacement. The remedies afforded Buyer under Article 7, entitled, "Warranties, Remedies and Limitations", shall be exclusive for defects discovered upon inspection. Buyer shall not delay payment pending such inspection.

ARTICLE 6—SPARE ENGINES

        6.1  Spare Engine Support

        To the extent specified in this Agreement, Pratt & Whitney will provision, procure, and maintain a number of Spare Engines.

        6.2  Spare Engine Records Maintenance

        Buyer will maintain any records, logs and other materials required by the Federal Aviation Regulation and Joint Aviation Requirements to be maintained in respect of the Spare Engines, regardless of upon whom such requirements are, by their terms, imposed, except for those records which Pratt & Whitney is required to maintain under the terms of this Agreement.

        6.3  Equipment Lease Terms and Conditions

        Pratt & Whitney's Spare Engine Lease Agreement shall govern all Spare Equipment support provided under this Agreement. As specified therein, the term "Lessee" shall mean "Buyer", and the term "Lessor" shall mean Pratt & Whitney.

3

        6.4  Title to Spare Engines

        Nothing in this Agreement shall operate to transfer title to any Spare Engine (or any records or logs relating thereto). Buyer acknowledges and agrees, that every Spare Engine delivered to it pursuant to this Agreement shall at all times remain the property of Pratt & Whitney. Pratt & Whitney may, at its option, and its own cost and expense, cause this Agreement and the leasing of any Spare Engine to be recorded, as appropriate, with the FAA, the JAA, or any other applicable government agency. As a condition to Pratt & Whitney's obligation to deliver Spare Engines hereunder, Buyer shall take all steps necessary for Pratt & Whitney to properly record and perfect its interest in Spare Engines.

ARTICLE 7—WARRANTIES, REMEDIES, AND LIMITATIONS

        In addition to Pratt & Whitney's obligation to perform maintenance services as specified in the Agreement, the following warranties are provided:

        7.1  Services

        [Intentionally Omitted]

4

        7.2  Parts

        The warranties and remedies for Pratt & Whitney provided parts delivered under this Agreement shall be as set forth below:

        7.2.1    Defects

        [Intentionally Omitted]

        7.2.2    Title

        Pratt & Whitney warrants to Buyer that it conveys good title to parts sold hereunder. Pratt & Whitney's liability and Buyer's remedy under this warranty are limited to the removal of any title defect or, at the election of Pratt & Whitney, to the replacement of the parts or components thereof which are defective in title; provided, however, that the rights and remedies of the parties with respect to patent infringement shall be limited to the provisions of Paragraph 7.2.4, "Patent Infringement", below.

        7.2.3    Spare Engines

        Pratt & Whitney warrants to Buyer that, at the time Spare Engines are delivered to Buyer, Pratt & Whitney is the owner of the Spare Engines or otherwise fully empowered to provide the Spare Engines for Buyer's temporary use in accordance with this Agreement.

        7.2.4    Patent Infringement

        Pratt & Whitney shall conduct, at its own expense, the entire defense of any claim, suit or action alleging that, without further combination, the use or resale by Buyer or any subsequent purchaser or user of the parts delivered hereunder directly infringes any United States patent, and shall indemnify and hold harmless Buyer, but only on the conditions that (i) Pratt & Whitney receives prompt written notice of such claim, suit or action and full opportunity and authority to assume the sole defense thereof, including settlement and appeals, and all information available to Buyer and defendant for such defense; (ii) said parts are made according to a specification or design furnished by Pratt & Whitney or, if a process patent is involved, the process performed with such parts is recommended in writing by Pratt & Whitney; and (iii) the claim, suit or action is brought against Buyer. Provided all of the foregoing conditions have been met, Pratt & Whitney shall, at its own expense, either settle said claim, suit or action or shall pay all damages, excluding indirect, incidental or consequential damages, and costs awarded by the court therein. If the use or resale of such parts is finally enjoined, Pratt & Whitney shall, at Pratt & Whitney's option, (i) procure for defendant the right to use or resell the parts, (ii) replace them with equivalent non-infringing parts, (iii) modify them so they become non-infringing but equivalent, or (iv) remove them and refund the purchase price (less a reasonable allowance for use, damage and obsolescence). If a claim, suit or action is based on a design or specification furnished by Buyer or on the performance of a process not recommended in writing by Pratt & Whitney, or on the use or sale of the parts delivered hereunder in combination with other parts not delivered to Buyer by Pratt & Whitney, Buyer shall defend, indemnify, and hold Pratt & Whitney and its affiliates harmless from any and all claims, suits or actions and all costs, expenses, damages, losses, settlements or judgments arising from or relating thereto.

