Q3 2023 Hawaiian Holdings Inc Earnings Call

Today.

Third quarter 'twenty to 'twenty three financial results call at this time, all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star and fetal on your telephone keypad.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Ms Mossy Moretto, managing director Investor Relations.

Please go ahead.

Thank you Ryan Hello, everyone and welcome to Hawaiian Holdings third quarter 2023 results Conference call here with me in Honolulu are Peter Ingram, President and Chief Executive Officer, Brent over week, Chief revenue Officer, and Shandong Tanaka Chief Financial Officer. We also have several other members of our management.

Attendance for the Q&A.

Peter will provide an overview of our performance Brett will discuss revenue and Shannon will discuss cost and the balance sheet at the end of the prepared remarks, we will open the call up for questions.

Operator: and welcome to the Hawaiian Holidayings. Third quarter, 2023 Financial Results Call. At this time, all participants are in a listen-only mode.

By 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 is available on the Investor Relations page of our website Hawaiian Airlines Dot com.

Operator: A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded.

During our call today, we were first at times, adjusted or non-GAAP numbers and metrics.

Marcy Morita: It is now my pleasure to introduce your host, Ms. Marcy Morita, managing director in Western Relations. Please go ahead. Thank you, Ryan.

A 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 fond prepared remarks contain forward looking statements include statements about our future plans and potential future financial and operating performance.

Peter Ingram: Hello, everyone and welcome to Hawaiian Holdings. Third quarter, 2023 Results Conference Call.

Management May also make additional forward looking statements in response to your questions.

Peter Ingram: Here with me and Honolulu R, Peter Ingram, President Chief Executive Officer, Brent Overbeek, Chief Prevenue Officer, and Shannon Nokinaka, Chief Financial Officer. We also have several other members of our management team and attendance for the Q&A. Peter will provide an overview of our performance, Brent with Discuss Revenue, and Shannon with Discuss Costs and the Balance Sheet.

These statements are subject to risks and uncertainties and do not guarantee future performance and therefore undue reliance should not be placed upon them.

We refer you to the Hawaiian Holdings' recent filings with the SEC for a more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward looking statements.

Peter Ingram: At the end of the prepared remarks, we will open the call of questions. By now, everyone should have access to the press release and it went out at about four o'clock Eastern time today. If you have not received the release, it is available on the VISTA Relations page or website, holinearlines.com. During call today, we refer at times suggested or non-gap numbers and metrics. A deed to reconciliation of gap to non-gap numbers and metrics can be found at the end of today's press release, posted on the VISTA Relations page or website.

These include the most recent annual report filed on Form 10-K, as well as subsequent reports filed on forms 10-Q, and 8-K I will now turn the call over to Peter.

Mahalo Mercy Hello, everyone and thank you for joining us today.

I wanted to start off by thanking our dedicated and compassionate team members, who continue to deliver outstanding hospitality to our guests in an ever changing external environment.

This quarter <unk>.

Peter Ingram: As a reminder, the following prepared remarks contain four-looking statements, include statements about our future plans and potential future financial and offering performance. Management may also make additional four-looking statements and response to your questions. These statements are subject to risk and uncertainties and do not guarantee future performance and therefore undue reliance should not be placed upon them. We refer you to the holinearlines recent filings with the SEC for a more detailed discussion of the facts that could cause actual results to differ maturely from those projected at any four-looking statement. These include the most recent annual report from the form 10K, as well as subsequent report from the form 10Q and 8K.

<unk> wildfires destroyed parts of Maui My colleagues once again rose to the occasion and answered the call for our guests and the communities we serve.

And even as we face more than our fair share of challenges. Our team remains focused on important initiatives that make us a better airline, including the debut of Amazon freighter flights early this month.

Unveiling of our 787 interiors and the successful first of type installation of Starlink Wi Fi on an <unk> hundred 21 aircraft.

I'll talk in Oh.

I'll talk more in a few moments about each of these initiatives.

Peter Ingram: I will now turn the call over to Peter. Hello, Marcy.

Before that I'll delve a bit more deeply into the events in Maui.

Peter Ingram: Hello, everyone, and thank you for joining us today. I want to start off by thanking our dedicated and compassionate team members who continue to deliver outstanding hospitality to our guests in an injured, ever-changing external environment. This quarter, as tragic wildfires destroyed parts of Maui, my colleagues once again rose to the occasion and answered the call for our guests and the communities we serve. And even as we face more than our fair share of challenges, our team remains focused on important initiatives that make us a better airline, including the debut of Amazon freighter flights early this month, the unveiling of our 787 interiors, and the successful first-of-type installation of Starlink Wi-Fi on an A321 aircraft. I'll talk more in a few moments about each of these initiatives.

Today, we will necessarily address the economic consequences, we must not lose sight of the enormous human cost of the tragedy.

