Q2 2022 Hawaiian Holdings Inc Earnings Call
Greetings and welcome to the Hawaiian Holdings, Inc. Second quarter 2022 financial results Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded I would now like to turn the conference over to your House, Jay Shafer, Vice President and Treasurer. Please go ahead Sir.
Thank you Maria Hello, everyone and welcome to Hawaiian Holdings second quarter 2022 results Conference call here with me in Honolulu are Peter Ingram, President and Chief Executive Officer, Brenda Overby, Chief revenue Officer, and Shannon <unk> Chief Financial Officer.
Peter will provide an overview of our performance Brent will discuss revenue and Shannon will discuss costs in the balance sheet.
At the end of the prepared remarks, we will open the call up for questions.
Now everyone should have access to the press release that went out at about four o'clock Eastern time today. If you have not received the release it's available on the Investor Relations page of our website Hawaiian Airlines Dot com.
During our call today, we will refer at times to adjusted or non-GAAP numbers and metrics. The detailed reconciliation of GAAP to non-GAAP numbers and metrics can be found at the end of today's press release posted on the Investor Relations page of our website.
As a reminder, the following prepared remarks contain forward looking statements, including statements about our future plans and potential future financial and operating performance management May also make additional forward looking statements in response to your questions. These statements are subject to risks and uncertainties and do not guarantee future performance.
Therefore undue reliance should not be placed upon them.
We refer you to Hawaiian Holdings' recent filings with the FCC for a more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward looking statements. These include our most recent annual report filed on Form 10-K as well as subsequent reports filed on forms 10-Q and 8-K.
Yes.
I will now turn the call over to Peter.
Hello, Jay Hello, everyone and thank you for joining us today.
Demand for travel to from and within Hawaii remains very strong.
As you know we updated our second quarter outlook at the end of May due to improved demand throughout our network and today's results are better than our may expectations.
We anticipate strong demand continuing into the third quarter as we increase our international schedule.
And importantly, with stability returning to the demand environment, we continue to reduce our debt levels, while maintaining a healthy liquidity position.
In North America yields improved throughout the quarter compared to the corresponding months in 2019 with premium demand leading the way.
<unk> indication suggests a continuation of these trends as we enter the third quarter.
Internationally.
Recovery in demand has taken root in Australia, South Korea, New Zealand, Tahiti and American Samoa.
Travel restrictions in Japan have prevented us from resuming a full pre pandemic schedule.
But these restrictions are incremental easing and next month, we are resuming service to haneda at the same time as we increased frequency from Narita and Osaka.
As we saw when when restrictions are loosened in North America consumers in international markets are showing strong interest in visiting Hawaii.
In the second quarter, the commercial team fully implemented variable seed pricing on all North America routes.
Early results are exceeding the business case expectations.
Building on our success in the premium cabin and with our extra comfort product variable seat pricing helps us better capitalize on our award winning service.
And as we discussed on last quarter's call work on the implementation of our passenger service system transition is underway and on track to launch in the spring of 2023.
Turning to our sustainability efforts in May we released our corporate Cooley on our report.
Cool Liana is Hawaiian word for responsibility and this report reflects our commitment to our environmental social and governance priorities.
This year, we announced commitments to replace single use plastics.
On our in our cabins by 2029.
To increase local sourcing of food and beverages served onboard to 40% and an ongoing focus on sustainable tourism.
As we work toward our commitment to become carbon neutral by 2050, we also announced a strategic partnership with the region to support the development of the monarch 100 seat electric sea glider for potential application in Hawaii and Inter island travel.
We also announced on.
The agreement with far Hawaii, Hawaii's largest supplier of energy products to explore the commercial viability of locally produced sustainable aviation fuel or SaaS.
<unk> is by far the most important near and medium term component of our efforts to reduce our carbon footprint and this study will be an important step toward developing SaaS supply in our home state, which will be critical to our long term sustainability goals.
I know that staffing has been in the news recently as delays and cancellations create frustration for travelers and airlines.
Our team has worked diligently to stay out of these headlines with the completion percentage of 99, 5% for the quarter and 99, 9% from the beginning of the Memorial day travel period through the end of the quarter.
We continue to see strong demand for open pilot and flight attendant possessions.