        7.3  EXCLUSIVE WARRANTIES AND REMEDIES—THE FOREGOING WARRANTIES ARE EXCLUSIVE AND ARE GIVEN AND ACCEPTED IN LIEU OF (i) ANY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE; AND (ii) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN CONTRACT, TORT OR STRICT LIABILITY AGAINST PRATT & WHITNEY OR ANY OF ITS AFFILIATES, WHETHER OR NOT ARISING FROM THE NEGLIGENCE, ACTUAL OR

5

IMPUTED, OF PRATT & WHITNEY OR SUCH AFFILIATE. PRATT & WHITNEY DOES NOT WARRANT ANY PARTS, WHETHER SUPPLIED BY PRATT & WHITNEY OR NOT, THAT WERE NOT ORIGINALLY SOLD BY PRATT & WHITNEY. THE REMEDIES OF BUYER SHALL BE LIMITED TO THOSE PROVIDED HEREIN TO THE EXCLUSION OF ANY AND ALL OTHER REMEDIES INCLUDING, WITHOUT LIMITATION, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES. NO AGREEMENT VARYING OR EXTENDING THE FOREGOING WARRANTIES, REMEDIES OR THIS LIMITATION WILL BE BINDING UPON PRATT & WHITNEY UNLESS IN WRITING, SIGNED BY A DULY AUTHORIZED OFFICER OF PRATT & WHITNEY.

ARTICLE 8—EXCUSABLE DELAYS

        Pratt & Whitney shall not be charged with any liability for delay or nondelivery when due to delays of suppliers, acts of God or the public enemy, compliance in good faith with any applicable foreign or domestic governmental regulation or order, whether or not it proves to be invalid, fires, riots, labor disputes, unusually severe weather or any other cause beyond the reasonable commercial efforts of Pratt & Whitney. To the extent that such causes actually delay deliveries on the part of Pratt & Whitney, the time for the performance shall be extended for as many days beyond the delivery date as is required to obtain removal of such causes.

ARTICLE 9—TAXES

        In addition to the price for Services and Equipment provided hereunder, any and all taxes (not including any income or excess profit taxes) which may be imposed by any taxing authority, arising from the sale, delivery or use of Pratt & Whitney's products and for which Pratt & Whitney may be held responsible for collection or payment, either on its own behalf or that of Buyer, shall be paid by Buyer to Pratt & Whitney. Buyer shall be responsible for any and all interest and penalties relating to nonpayment or late payment of such taxes due in any jurisdiction.

ARTICLE 10—MATERIAL DISPOSITION

        10.1 With respect to work covered under the Services Rate, Equipment or parts thereof received from Buyer, which in the reasonable opinion of Pratt & Whitney have no value other than as scrap because they cannot be repaired to a serviceable condition, shall be disposed of by Pratt & Whitney, and no accountability or liability for such parts shall be imposed on Pratt & Whitney by Buyer. Title to all such Equipment shall vest in Pratt & Whitney.

        10.2 With respect to Excess Work, Equipment or parts thereof received from Buyer, which in the reasonable opinion of Pratt & Whitney have no value other than as scrap because they cannot be repaired to a serviceable condition, shall be disposed of by Pratt & Whitney, and no accountability or liability for such parts shall be imposed on Pratt & Whitney by Buyer. Pratt & Whitney agrees, however, to return to Buyer, at Buyer's expense, parts which are either scrap, superseded or uneconomical to repair if so indicated on the face of Buyer's Purchase Order or supplement thereto. In any event, Buyer's instructions regarding scrap disposition must be received by Pratt & Whitney within thirty (30) days after shipment of an engine to Buyer or all scrap will be disposed of locally. To assist Buyer in identification of scrap parts returned at its request, such scrap may be shipped in an altered state which will indicate that it is clearly unfit for service use.

