Hawaiian Holdings Reports 2023 First Quarter Financial Results

HONOLULU, April 25, 2023 /PRNewswire/ -- Hawaiian Holdings, Inc. (NASDAQ: HA) (the "Company"), parent company of Hawaiian Airlines, Inc. ("Hawaiian"), today reported its financial results for the first quarter of 2023.

"A big mahalo to our team who continue to make us a stronger, better airline. The demand for leisure travel remains strong in the domestic markets we serve, and we see similar conditions in most of our international markets," said Hawaiian Airlines President and CEO Peter Ingram. "In recent days, our team completed a significant technology initiative, one of many projects underway in 2023 that position us for a bright future. We look forward to sustaining momentum on these initiatives and returning Hawaiian to profitability."

Statistical data, as well as a reconciliation of the reported non-GAAP financial measures, can be found in the accompanying tables.

Liquidity and Capital Resources

As of March 31, 2023, the Company had:

• Unrestricted cash, cash equivalents and short-term investments of $1.4 billion
• $1.6 billion in liquidity, including its undrawn $235 million revolving credit facility
• Outstanding debt and finance lease obligations of $1.7 billion

Revenue Environment

Hawaiian benefited from continued robust leisure demand from North America to Hawaiʻi and the restoration of its international network excluding Japan. International traffic was buoyed by strong U.S. point of sale activity. Demand remained strong for premium products both domestically and internationally. The Company's overall operating revenue for the first quarter 2023 was up 28.4% from the first quarter 2022 on 15.4% higher capacity as Hawaiian recovered from the effects of the Omicron variant of COVID-19, which impacted results in the first quarter 2022.  

Other revenue was down 12.4% compared to the first quarter of 2022 driven by a decrease in cargo revenue.

Operational Environment 

Several challenges continued to negatively affect the environment in which the Company operates.  Constraints on the availability of A321 aircraft due to Pratt & Whitney engine delays, ongoing runway construction at Daniel K. Inouye International Airport in Honolulu ("HNL"), and delays related to air traffic control protocols disrupted Hawaiian's on-time performance, impaired its scheduling, and adversely affected its financial results.

Limitations on Hawaiian's A321 fleet availability necessitated the substitution of A330 aircraft, which are less fuel efficient, on some A321 routes.  Fuel consumption for the first quarter 2023 was up 21.4% as compared to the first quarter of 2022 due to higher capacity and inefficiencies resulting from these challenges.

First Quarter 2023 Highlights

Technology Advancement

• Transitioned its Passenger Service System to Amadeus' Altea platform marking a significant information technology ("IT") accomplishment for the Company in April; this new platform will enable the Company to be more commercially and operationally nimble

Routes and Network 

• Operated at 115% of its 2022 first quarter capacity, comprised of 98%, 119%, and 275% capacity on its North America, Neighbor Island and International routes, respectively
• Announced an increase in summer weekly frequencies between Honolulu and Austin, Boston, Las Vegas, and Pago Pago in preparation for strong summer demand to Hawai'i as well as a fourth daily flight between Honolulu and Los Angeles twice per week
• Announced resumption of service between Honolulu and Fukuoka beginning April 28 with thrice-weekly service

Guest Experience

• Streamlined the Honolulu travel experience with the opening of a new TSA security checkpoint at HNL, which added 1,000 square feet for passenger queuing and 3,000 square feet of screening area; expanded screening capacity alleviates congestion and benefits all guests whether they are flying to a neighbor island or boarding a transpacific flight

People

• Received ratification by Hawaiian's pilots represented by the Air Line Pilots Association of a four-year contract that provides for pay scale increases across all fleet types, improved health benefits, a signing bonus, and cost sharing, and enhancements to the postretirement and disability plans for more than 1,000 employees
• Formed a partnership with Embry-Riddle Aeronautical University's Aviation Maintenance Technology SkillBridge program which provides an opportunity for veterans to bridge the transition into the civilian aviation and aerospace sector
• Established a $100,000 scholarship fund in partnership with Arizona State University's W.P. Carey School of Business to encourage Hawai'i students to pursue careers in IT with the potential to build a career at Hawaiian

Environmental, Social and Corporate Governance

• Committed to new milestones on the path to net-zero greenhouse gas emissions by 2050; the Company's decarbonization roadmap relies on several key drivers, including the use of sustainable aviation fuel (SAF), fleet modernization and new aircraft technologies, operational best practices to improve fuel efficiency, and advocacy for air traffic control system improvements
• Announced an agreement with biofuel company Gevo, Inc. to purchase 50 million gallons of SAF over five years with deliveries to Hawaiian's gateway cities in California anticipated starting in 2029
• Published the No Kākou a Pau ("interconnectedness") economic impact report which underscores the ways Hawaiian is connected to the economy of its home state including stimulating $10.2 billion in economic activity in Hawai'i and providing, directly or indirectly, for 53,500 jobs statewide in 2022

Second Quarter 2023 Outlook

The table below summarizes the Company's expectations for the quarter ending June 30, 2023 expressed as an expected percentage change compared to the results for the quarter ended June 30, 2022.