Executing on our pilot training efforts will remain a focus of our management team through the end of the year as this represents the primary constraint on our scheduling flexibility.
And while aircraft technician and airport operations staffing remain tighter than we would prefer we are working to ensure that we can successfully attract the right talent.
Tight coordination between our recruiting training and scheduled planning teams is ongoing to ensure that we can operate schedules that we publish.
The labor agreement covering our pilots became amendable this month.
Hi.
We've had positive and productive conversations with alpha well ahead of this month's amendable date in.
And we look forward to completing a new contract that recognizes the critical contribution our pilots make to our business and the competitive environment for these highly skilled professionals.
At this point, we cant put a specific timeline to completing these negotiations.
Hi, and volatile fuel prices will continue to be a challenge going forward, especially on our more fuel intensive long haul operations.
The gyrations of the fuel the global jet fuel market are beyond our control.
We'll focus on managing what we can including cost management elsewhere in the business and revenue generation.
Compared to the challenges of 2020 and most of 2021. These are high class problems and I am pleased with our performance in the second quarter and the outlook for the third quarter.
Our team throughout the operation and here at our headquarters has done a fantastic job navigating the twists and turns of the past several quarters.
And their hard work is being recognized by the traveling public who selected Hawaiian Airlines as the best domestic airline and travel and leisure magazine's world's Best Awards recent survey.
The progress we continue to make on our goals for 2022 sets us up well for the remainder of the year and for years beyond.
With that let me turn the call over to Brent to discuss our commercial results and outlook in more detail.
Thank you Peter Hello, Hi, everyone.
As Peter mentioned, our second quarter revenue performance was better than expected throughout their network.
Passenger revenue was down just five 5% from 2019.
Although two points of the quarter's revenue performance compared to 2019 was due to an accounting revisions that Shannon will elaborate on later.
We operated 112% of our domestic capacity and 31% of our international capacity compared to 2019.
Demand for our North American markets was robust throughout the quarter, peaking with a 92, 9% load factor in June .
Yields also strengthened as we progressed through the quarter with June up about 9% versus 2019.
For our inter island market the second quarter saw a good recovery in both fair and volume.
And recovery has been rapid for those international markets that are fully relax travel restrictions.
As we increase our Japan flying our performance there in the near term will be constrained by the passenger arrival caps currently at 20000 per day.
However, we are optimistic that the cap will be increased or lifted altogether in the coming months.
Similar to last quarter, our premium products continue to perform very well. We saw continued strong demand for our front cabin with North America premium cabin PRASM up 37% for the quarter versus 2019.
Total ancillary ancillary revenue, including seats bags cargo and other products continues to perform exceptionally well.
System wide extra comfort revenue was up 2% compared to the second quarter of 2019, despite reduced capacity.
In North America extra comfort revenue was up 25% on 15% more capacity.
And as Peter mentioned preferred seats are off to an encouraging start and the benefits will approach steady state as we get later in the year.
Our co brand credit card program continues to show strong performance with another record quarter as revenue was up 11% versus 2019.
Net retail sales were up 14%.
New accounts increased by 11% compared to 2019, both records for the program.
Acquisition and spend remains strong with no signs of weakening.
The cargo team recorded its highest second quarter revenue ever.
50% compared to the second quarter of 2019.
Second quarter yields remained strong up 84% compared to the second quarter of 2019.
With the strongest demand from our Asia Pacific sales.
Looking forward, we are encouraged by both domestic and international bookings and are expecting continued strong demand for travel to Hawaii.
For the third quarter, we anticipate overall revenue to be down about one 5% from 2019.
Breaking this further down by geography in North America, we continued to see strong demand anticipate our load factor to approach third quarter 2019 levels.
The revenue environment continues to improve and we anticipate our third quarter PRASM for North America to exceed 2019 levels roughly two point sequential improvement from the second quarter.
Okay.
We expect this fly a similar amount of capacity to the second quarter at about 116% of our 2019 schedule.
While industry capacity to Hawaii is still elevated we continue to see moderation both versus last year and 2019, as we move through the summer and into the fall.
We remain well positioned and based on the latest data from the <unk>.
We continue to materially outperform our competitors on PRASM in North America.
This demonstrates the strength of our North America network.
Focus on the Hawaii premium leisure traveler.