        10.3 With respect to Excess Work, parts for which there are currently no repair procedures and which, in the opinion of Pratt & Whitney, have potential to be repaired to a serviceable condition sometime in the future, shall be returned, unaltered, to Buyer at Buyer's expense.

6

ARTICLE 11—LIABILITY LIMITATION

        11.1 The price allocable under this Agreement to any product or service alleged to be the cause, or in any way arising from or related to the cause, of any loss or damage to Buyer shall be the ceiling limit on Pratt & Whitney's liability, except for the gross negligence or willful misconduct of Pratt & Whitney, whether founded in contract, tort (including negligence) or strict liability, arising out of or resulting from (i) this Agreement or the performance or breach thereof, (ii) the design, manufacture, delivery, sale, overhaul, repair, replacement, or (iii) the use of any such product or the furnishing of any such service. In no event shall Pratt & Whitney have any liability for any indirect, incidental, special or consequential damages.

        11.2 For purposes of this Article, the "price allocable" shall be: (i) in the case of products or services provided under the Services Rate, Pratt & Whitney's monthly maintenance service charge for the applicable engine, (ii) in the case of Equipment provided for Buyer's temporary use under the Equipment Support provisions, Pratt & Whitney's customary daily lease charge, and (iii) in the case of any other products or services provided under this Agreement, the price charged by Pratt & Whitney in relation to the product or service alleged to be the cause of loss or damage.

ARTICLE 12—SELLER'S INSURANCE

        Except as otherwise set forth herein, Pratt & Whitney agrees that Buyer's Equipment will, while in the care, custody and control of Pratt & Whitney, be adequately protected from loss, damage or destruction under the terms of Pratt & Whitney's insurance. Such protection will commence upon Equipment delivery to Pratt & Whitney and will remain until Equipment is redelivered to Buyer.

ARTICLE 13—TERM AND TERMINATION

        13.1 This Agreement shall be effective for the term specified.

        13.2 Either party may terminate this Agreement without prejudice to any rights then accrued for material breach upon ninety (90) days written notification to the other party of such intent to terminate, provided the notice specifies the cause for termination and such cause remains uncured for ninety (90) days after receipt of the notice.

        13.3 With or without notice, Pratt & Whitney may terminate this Agreement with immediate effect but without prejudice to any rights then accrued in the event Buyer does not pay within thirty (30) days of the due date any amount payable under this Agreement in the manner in which it is expressed to be payable.

        13.4 Upon early termination of this agreement, if Pratt & Whitney is the non-defaulting party, Pratt & Whitney will re-price previously provided services covered by the FMP Rate at Pratt & Whitney's then-current standard rates and charges in effect at the time such service was provided and invoice Buyer for any deficiency in amounts collected to date in respect of such services. If, instead of a deficiency, there is a surplus in the amount collected, Pratt & Whitney will credit this amount to Hawaiian's account with Pratt & Whitney, provided the aircraft lessor makes no claim to this overage. Hawaiian shall only use this credit to pay for subsequent shop visits on Eligible Engines at the Pratt & Whitney Facility at Pratt & Whitney's then-current standard rates and charges.

ARTICLE 14—EXCLUSION OF BENEFITS

        Pratt & Whitney reserves the right to exclude from any credit due, amounts incurred as the result of a failure by Buyer to comply with any of the requirements specified in this Agreement.

7

ARTICLE 15—NOTICES—DEEMED RECEIPT

        15.1 Any notice provided under this Agreement shall be deemed to have been received by the party to whom it is addressed (and reference herein to receipt by any party shall include deemed receipt):

        15.1.1    in the case of notice given by prepaid airmail letter post at the expiration of ten (10) days after posting; or

        15.1.2    in the case of notice given by facsimile when dispatched provided that the sender has received a receipt indicating proper transmission and for the purpose of determining the time of deemed receipt of notice given by facsimile the letter confirmation of such notice shall be disregarded; or

        15.1.3    In the case of notice delivered by hand on delivery.

ARTICLE 16—INSPECTION OF RECORDS

        Except for records that Pratt & Whitney is responsible for maintaining under the terms of this Agreement, Buyer shall maintain all Eligible Engine operation and maintenance records required by airworthiness authorities with applicable jurisdiction. Buyer shall make all records available for inspection by Pratt & Whitney or its designated representatives at all reasonable times during this Agreement.