Full Year 2023 Outlook

The table below summarizes the Company's updated expectations for the full year ending December 31, 2023 expressed as an expected percentage change compared to the results for the year ended December 31, 2022.

Statistical information, as well as a reconciliation of certain non-GAAP financial measures, can be found in the accompanying tables.

Investor Conference Call

Hawaiian Holdings' quarterly results conference call is scheduled to begin today, April 25, 2023, at 4:30 p.m. Eastern Time (USA).  The conference call will be broadcast live over the Internet. Investors may access and listen to the live audio webcast on the investor relations section of the Company's website at HawaiianAirlines.com. For those who are not available for the live webcast, a replay of the webcast will be archived for 90 days on the investor relations section of the Company's website.

About Hawaiian Airlines

Now in its 94th year of continuous service, Hawaiian is Hawaiʻi's biggest and longest-serving airline. Hawaiian offers approximately 150 daily flights within the Hawaiian Islands, and nonstop flights between Hawaiʻi and 15 U.S. gateway cities – more than any other airline – as well as service connecting Honolulu and American Samoa, Australia, Japan, New Zealand, South Korea and Tahiti.

Consumer surveys by Condé Nast Traveler and TripAdvisor have placed Hawaiian among the top of all domestic airlines serving Hawaiʻi. In 2022, the carrier topped Travel + Leisure's 2022 World's Best list as the No. 1 U.S. airline and was named Hawaiʻi's best employer by Forbes. Hawaiian^® led all U.S. carriers in on-time performance for 18 consecutive years (2004-2021) as reported by the U.S. Department of Transportation.

The airline is committed to connecting people with aloha by offering complimentary meals for all guests on transpacific routes and the convenience of no change fees on Main Cabin and Premium Cabin seats. HawaiianMiles members also enjoy flexibility with miles that never expire. As Hawai'i's hometown airline, Hawaiian encourages guests to Travel Pono and experience the islands safely and respectfully.

Hawaiian Airlines, Inc. is a subsidiary of Hawaiian Holdings, Inc. (NASDAQ: HA). Additional information is available at HawaiianAirlines.com. Follow Hawaiian's Twitter updates (@HawaiianAir), become a fan on Facebook  (Hawaiian Airlines), and follow us on Instagram (hawaiianairlines). For career postings and updates, follow Hawaiian's LinkedIn page.

For media inquiries, please visit Hawaiian Airlines' online newsroom.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the Company's current views with respect to certain current and future events and financial performance.  Such forward-looking statements include, without limitation, the Company's timing and expectations related to network and route recovery; future domestic and international demand for air travel; the outcomes of the Company's university partnerships; the Company's environmental commitments; expectations relating to aircraft deliveries; expectations relating to SAF deliveries; expectations related to the market for SAF and its impact on jet fuel consumption; the Company's outlook for the quarter ending June 30, 2023 and twelve-months ending December 31, 2023; statements regarding the Company's future performance; and statements as to other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing.  Words such as "expects," "anticipates," "projects," "intends," "plans," "believes," "estimates," variations of such words, and similar expressions are also intended to identify such forward-looking statements.  These forward-looking statements are and will be subject to many risks, uncertainties and assumptions relating to the Company's operations and business environment, all of which may cause the Company's actual results to be materially different from any future results, expressed or implied, in these forward-looking statements.  

The Company is subject to risks, uncertainties and assumptions that could cause the Company's results to differ materially from the results expressed or implied by such forward-looking statements, including the risks, uncertainties and assumptions discussed from time to time in the Company's  public filings and public announcements, including the Company's Annual Report on Form 10-K and the Company's Quarterly Reports on Form 10-Q, as well as other documents that may be filed by the Company from time to time with the Securities and Exchange Commission.  All forward-looking statements included in this document are based on information available to the Company on the date hereof.  The Company does not undertake to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date hereof even if experience or future changes make it clear that any projected results expressed or implied herein will not be realized.

Table 3.  
Hawaiian Holdings, Inc.  
Economic Fuel Expense (unaudited)

The Company believes that economic fuel expense is a good measure of the effect of fuel prices on its business as it most closely approximates the net cash outflow associated with the purchase of fuel for its operations in a period. The Company defines economic fuel expense as GAAP fuel expense plus losses/(gains) realized through actual cash (receipts)/payments received from or paid to hedge counterparties for fuel hedge derivative contracts settled during the period.

Table 4.  
Hawaiian Holdings, Inc.  