Award winning service and.
And optimally configured aircraft.
In the neighbor Islands, we expect to fly about 82% of our 2019 capacity in the third quarter.
As with last quarter, we have implemented modest schedule adjustments based on some of the pilot bottlenecks impacting our 700 700 fleet.
We remain well positioned and continue to maintain a share of local traffic well in excess of our seed share and earn a very sizable fluids factor premium as well as yield premium versus our competitor.
However, the recent reintroduction of deeply discounted fares will pressure industry PRASM in this entity.
Internationally as I mentioned earlier, we are seeing a fairly rapid recovery for markets that are not subject to ongoing travel restrictions.
South Korea performance is very strong since the quarantine requirement was removed in April .
Sydney is build a bit more slowly but July load factors are in the eighties, which is positive and yields remained strong.
Auckland, where we just presumed service in July is beginning to accelerate and we are optimistic of our performance there.
Of course, a full recovery in Japan is dependent on the easing of government restrictions on arrivals and the current yen dollar exchange rate, which is down about 22% compared to 2019 will increase the cost of the Hawaii vacation for these travelers.
However, consistent with our other international geographies as restrictions ease, we do anticipate demand to pick up materially.
Moving to our capacity outlook, we anticipate our overall capacity for the third quarter to be down approximately six 5% from 2019 levels.
This is about six points higher than the same comparison for the second quarter as we continue to build back our international network.
For the full year, we expect capacity to be down approximately nine 5%.
However, this may move a bit depending on the changes to the Japanese government's cap on arrivals.
To summarize we anticipate strong domestic demand and we expect our load factor to be close to 2019 levels.
Liam Kevin PRASM improvements to continue to accelerate to historical highs and extra comfort revenue to exceed 2019 levels.
Internationally travel restrictions continue to ease and we're seeing robust demand for Hawaii vacation, we have the right products for our markets are strong brand.
Exceptional team and a winning formula for success.
With that I'll turn the call over to Shannon.
Thanks, Brent and thanks, everyone for joining us today, let.
Let me start with an update on the balance sheet, we closed the quarter with $1 $8 billion in total liquidity inclusive of cash short term investments and our undrawn revolver.
Adjusted net debt.
$45 million, which.
Which continues to be below 2019 levels.
During the quarter, we fully redeemed the remaining principal on our 2020 WTC bonds.
The combination of the tender offer in November 2021, and the redemption in June reduced our outstanding debt by $223 million or 11%.
Not only does this improve our leverage but we'll trim our interest expense by $18 million per year.
In total since we issued our loyalty program in 2021, we've reduced our debt load by $607 million or 27%.
Remaining debt and lease principal payments for this year totaled $36 million.
Our balance sheet remains soft and we have ample liquidity with.
With high fuel prices and an uncertain economy, we plan to maintain liquidity above pre pandemic levels for the coming quarters.
Turning to the P&L, we finished the quarter with an adjusted EBITDA of $1 1 million.
These results were better than we originally expected despite increases in steel costs, given the strong domestic revenue results discussed.
As Brent noted in the second quarter, we recorded additional passenger revenue and accelerates the recognition of spoilage of unused tickets.
This change in estimate was based on an evaluation of the trends for passenger use or nonuse.
Yes.
The impact to the second quarter was $10 million more than what we had anticipated entering the quarter.
On the cost side, our second quarter non fuel costs, excluding nonrecurring items totaled $491 million with unit cost up 16% compared to 2019, which was at the better end of our expectations.
This year over three year increase is primarily due to wage and airport rate increases accompanied by lower ASM.
For the third quarter, we expect our unit costs, excluding fuel and special items to be up about 10% compared to the third quarter of 2019 on a capacity decrease of six 5%.
As with last quarter. This quarter, the biggest drivers are wages and benefits and airport rent.
For the full year, we expect unit costs to be up approximately 14% compared to 2019 on a capacity decrease of about 95%.
Steel costs rose in the second quarter to $3 95 per gallon.
Approximately 5% from our May guidance update.
And we're forecasting our price per gallon for the third quarter to be $3 50.
Based on the forward curve as of July 14.
We expect our fuel consumption for the third quarter to be down about 12, 5% as compared to 2019.