ARTICLE 17—ASSIGNMENT AND SUBCONTRACTING

        This Agreement and the right to receive credits or payment hereunder may not be assigned by either Party, in whole or in part, without the prior written consent of the other Party, such consent not to be unreasonably withheld, except that Pratt & Whitney may assign, without recourse to Pratt & Whitney or United Technologies Corporation, its interest, rights and obligations in this Agreement to any subsidiary or affiliate succeeding in interest to the commercial engine fleet management business of United Technologies Corporation, or in connection with the merger, consolidation, reorganization or voluntary sale or transfer of its assets.

ARTICLE 18—CONFIDENTIAL OR PROPRIETARY INFORMATION AND PROPERTY

        Each party shall keep confidential and otherwise protect from disclosure all information and property obtained from the other in connection with this Agreement and identified in writing as confidential or proprietary. Upon request, and in the event of completion, termination or cancellation of this Agreement, the recipient of confidential or proprietary information shall return all such information and property or make such other disposition thereof as is directed by the disclosing party.

ARTICLE 19—NON-WAIVER AND PARTIAL INVALIDITY

        Any and all failures, delays, or forbearances of either party in insisting upon or enforcing at any time or times any provisions of this Agreement, or to exercise any rights or remedies under this Agreement, shall not be construed as a waiver or relinquishment of any such provisions, rights, or remedies in those or any other instances; rather, the same shall be and remain in full force and effect. Further, if any provision of this Agreement becomes void or unenforceable by law, the remainder shall be valid and enforceable.

ARTICLE 20—FURTHER ASSURANCE

        Each party expressly agrees that at any time and from time to time it shall execute and deliver such further documents and do such other acts and things as the other party may reasonably request in

8

order to give effect to this Agreement or which are necessary for the consummation of the transactions and other matters contemplated by this Agreement.

ARTICLE 21—BUYER'S FINANCIAL STATUS

        If, before expiration of this Agreement, a receiver or trustee is appointed for any of Buyer's property, or Buyer is adjudicated as bankrupt under the applicable bankruptcy laws of any jurisdiction, or application for reorganization under the applicable bankruptcy laws of any jurisdiction is filed by or against Buyer which shall not be dismissed within ninety (90) days, or if Buyer becomes insolvent or makes an assignment for the benefit of creditors, or takes or attempts to take the benefit of any insolvency acts, or an execution is issued pursuant to a judgment rendered against Buyer, or should Buyer refuse to make payment to Pratt & Whitney in accordance with any of its obligations to Pratt & Whitney, or Buyer has not made payment to Pratt & Whitney of invoices for a period of ninety (90) days, Pratt & Whitney may, at its option in any of such events, terminate this Agreement by giving Buyer written notice of its intention to do so, and Pratt & Whitney shall thereupon be relieved of any further obligations to Buyer. Buyer shall reimburse Pratt & Whitney for its actual and reasonable termination costs and expenses and a reasonable allowance for profit. If permitted by applicable law, Pratt & Whitney shall be entitled to sell any Equipment in Pratt & Whitney's possession or control to satisfy any obligation of Buyer for Services rendered or parts provided by Pratt & Whitney to Buyer.

ARTICLE 22—EXPORT MATTERS

        22.1 The export and re-export of goods and related technical information under this Agreement is subject to the export laws of the United States of America. Buyer shall be responsible for applying for, obtaining and maintaining all required export licenses and approvals and complying with all applicable export reporting requirements. Pratt & Whitney does not guarantee the issuance of such licenses or their continuation in effect once issued. It shall be a condition precedent to Pratt & Whitney's obligations hereunder that all necessary and desirable export licenses and approvals shall be timely granted and continue in effect during the term of this Agreement.

        22.2 Buyer agrees that it will not, directly or indirectly, export or re-export any goods or technical information received from Pratt & Whitney to any destination if such export or re-export would violate the laws of the United States of America. Buyer agrees to indemnify and hold harmless Pratt & Whitney, its subsidiaries, affiliates, stockholders, directors, officers, employees and agents, from and against any claim, damage, injury, loss or expense (including attorney's fees) resulting or arising from any breach of Buyer's obligations under this Section 22.2.