Non-GAAP Financial Reconciliation (unaudited)

The Company evaluates its financial performance utilizing various GAAP and non-GAAP financial measures, including adjusted net income (loss), adjusted operating expenses, adjusted diluted net income (loss) per share (EPS), CASM, PRASM, RASM, Passenger Revenue per RPM, and Adjusted EBITDA.  Pursuant to Regulation G, the Company has included the following reconciliation of reported non-GAAP financial measures to comparable financial measures reported on a GAAP basis.  The adjustments are described below:

• CBA related expense.
• In February 2023, pilots represented by ALPA ratified a new four-year CBA, which included, amongst other things, a signing bonus, pay scale increases across all fleet types, improved health benefits and cost sharing, and enhancements to the Company's postretirement and disability plans. In connection with the ratification, the Company recorded a signing bonus and vacation liability true-up of $17.7 million which were recorded in wages and benefits during the quarter ended March 31, 2023.
• In January 2022, the Company reached a tentative agreement with the representatives of its International Association of Machinists and Aerospace Workers (IAM-M) and International Association of Machinists and Aerospace Workers - Clerical Division (IAM-C) employees. In February 2022, the Company received notice from IAM that the agreement was ratified by its members. The new CBA included a signing bonus of $2.1 million, which was recorded in wages and benefits.
• Contract termination amortization. In December 2022, the Company entered into a Memorandum of Understanding (MOU) with one of its third-party service providers to early terminate its Amended and Restated Complete Fleet Services Agreement (Amended CFS) covering A330-200 aircraft. The Amended CFS was originally scheduled to run through December 2027, and will now terminate in April 2023. Upon execution of the MOU, the Company agreed to pay a total of $12.5 million in termination fees, which was recognized in fiscal year 2022. As of December 31, 2022, the Company had approximately $24.1 million in deferred liabilities to be recognized into earnings over the remaining contract term as contra-maintenance materials and repairs expense. During the three months ended March 31, 2023, the Company recognized approximately $18.1 million in amortization within Maintenance, materials and repairs in the Consolidated Statements of Operation.
• Changes in fair value of fuel derivative contracts. Changes in fair value of fuel derivative contracts, net of tax, are based on market prices for open contracts as of the end of the reporting period, and include the unrealized amounts of fuel derivatives (not designated as hedges) that will settle in future periods and the reversal of prior period unrealized amounts.
• Gain on sale of commercial real estate. In February 2023, the Company entered into an agreement for the sale of its commercial real estate and recognized a gain on sale of $10.2 million, which was recorded in Other operating expense in the Consolidated Statements of Operations.
• Interest income on federal tax refund. In March 2023, the Company received $4.7 million in interest income related to a refund received on the Company's income tax return. The interest income received was recorded in Interest income in the Consolidated Statements of Operations.
• Unrealized gain on foreign debt. Unrealized gain on foreign debt is based on fluctuation in exchange rates and the measurement of foreign-denominated debt to the Company's functional currency.
• Unrealized (gains) losses on non-designated foreign exchange positions. Changes in fair value of foreign currency derivative contracts, net of tax, are based on market prices for open contracts as of the end of the reporting period, including the unrealized amounts of foreign currency derivatives (not designated as hedges) that will settle in future periods and the reversal of prior period unrealized amounts.
• Unrealized (gain) loss on equity securities. Unrealized (gain) loss on equity securities is driven by changes in market prices and currency fluctuations, which is recorded in Other nonoperating expense in the Consolidated Statements of Operations.

The Company believes that adjusting for the impact of the changes in fair value of equity securities and fuel derivative contracts, fluctuations in exchange rates on debt instruments denominated in foreign currency, and non-recurring expenses and income/gains (including CBA-related, contract termination amortization, interest income on tax refund, and gain on sale of commercial real estate), helps investors better analyze the Company's operational performance and compare its results to other airlines in the periods presented.

Adjusted EBITDA

The Company believes that adjusting earnings for interest, taxes, depreciation and amortization, non-recurring operating expenses (such as changes in unrealized gains and losses on financial instruments) and one-time charges helps investors better analyze the Company's financial performance by allowing for company-to-company and period-over-period comparisons that are unaffected by company-specific or one-time occurrences.

Operating Costs per Available Seat Mile (CASM)

The Company has separately listed in the table below its fuel costs per ASM and non-GAAP unit costs, excluding fuel and non-recurring items.  These amounts are included in CASM, but for internal purposes the Company consistently uses cost metrics that exclude fuel and non-recurring items (if applicable) to measure and monitor its costs.

Pre-tax margin

The Company excludes changes in fair value of equity securities and fuel derivative contracts, fluctuations and exchange rates on debt instruments denominated in foreign currency, and non-recurring items from pre-tax margin for the same reasons as described above.

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SOURCE Hawaiian Holdings, Inc.