Our capital expenditure forecast for 2022 is approximately $115 million with about two thirds for aircraft and the remaining third for non aircraft spend.
The majority of the aircraft Capex is pre delivery payments for our 700 incentives.
Or potentially all of these payments may shift into 2023, depending on the timing of our delivery schedule, which is still in flux.
The non aircraft expenditures reflect investments in technology and in our facilities.
We expect our adjusted EBITDA to increase in the third quarter to approximately $45 million.
While <unk> has moderated somewhat in the past month.
Peter mentioned yields will need to improve further to fully offset the high steel cost environment.
And as we have seen through the first half of the year fuel prices are susceptible to volatility.
In conclusion, we're confident that we're on the road to recovery and our focus is on the long term success of our business.
By strengthening our brand and award winning hospitality and service to differentiate us from the competition and win in the marketplace.
Restoring our international service and returning operations to full scale.
Hiring and training our people as we plan and prepare for our future.
And investing in foundational technology to enhance our commercial agility and increase our cost competitiveness.
We believe that these priorities are the winning formula to growing value for our shareholders.
And with that we can open the call for questions.
At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Our first question is from Helane Becker with Cowen. Please proceed with your question.
Oh, thanks, very much operator, hi, everybody.
So I have I think just two questions one is on Orlando.
I went to Orlando I know, you're leaving Orlando can you just talk a little bit about that decision.
Yes, I think listen as with the delay of our 780 Sevens, we've known for some time, we wouldn't have sufficient aircrafts to continue operating on all the routes that we had added in North America as demand for those aircraft increased in Orlando has been a strong market during the peak periods.
But during some of it's off peak periods was a little bit softer than we anticipated and kind of given where we were with aircraft. It was the best decision right now in terms of the network.
Got it okay.
Then.
So maybe you can just save that.
As we think about the guidance you've taken those ASM doubt so what percentage.
The.
And the growth in ASN.
<unk> it.
It would represent Orlando.
We've taken them out in terms of the guidance and it would have been relatively small we're talking about.
That was operating at three days a week in the back part of <unk> for three weeks in September . So I don't have that number handy helane, but it's pretty de minimis.
That's fine and then on the 700 seventeens that fuel prices going up just that so much.
Just just does that change the way you are going to be thinking about replacing the 700 <unk> I know you talked about that new the monarch, which kind of could be an exciting opportunity, but just wanted to ask.
What about shorter term right because that's probably a 2030 kind of a thing.
Yes, Thanks Helane.
The 770, <unk>, we still expect to be operating that airplane at least through the middle of the decade as we've communicated before frankly.
Fuel costs on short haul flying like we have in our neighbor Island operation.
Is a smaller proportion of the total cost equation than that is.
Ground handling costs airport costs other things associated with the fact that it's very high frequency high cycle environment, and frankly that goes for.
The operating cost of the airplane and the cycle costs on power by the hour deals and things like that so it's really not as fuel sensitive of the 700 <unk> a terrific airplane for what we do.
They're really if we could.
Replace 700 Sevens with new 700, Seventeens that would probably be the ideal aircraft choice for us at.
At some point so so we're happy with that airplane and it doesn't really change the equation.
Okay, Alright, well that's really helpful. Thanks Peter.
Sure. Thanks, a lot.
Our next question comes from Mike Lindenberg with Deutsche Bank. Please proceed with your question.
Oh, Hey.
Good morning, everyone.
I guess a couple here on the the <unk> III <unk>.
Obviously, youre, bringing the plane back from Orlando since I think you indicated you know to backfill into some of the international that you are ramping back up but what is the utilization on that airplane.
Sort of what your schedule looks like in the September and beyond it still seems like Youre down pretty meaningfully can you talk about what the utilization is.
And what's sort of embedded productivity gains that you should see as you as you ramp that fleet back up to full utilization.
What's the headwind.
Oh.
So we arent kind of peak productivity in terms of the three <unk>, we'll get there as we get later in the year and built Japan back.
A little bit more so I don't have the eggs are in terms of productivity, it's probably.
Little bit less than where we were back in 2019, but as we continue to build back Japan in the latter part of the year I think we will get back to those same levels, if not maybe a little bit higher of productivity and I want to say at that point. It was around 12 hours a day, but I don't have that number handy.
Okay.