ARTICLE 23—WARRANTY CREDITS

        Any claims for adjustment to which Buyer would normally be entitled under the manufacturer's engine warranty and/or service policies in relation to the Services provided pursuant to this Agreement will be processed and administered by Pratt & Whitney. Remittance (if any) from the manufacturer shall be to the account of Pratt & Whitney.

ARTICLE 24—APPLICABLE LAWS/SERVICE OF PROCESS

        24.1 This Agreement shall be interpreted in accordance with, and the construction thereof shall be governed by, the laws of the State of Connecticut, USA without regard to principles of conflicts of laws.

        24.2 Buyer agrees that any legal action or proceeding against it may be brought and determined in such court as may from time to time be the court of general jurisdiction in the State of Connecticut.

9

        24.3 Buyer hereby represents that it has, prior to signing this Agreement, appointed an agent for service of process in Connecticut and undertakes that it shall at all times maintain such agent for service of process in Connecticut during the term of this Agreement.

ARTICLE 25—CAPTIONS/ORDER OF PRECEDENCE/MERGER OF NEGOTIATIONS

        25.1 Captions as used in these terms and conditions are for convenience of reference only and shall not be deemed or construed as in any way limiting or extending the language of the provisions to which such captions may refer.

        25.2 In the event that there are any conflicts or inconsistencies between the provisions of this Agreement, or the attachments hereto or any Purchase Order, the provisions of this Agreement shall govern.

        25.3 This Agreement does not change or modify any special programs or guarantees which may be in effect between Pratt & Whitney and Buyer.

        This Agreement contains the entire understanding between the parties with respect to the subject matter hereof and shall supersede all previous communications, representations and agreements, either oral or written, between the parties hereto with respect to the subject matter hereof. No amendment or modification of this Agreement shall be binding upon either party unless set forth in a written instrument signed by both parties. The rights and remedies afforded to the parties or the Buyer pursuant to any provision of this Agreement are in addition to any other rights and remedies afforded by any other provisions of this Agreement, by law, or otherwise.

10

ATTACHMENT V

PW4060 ENGINE FLEET MANAGEMENT PROGRAM AGREEMENT

PRATT & WHITNEY SERVICE BULLETIN COMPLIANCE CODE DEFINITIONS

Compliance Code Number	Compliance Connotation	Compliance Definition
1	Hard Time/Threshold Limit	Accomplish prior to next flight.
2	Hard Time/Threshold Limit	Accomplish at first layover of the aircraft at a line station or maintenance base capable of compliance with the accomplishment instruction.
3	Hard Time/Threshold Limit	Accomplish within            hours or            cycles.
4	Nonquantified Time	Accomplish at the first visit of an engine or module to a maintenance base capable of compliance with the accomplishment instructions regardless of the planned maintenance action or the reason for engine removal.
5	Nonquantified Time	Accomplish when the engine is disassembled sufficiently to afford access to the affected subassembly (i.e., modules, accessories, components, build groups) and to all affected spare subassemblies.
6	Nonquantified Time	Accomplish when the subassembly (i.e., modules, accessories, components, build groups) is disassembled sufficiently to afford access to the affected part and to all affected spare parts.
7	Nonquantified Time	Accomplish when supply of superseded parts has been depleted.
8	Operator's Decision	Accomplish based upon experience with the prior configuration.

ATTACHMENT VI

PW4060 ENGINE FLEET MANAGEMENT PROGRAM AGREEMENT

MONTHLY OPERATIONAL REPORT

FOR

HAWAIIAN AIRLINES, INC.

        During the monthly calendar period beginning                        , the average Aircraft flight hours was as indicated below.

        The following will be provided by submission of this form, or an equivalent method of electronic reporting containing the requested data.

Fleet Management Program Monthly Utilization Reporting Template
Customer Name	Month- Year	A/C Tail No.	Engine Position	ESN	Engine Model	Flight Hours*	Flight Cycles*	Hours/ Cycle*	Avg T/O Derate**	Average Ambient Temp***	Comments

*

Rounded to the nearest tenth.

