The parent of Hawaiian Airlines turned what would have been a money-losing quarter into a profitable one by making successful bets on rising fuel prices.

Hawaiian Holdings Inc. yesterday reported a net income of $3.3 million, or 7 cents per share, during the three months ending Dec. 31, 2007. The results reverse a loss of $9.6 million, or 20 cents per share, in the year-earlier quarter.

The quarterly profit includes a $5.5 million gain from the company's investments tied to heating oil prices. The company entered into forward contracts that gained in value with changes in prices. Minus the investment gains, Hawaiian had an operating loss of $2 million for the quarter.

For the year, Hawaiian said it earned $7.1 million, or 15 cents per share, on revenues of $982.6 million. In 2006, the company lost $40.6 million, or 86 cents per share, on revenues of $888.1 million.

Mark Dunkerley, Hawaiian's chief executive officer, noted during a conference call with investors yesterday that "2007 was another challenging year."

"The substantial steps forward we took in reducing our controllable costs were largely offset by the rising cost of fuel and the consequences that prowl from the tough competitive climate."

Shares of Hawaiian slipped 17 cents to close at $4.91 yesterday on the American Stock Exchange.

Dunkerley said passenger traffic on Hawaiian's trans-Pacific routes — which represents about 70 percent of the company's overall revenues — improved during the quarter, thanks to a 10 percent increase in seating capacity.

The company's interisland segment — which is less than a quarter of the company's overall business — continues to suffer from the fare war bought on by the June 2006 entry of discount carrier go!

The quarterly results don't include an $80 million judgment it received against go! and its parent, Phoenix-based Mesa Air Group. In October, a federal bankruptcy judge awarded Hawaiian that amount plus $3.9 million in attorney fees after it successfully sued Mesa for misusing confidential business information.

The judgment is under appeal and is headed for a trial in May.

Hawaiian said its fuel costs rose about 45 percent during the fourth quarter to $87.4 million, or more than a third of the airline's overall expenses. During that period, the average price of a gallon of jet fuel rose 33 percent to about $2.65.

But the company said some of its investments made money as a result of rising fuel prices.

As a hedge against rising fuel prices, airlines typically will invest in jet fuel futures and related investments such as jet fuel swaps. Hawaiian's chief financial officer, Peter Ingram, said the airline moved much of its investment in jet fuel swaps during the quarter into heating oil forward contracts.

The move resulted in additional income of $5.5 million, which included $3.3 million in unrealized gains, the airline said.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.