We are a patient community and everybody at Hawaiian knows someone whose life was touched by this tragedy.

For the first three days following the fires we had a very focused mission with three essential elements.

As the largest provider of passenger transportation to the islands. We took the lead in the evacuation of displaced visitors and residents and getting first responders to where they needed to be.

We made sure that we supported our team on the ground in Maui airport with whatever resources they needed.

And we confirm that each of our 500, plus teammates who live or work on Maui was safe.

Each of these objectives was achieved in the 72 hours following the fires and we continued to support what will be a long recovery for the community through charitable, giving and the volunteer activities of our team.

Peter Ingram: Before that, I'll delve a bit more deeply into the events in Maui. While today we will necessarily address the economic consequences, we must not lose sight of the enormous human cost of the tragedy. We are a picnic community, and everybody at Hawaiian knows someone whose life was touched by this tragedy. For the first three days following the fires we had a very focused mission with three essential elements. As the largest provider of passenger transportation to the islands, we took the lead in the evacuation of displaced visitors and residents, and getting first responders to where they needed to be.

In the immediate aftermath of the tragedy, new bookings to Maui slowed to a trickle and we saw large volumes of close in cancellations for Maui trips.

A portion of this close in business shifted to other islands, notably Hawaii.

Booking trends stabilized in the weeks are followed and cancellations have abated, but it will be a while yet before demand fully returns to the robust levels. We saw earlier in the summer.

Load factors, both on our North America, and neighbor island flights to and from now we remain below typical levels, but are improving.

Peter Ingram: We made sure that we supported our team on the ground in Maui Airport with whatever resources they needed, and we confirmed that each of our 500 plus teammates who live or work on Maui was safe. Each of these objectives was achieved in the 72 hours following the fires, and we continue to support what will be a long recovery for the community through charitable giving and the volunteer activities of our team. In the immediate aftermath of the tragedy, the new bookings to Maui slowed to a trickle, and we saw large volumes of close-in cancellations for Maui trips.

October will be better than September, which at a low point in load factors.

The trajectory, we're seeing is encouraging.

In the current environment accommodations inventory has not been a constraint rather it has been the hesitation of travelers about coming to Maui in the wake of the fires.

It is important to note that almost all of western I always hotels were physically unaffected by the fire and the phased reopening of properties nearest to the wildfire area began earlier this month.

Peter Ingram: A portion of this close-in business shifted to other islands notably Kauai. Booking trends stabilized in the weeks have followed, and cancellations have abated, but it will be a while yet before demand fully returns to the robust levels we saw earlier in the summer. Load factors both on our North America and neighbor island flights to and from Maui remain below typical levels, but are improving. October will be better than September, which at a low point in load factors, and the trajectory we're seeing is encouraging.

Yesterday, Maui County announce of this phased reopening will be extended to all of the key west Maui resort areas on November one.

On September 5th we updated our guidance to incorporate the impact from the wildfires to revenue for what we knew at the time and later in this call Brent will provide more details on the current outlook.

The other significant near term challenge, we've been navigating as the availability of our <unk> hundred 21 fleet.

Just before our last quarterly call, we learned of new inspection requirements for the Pratt and Whitney engines that power of these aircraft.

Peter Ingram: In the current environment, accommodations inventory has not been a constraint, rather it has been the hesitation of travelers about coming to Maui in the wake of the fires. It is important to note that almost all of West Maui hotels were physically unaffected by the fire, and the phased reopening of properties nearest to the wildfire area began earlier this month. Yesterday, Maui County announced that this phased reopening will be extended to all of the key West Maui resort areas on November 1st.

The impact is understood at the time was incorporated in our September Investor update.

Since then in addition to receiving more details about inspection requirements beyond the end of this year. We have also seen a number of engine removals not associated with the powder metal inspection issued.

These removals contributed to an elevated cancellation rate in the early days of the current quarter.

We currently have two aircraft grounded, which is an improvement over the earlier part of this month and expect to have between two and four aircraft out of service at any point in time over the next few months.

Peter Ingram: On September 5th, we updated our guidance to incorporate the impact from the wildfires to revenue for what we knew at the time, and later in this call, Brent will provide more details on the current outlook.

In response to the most recent engine removals, we have adjusted our schedules to accommodate up to four out of service aircraft through <unk> and into the beginning of next year.

Peter Ingram: The other significant near-term challenge we've been navigating is the availability of our A321 fleet. Just before our last quarterly call, we learned of new inspection requirements for the patent when the engines that power these aircraft. The impact is understood at the time was incorporated in our September 5th investor update. Since then, in addition to receiving more details about inspection requirements beyond the end of this year, we have also seen a number of engine removals not associated with the powder metal inspection issue.

We expect the situation for 2024 will improve as our engine inventory will be bolstered by the return of several engines that are already in the MRO pipeline.