**

Rounded to the nearest tenth of a percentage point.

***

Rounded to the nearest whole degree in Fahrenheit or half degree in Celsius.

AUTHORIZED
HAWAIIAN AIRLINES, INC.
SIGNATURE

PRATT & WHITNEY
FIELD REPRESENTATIVE
VERIFICATION / SIGNATURE

ATTACHMENT VII

        The rates and charges contained herein are valid for work performed on Equipment delivered to Pratt & Whitney on or before December 31, 2001. Rates and charges for worked performed after December 31, 2001 will be adjusted annually in accordance with Appendix D to this attachment.

I.    FIXED PRICES

        A.    FIXED PRICES FOR ENGINE MAINTENANCE

        1.    Heavy Maintenance

[Intentionally Omitted]

        2.    Gas Path Repair and Maintenance

[Intentionally Omitted]

        3.    Hot Section Maintenance

[Intentionally Omitted]

        B.    FIXED PRICE PER ENGINE MODULE

        The following fixed rates and charges for basic labor associated with Module heavy maintenance apply per Engine. Kit & Bin fixed prices are listed in Appendix B hereto.

Low Pressure Compressor ("LPC")

[Intentionally Omitted]

High Pressure Compressor ("HPC")

[Intentionally Omitted]

Low Pressure Turbine ("LPT")

[Intentionally Omitted]

High Pressure Turbine ("HPT")

[Intentionally Omitted]

Turbine Exhaust Case

[Intentionally Omitted]

Diffuser / Combustor 1st Turbine Nozzle Group

[Intentionally Omitted]

Main Accessory Gearbox

[Intentionally Omitted]

Angle Gearbox

[Intentionally Omitted]

Fan Cases

[Intentionally Omitted]

Intermediate Case Assembly

[Intentionally Omitted]

High Pressure Compressor Drum Rotor Blade Tip Grinding

[Intentionally Omitted]

QEC

[Intentionally Omitted]

Engine Test In Conjunction With Engine Shop Visit

[Intentionally Omitted]

        C.    FIXED PRICES FOR REPAIR OF PARTS

        Fixed prices will be charged for most Parts repaired by Pratt & Whitney. Part repairs which are not fixed priced will be charged at Pratt & Whitney's Over-and-Above labor and material rates stated in Section II of this Attachment.

II.    OVER-AND-ABOVE RATES

        A.    PRATT & WHITNEY LABOR RATE

[Intentionally Omitted]

        B.    MATERIAL PRICES—NEW PARTS

        New Parts, except Kit and Bin Parts for Engines and Modules, will be charged at the then-current manufacturer's new part list price. Kit and Bin Parts for miscellaneous workscopes not included in the workscopes set forth in Appendix A will be charged on a fixed price basis in accordance with Appendix B to this Attachment VII.

        C.    MATERIAL PRICES—USED SERVICEABLE PARTS

        Used serviceable material sold under the Serviceable Material Sales ("SMS") Program shall be priced as follows:

        Life limited parts will be provided on a pro rata cycle remaining basis, in accordance with the following calculation:

SMS Part Remainint Life Pratt & Whitney Engine Manual Life Limit x Then - Current
Manufacturer's
List Price

[Intentionally Omitted]

        D.    MATERIAL HANDLING CHARGES

        Material handling charges will be applied to Pratt & Whitney furnished new or used serviceable Parts and customer furnished Parts required to accomplish Over-and-Above Work performed hereunder. These charges are expressed below as a percentage of the applicable Part price up to the maximum charge per Part or extended line item.

[Intentionally Omitted]

        E.    EXCHANGE MATERIAL

[Intentionally Omitted]

2

        Adjustments for warranty benefits and any differential residual value for life limited parts as designated by the manufacturer will also be provided, calculated in accordance with the following formula:

Credit or Debit	=	Removed Part Remaining Life	- -	Installed Part Remaining Life	x	Then - Current Manufacturer's List Price
		Pratt & Whitney Engine Manual Life Limit

        F.    SUBCONTRACT CHARGES

[Intentionally Omitted]

All Rates, Charges and Prices are Expressed in United States Dollars

3

ATTACHMENT VII, APPENDIX A

[Intentionally Omitted]