Then when I look at the EBITDA guide for the third.
Third quarter. It does look like that you still.
You may be close to the high end, maybe maybe youre slightly profitable.
At the midpoint, maybe youre not I think the third quarter seasonally is also one of your better quarters.
Where are we are we at the limit on how much you can take fares up.
Given where the fuel prices are and the elasticity of demand.
We are pushing on a string here.
Assuming that Asia doesn't your Japan doesn't come back where do you get that additional revenue when youre dealing with a largely discretionary realm.
Relatively more price sensitive customer base, how should we think about that.
Yes, So let me touch on a couple of things and then see if Brent or Shannon want to add on to it a little bit I think there is.
Still some opportunity for upside one of the things we're encouraged about as we go.
Look at data, which has a little bit of a lag, but we really haven't seen.
Changes in the trends, we continue to outperform our competitors in all the geographies. We serve in terms of revenue generation and we know our cost structure is competitive as well. So I think we are.
We are the most.
Profitable airline in the markets we serve.
The market mix, we have is a little bit different competitively then.
Then some of our competitors have across their.
Networks, I think as we get back to.
Flying more to Japan, Youll see that manifest itself in terms of improved productivity on the labor side.
Today, we have <unk>.
More pilots on payroll than we did in 2019, but we aren't doing as much flying as we did in 2019, so clearly as we get that utilization up we have an improvement on the cost side, we haven't seen any weakening in.
Demand in North America, which is the biggest part of our market you do see.
Some seasonal changes as we go into the fall, but really nothing that indicates demand.
And we're we're.
Mystic about Japan.
Japan.
Brent mentioned.
The potential headwind.
Exchange rate, but.
But if you look at how robust demand has been in places like Australia, and South Korea, which haven't necessarily benefited from favorable exchange rates themselves.
We've seen a real strong desire for travel and a willingness to spend and I think Japan is going to help us a lot as we move.
Through the end of the year and into 2023.
Okay, Hi, Peter just a quick follow on and maybe Brent can add on this.
You've done a nice job on the premium product and I think that your products stands out, but when I look at your wide bodies I feel like you don't have enough seats, maybe you'll disagree with me, but I think the premium has been where people are paying up in some of those fares are pretty high.
If you had your druthers is it what is it is it 18 seats on the <unk> hundred 30, and maybe is the right number 24 28 like if you could have more seats or maybe maybe it doesn't matter maybe maybe that's.
The issue there because I feel like you are.
Relative to some of your competitors you do have a smaller premium cabin and it may be that may be where you were leaving revenue on the table.
I don't know if this is a subject this subject, we discuss a fair bit around here and.
I think we we felt when we modified the <unk> hundred <unk> back.
<unk> years ago now.
We had the the.
The right sweet spot for that moment in history.
But I think your observation is right Brent has been.
Getting on these calls quarter after quarter and telling you that our premium demand has been improving faster than our main cabin demand and I think if we.
If there was zero cost to doing a fleet transition and we could complete it overnight and not have aircraft out of service.
For a long time, we probably would stretch that front cabin back a little bit, particularly on the <unk> hundred <unk> and possibly even on the <unk> hundred 20 ones as well.
I think Peter you took the words right.
I think.
If we had a note at no cost option. There we would clearly go do that it's something that we'll continue to evaluate kind of the economics over the life of that airplane not just in the short term in terms of today's environment I will say, we have seen probably a little more strength on the 330, then we have the 321 some of that is a market mix issue, but overall.
It has done exceptionally well.
Mike The one last thing I'd add on this subject, but as we look forward to the 787, which isn't going to be a huge contributor to our fleet over the next couple of years, but obviously will be going forward.
The low but we have designed for that aircraft actually has a a larger premium mix, we dedicate a little bit more of the geography of the airplane to the premium cabin and the 787, so it's going to be well suited.
To where the market has been evolving over the last couple of years.
Great. Thanks, Thanks for the time everyone.
Okay.
Our next question comes from Dan Mckenzie with Seaport Global. Please proceed with your question.
Yeah, Hi, thanks, guys.
Going up on Mikes question, just given the movement in the dollar Im just wondering if you can talk about how that's impacting foreign point of sale versus U S point of sale internationally.
<unk> destinations.
It sounds like things are pretty strong and that's not really having an impact at this point.
But maybe just clarify can you just remind us what percent of the bookings.
That represents the international inbound it and then just related to this how that distribution strategy augments that foreign point of sale.
So.
We haven't seen a material shift in point of sale, maybe were up slightly in U S point of sale, particularly to kind of Australia and New Zealand.
But not a material shift there I think in all of those markets as they've opened up we've seen a desire for.
For guests in those countries to travel in and have been willing to kind of offset higher dollar denominated trip for them.
In terms of point of sale mix. It differs a fair amount from.
Kind of I'll call, It Australia, and New Zealand is a bit different than Japan and Korea.
In New Zealand, we're probably we're generally about two thirds.
Point of sale non U S about a third U S and Japan Korea are probably closer to 90% heavy heavily weighted towards.
Foreign point of sale.
And how that distribution strategy as augmenting that foreign point of sale.
Okay.
Our distribution strategy internationally really hasnt changed at all the recent changes we've made in terms of our distribution policies with.
With a domestic focus.
Yeah, we have seen throughout the pandemic, we have seen a little bit of behavioral shift from guests.
And more and more activity getting conducted online both direct through our website and a little bit more through otas. So we are seeing a little bit of a shift.
<unk> from some of the traditional agencies across geographies and some of that is.
Coming direct to us.
Where we can we can transact and offer more products and services and really our industry vision strategies and intend to continue that and offer that and more channels.
Very good.
Second question here just looking out.
Three years three to five years.
Just wonder if you can help us reconcile the inflation pressures, we're seeing today from from where you sit.
And.
Just internally if the plan calls for margins that can get back to pre pandemic levels or <unk>.
Longer term investors anticipate potentially some just some erosion here from the cost pressures.
Yeah.
Well.
Dan it's hard to.
<unk>.
Specifically forecast.
Inflation going forward I think obviously in the near term, we're an inflation environment.
Many of us haven't seen in our.
Professional careers.
But I do think that this industry has.
Proven resilient over time, particularly in the United States of being able to.
Adjust and adapt maybe not not always as quickly as people would like quarter to quarter, but over a period of time.
See supply and demand.
Fall into balance and strategies emerge to be able to develop different revenue sources and different cost savings opportunities.
I think that we will.
Play out.
Again, and we will be able to to return to.
Profitability levels that are.
Comparable with what we've been able to produce historically, yes.
I Wonder if add.
I would add that in the medium term I think we have a lot of opportunity, especially on the cost side, but I think once we have more of our fleet plans firmed.
<unk> I think the commercial team can then do.
Medium term planning.
Pat will provide more opportunities for revenue increase but looking at the cost side I think we have a lot of opportunity.
Labor productivity.
On a variety of things.
When we.
Get new contracts with our labor groups, obviously the rates go up day, one but.
A lot of times, we are able to get some work real benefits that take time to implement and so I think youll see we will see that our productivity from those contracts over the next few years I think some of the contracts also get.
Productivity improvements with Mark Klein.
So we will see better productivity from that also we're making a lot is investment in technology and facilities and we should be able to get a lot of cost savings from those and then.
Next few years.
Terrific. Thanks for the time you guys.
Thanks, David.
Our next question comes from Chris Stathopoulos with Susquehanna International Group. Please proceed with your question.
Hey, Thanks, good afternoon. Thank you so <unk>.
Peter Shannon.
There's a lot going on here with the international regions.
With respect to FX different reopening timetables so.
Could you rank in terms of utilization, Japan, South Korea, Australia, and New Zealand, where you are today and then how you're ranking these markets were waiting excuse me.
These markets into your planning for 2023, I realize some of this year.
Can't control.
In your prepared remarks, there's just a lot of moving pieces here.
With respect to your.
Flights into these.
Markets are kind of better understand if you could where you are.
Utilization, but also going forward, how youre thinking about these individual markets in your planning for next year. Thank you.
Yes, let me, let me start and hopefully.
Hit the Mark correctly on where youre going with the question.
In Australia.
New Zealand, South Korea, where we're pretty much Ed.
A steady state level in terms of the amount of capacity that we would have in those markets.
May vary by a frequency or two here or we may make some adjustments seasonally but were not dramatically.
Below where we intend to be for the near term on.