ATTACHMENT VII, APPENDIX B

PW4000 KIT & BIN PARTS FIXED PRICE LISTING

        With the exception of Engine model conversions, the following fixed prices are valid for Kit & Bin parts used to reassemble PW4000 series Engines and Modules delivered to Pratt & Whitney on or before December 31, 2001. These fixed prices will be adjusted annually relative to the Pratt & Whitney Commercial Spare Parts Price List prices. The adjustment will be based on the percent change in the Pratt & Whitney spare parts prices for the effective year of the adjustment. For the purpose of this Appendix B, Kit & Bin Parts shall mean those Parts such as O'rings, gaskets, packings, seals, nuts, bolts, washers and external clips and clamps required for reassembly. Prices are based on average consumption and include minor modifications to Engines or Modules.

        Charges for nuts, bolts, washers, packings, gaskets, and similar Parts that are details of a Part assembly are not included in the Kit & Bin fixed prices listed below and will be invoiced as applicable. It should be noted that the part number for such a Part might be the same as a Kit & Bin Part used in the final assembly of Engines, Modules and major Engine assemblies/Build Groups listed below. However, the consumption of these Parts used in the subassembly process have not been included in the prices listed below.

        [Intentionally Omitted]

ATTACHMENT VII, APPENDIX C

IN-HOUSE MINOR REPAIRS

INCLUDED IN

MAINTENANCE SERVICES FIXED PRICES

        All of the fixed prices for Engine Maintenance that are provided in Attachments VII include the following minor repairs when such are accomplished at the engine overhaul facility performing the Maintenance Services on the relevant Equipment (referred to herein as "In-House Minor Repairs"):

Welding (without the need for heat treatment)

Blending (such as blending of fan blades)

Shot-peening

Machining (as with a lathe)

Boring (as required for bushing replacement)

Drilling (as required for replacement of rivets, removal of seized bolts, stubs, and plugs)

Surface Treating (including painting, graphite varnishing but excluding plating)

RTV replacement (such as on blades and stators)

In-situ repairs (repairs normally done on site)

        All other repairs performed at the engine overhaul facility performing the Maintenance Services on the relevant Equipment that are not listed above shall be invoiced at the applicable Over-and-Above Rates.

ATTACHMENT VII, APPENDIX D

PRATT & WHITNEY

ESCALATION
PERTAINING TO THE EIGHT (8) INITIAL REFURBISHMENT VISITS

[Intentionally Omitted]

QuickLinks

PW4060 ENGINE FLEET MANAGEMENT PROGRAM AGREEMENT BY AND BETWEEN UNITED TECHNOLOGIES CORPORATION PRATT & WHITNEY DIVISION AND HAWAIIAN AIRLINES, INC.
PW4060 ENGINE FLEET MANAGEMENT PROGRAM AGREEMENT FOR HAWAIIAN AIRLINES, INC.
Table of Contents
ATTACHMENT I FMP ELIGIBLE ENGINES SERIAL NUMBERS FOR FLEET NO. 1
ATTACHMENT II PART A FMP ELIGIBLE ENGINES SERIAL NUMBERS FOR FLEET NO. 2
ATTACHMENT II PART B FMP ELIGIBLE ENGINES SERIAL NUMBERS FOR FLEET NO. 3
ATTACHMENT III
ESCALATION PERTAINING TO THE FMP RATE
ATTACHMENT IV UNITED TECHNOLOGIES CORPORATION Pratt & Whitney Division ("Pratt & Whitney") PW4060 FLEET MANAGEMENT AGREEMENT TERMS AND CONDITIONS OF SALE
ARTICLE 1—DEFINITIONS
ARTICLE 2—BUYER WARRANTIES OF EQUIPMENT CONDITION
ARTICLE 3—MATERIAL SUPPORT
ARTICLE 4—TITLE, DELIVERY, AND RISK OF LOSS
ARTICLE 5—INSPECTION
ARTICLE 6—SPARE ENGINES
ARTICLE 7—WARRANTIES, REMEDIES, AND LIMITATIONS
ARTICLE 8—EXCUSABLE DELAYS
ARTICLE 9—TAXES
ARTICLE 10—MATERIAL DISPOSITION
ARTICLE 11—LIABILITY LIMITATION
ARTICLE 12—SELLER'S INSURANCE
ARTICLE 13—TERM AND TERMINATION
ARTICLE 14—EXCLUSION OF BENEFITS
ARTICLE 15—NOTICES—DEEMED RECEIPT
ARTICLE 16—INSPECTION OF RECORDS
ARTICLE 17—ASSIGNMENT AND SUBCONTRACTING
ARTICLE 18—CONFIDENTIAL OR PROPRIETARY INFORMATION AND PROPERTY
ARTICLE 19—NON-WAIVER AND PARTIAL INVALIDITY
ARTICLE 20—FURTHER ASSURANCE
ARTICLE 21—BUYER'S FINANCIAL STATUS
ARTICLE 22—EXPORT MATTERS
ARTICLE 23—WARRANTY CREDITS
ARTICLE 24—APPLICABLE LAWS/SERVICE OF PROCESS
ARTICLE 25—CAPTIONS/ORDER OF PRECEDENCE/MERGER OF NEGOTIATIONS
ATTACHMENT V PW4060 ENGINE FLEET MANAGEMENT PROGRAM AGREEMENT PRATT & WHITNEY SERVICE BULLETIN COMPLIANCE CODE DEFINITIONS
ATTACHMENT VI PW4060 ENGINE FLEET MANAGEMENT PROGRAM AGREEMENT MONTHLY OPERATIONAL REPORT FOR HAWAIIAN AIRLINES, INC.
ATTACHMENT VII
ATTACHMENT VII, APPENDIX A
[Intentionally Omitted]
ATTACHMENT VII, APPENDIX B PW4000 KIT & BIN PARTS FIXED PRICE LISTING
ATTACHMENT VII, APPENDIX C IN-HOUSE MINOR REPAIRS INCLUDED IN MAINTENANCE SERVICES FIXED PRICES
ATTACHMENT VII, APPENDIX D
PRATT & WHITNEY
ESCALATION PERTAINING TO THE EIGHT (8) INITIAL REFURBISHMENT VISITS
[Intentionally Omitted]

EX-23

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 23

CONSENT OF INDEPENDENT AUDITORS

        We consent to the reference to our firm in Registration Statements (Form S-8 Nos. 033-064299, 333-09667, 333-09669, 333-09671, 333-09673, 333-26179, 333-63575 and 333-61244) and to the incorporation by reference therein of our report dated March 25, 2002, with respect to the financial statements and schedule of Hawaiian Airlines, Inc. included in its Annual Report (Form 10-K) for the year ended December 31, 2001, filed with the Securities and Exchange Commission.

Honolulu, Hawaii
March 25, 2002

QuickLinks

CONSENT OF INDEPENDENT AUDITORS

EX-24

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 24

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Christine R. Deister, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Form 10-K, and to file the same, with all exhibits thereto, and other documents in connections therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that all attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Exchange Act 1934, this report has been signed below by the following persons in the capacities and on the dates indicated below.

SIGNATURE	TITLE	DATE
/s/ John W. Adams John W. Adams	Chairman of the Board of Directors	April 1, 2002
/s/ Paul J. Casey Paul J. Casey	Vice Chairman, Chief Executive Officer and Director (Principal Executive Officer)	April 1, 2002
/s/ Christine R. Deister Christine R. Deister	Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	April 1, 2002
/s/ Todd G. Cole Todd G. Cole	Director	April 1, 2002
/s/ Robert G. Coo Robert G. Coo	Director	April 1, 2002
/s/ Joseph P. Hoar Joseph P. Hoar	Director	April 1, 2002
/s/ Reno F. Morella Reno F. Morella	Director	April 1, 2002
/s/ Samson Po'omaihealani Samson Po'omaihealani	Director	April 1, 2002

/s/ Edward Z. Safady Edward Z. Safady	Director	April 1, 2002
/s/ Sharon L. Soper Sharon L. Soper	Director	April 1, 2002
/s/ Thomas J. Trzanowski Thomas J. Trzanowski	Director	April 1, 2002
/s/ William M. Weisfield William M. Weisfield	Director	April 1, 2002

QuickLinks

POWER OF ATTORNEY