How we allocate aircraft to those regions, Japan, we're still pretty considerably below during this period, we are just operating a.
Single Daily flight to Osaka.
<unk>.
That was a daily.
We're less than daily on a reader that was daily before we had two flights in haneda.
Daily flights for the pandemic, we were about a third.
And.
We don't start flying to Veneta.
Until August and then Theres Fukuoka Sapporo, Japan, we're still operating really a.
A fraction I don't have the precise number but we can get that for you, but it's a fraction of what we're doing before so that's where.
That's where the growth is coming on the international as we look forward to the end of this year, but even more importantly into 2023.
Okay.
And my second question here so.
From your competitors.
Recovery in their core markets years moving forward.
So I was wondering if you could give some color here with respect to.
The capacity of the U S mainland how thats, what youre seeing.
And also any color with respect to.
Fares and anything that you are able to speak to your confidence with.
30, or 60 days out there. Thank you.
Yeah, I'll start with that one and then maybe hand it over to Brent on North America to Hawaii flying.
<unk> has come down a little bit from where it was in 2021, but it still remains above where it was in 2019 pre pandemic. So it's still been a net add over the course of the pandemic, although some of our competitors.
Letters of.
Made some adjustments over the last.
Few months.
So that's that's probably the biggest one international.
More of the capacity come back again with the exception of Japan, where we're the competitive capacity is.
Still substantially on the sidelines as we are yeah.
Yes relative to 'twenty, one clearly we've peaked and are coming off of that and were still from an industry capacity a bit above.
Where we were at in 2019, albeit that's abating, a little bit as well as we get into the fall.
Obviously, that's a fair amount more than the capacity thats.
It remains for travel within the lower 48, where industry capacity is down a fair amount so.
We are a little bit of it in terms of our geography had a bit of capacity disadvantage.
There.
Not to get into specifics on pricing, but I will say.
Yields have held up throughout the summer we had a really strong June that I referenced the rest of the summer looks good.
And then even into the fall we are continuing to see pricing improvements in average share improvements versus 2019 at this point.
Okay. Thank you.
Our next question comes from Andrew <unk> with Bank of America. Please proceed with your question.
Hey, good afternoon, everyone.
Peter.
You both mentioned the variable pricing.
<unk> can you maybe provide a little bit more color around that when it was introduced in each of the regions and I guess.
What kind of impact do you think it has had on pricing in these early days.
Well the early days the impact is quite small so we implemented it.
Fairly early in the quarter.
We are doing is charging for some of our more desirable main cabin seats.
We did not.
All the guests to pre reserve seats in those seats, we let them remain in those seats and so our ability to sell some of those in the second quarter was.
It was rather small as we get into the third quarter. It gets greater it hits in the fourth quarter, obviously, even more.
We've been really encouraged by the take rate again, we've got a little bit of a restricted supply as we were moving through the quarter.
And our business case on this has it at.
Kind of in the $10 million to $15 million and on an annual basis and I think at this point, we're while our results are still early and we've got a long ways to go I think we're pretty encouraged with the domestic results. We've seen so far we have not rolled it out in any of our international markets, yet and Thats a process that we're working through but our intention in there is that.
We will roll the product out in those geographies as well in the months ahead.
Got it and then I guess just on.
On the implied <unk> capacity here I guess, one theres a pretty big disconnect versus your schedules I think your schedules are up mid single digits, I guess, where do you have to adjust the most and.
Sequentially <unk> to <unk> just curious on.
What's the limiting factor here like why isn't there a bit more of a step up in capacity, especially with international reopening.
So we've got I think going back to one of the previous questions for the most part.
Reopened internationally it everywhere about Japan.
We've got a little bit of scheduled cleanup that we need to do and particularly in the front part of the fourth quarter and Youll see that probably in the not so distant.
In the future. So that I think is probably the majority of the this joint that that Youre looking at.
Okay. Thank you.
Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back over to Peter Ingram for closing remarks. Please go ahead.
Thank you operator, mahalo again to all of you for joining us today on the strong demand improvement as we move through the first half of 2022 gives us confidence for the periods ahead I'm extremely.
Proud of our team and their commitment to deliver an outstanding guest experience and we appreciate your interest and look forward to updating you on our progress in a few months.
Hello, Hi.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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