We have reached terms with Pratt <unk> Whitney on short term compensation for their failure to provide required engine spares over the course of the past several months.

But this interim agreement will expire later this quarter.

We are in ongoing discussions with Pratt on further compensation beyond the scope of this short term agreement and most importantly to provide more certainty about engine availability. So that we can plan more effectively for the medium and long term.

Peter Ingram: These removals contributed to an elevated cancellation rate in the early days of the current quarter. We currently have two aircraft grounded, which is an improvement over the earlier part of this month, and expect to have between two and four aircraft out of service at any point in time over the next few months. In response to the most recent engine removals, we have adjusted our schedules to accommodate up to four out of service aircraft through four Q and into the beginning of next year.

After some external challenges to reliability in the first half of the year. Our on time performance steadily approve improve from July to August to September.

The latest published report for July showed us reclaiming the number one spot in the industry on time performance and I expect our August and September results to be at or near to the top of the pack.

Peter Ingram: We expect the situation for 2024 will improve, as our engine inventory will be bolstered by the return of several engines that are already in the MRO pipeline. We have reached terms with Brad and Whitney on short-term compensation for their failure to provide required engine spares over the course of the past several months, but this interim agreement will expire later this quarter. We're in ongoing discussions with Brad on further compensation beyond the scope of the short-term agreement, and most importantly, to provide more certainty about engine availability so that we can plan more effectively for the medium and long-term.

In October as I noted earlier, we have experienced about of cancellations, primarily driven by the <unk> hundred 21 fleet.

That underscores the importance of getting more certainty about the availability of engines.

We are encouraged by the improved performance in the third quarter and will not be satisfied until we are once again consistently at the top of the industry for operational performance.

I'll now touch on a few highlights of our commercial performance of Brent will address in more detail.

Up until the wildfires on Maui, our revenue was tracking ahead of the expectations, we had entering the quarter with particular strength.

Peter Ingram: After some external challenges to reliability in the first half of the year, our on-time performance steadily improved from July to August of September. The latest published DOT report for July showed us reclaiming the number one spot in the industry on-time performance, and I expect our August and September results to be at or near to the top of the path. In October, as I noted earlier, we have experienced about of cancellations primarily driven by the A321 fleet.

From the U S mainland to Hawaii.

Sydney and Incheon continue to produce strong results international.

<unk> performance was not materially affected by the Maui wildfires.

On the neighbor Island front, we continue to comprehensively outperform southwest by wide margins in terms of load factor in unit revenue.

These facts reinforce our conviction that the way, we take care of our guests and deliver authentic Hawaiian hospitality makes us the clear carrier of choice for travel between the islands.

Peter Ingram: That underscores the importance of getting more certainty about the availability of engines. We are encouraged by the improved performance in the third quarter and will not be satisfied until we are once again consistently at the top of the industry for operational performance.

In Japan, the encouraging trends, we noted during last quarter's call continued through the summer.

Since may we have seen a sustained recovery of Japan point of sale bookings on.

Peter Ingram: I'll now touch on a few highlights of our commercial performance that Brent will address in more detail. Up until the wildfires on Maui, our revenue was tracking ahead of the expectations we had entering the quarter, with particular strength from the U.S, mainland to Hawaii. Sydney and Inchan continued to produce strong results. International performance was not materially affected by the Maui wildfires. On the neighbor island front, we continued to comprehensively outperform southwest by wide margins in terms of load factor and unit revenue.

On top of the ongoing high level of U S point of sale demand.

In the coming quarters, we will see an increase in supply in the Japan to Hawaii market as relief from use it or lose it requirements for slots and route authorities expire at the end of this month.

We will need to see continued recovery in Japan point of sale demand to keep pace with this increasing supply, but the trend is encouraging and certainly a welcome change from where things stood at the beginning of the year.

We also are aren't slowing down on our execution of initiatives as we take important projects across the finish line and achieved major milestones on others.

Peter Ingram: These facts reinforce our conviction that the way we take care of our guests and deliver authentic Hawaiian hospitality makes us the clear carrier of choice for travel between the islands. In Japan, the encouraging trends we noted during last quarters call continued through the summer. Since May, we have seen a sustained recovery of Japan point of sale bookings on top of the ongoing high level of U.S, point of sale demand. In the coming quarters, we'll see an increase in supply in the Japan to Hawaii market as relief from use that are losing requirements for slots and root authorities expire at the end of this month.

On October 2nd we flew our first a $3 3300 freighter revenue flight from Cincinnati to San Bernardino.

As a reminder, this is the beginning of a contractual relationship that envisions initial growth to a 10 aircraft fleet in the months ahead.

The first flight. This month was a significant milestone as we embark on this new venture to provide important diversified growth for our business.

Continuing on a positive note we announced the initial route deployments for our new Boeing 787 Dreamliner.

The aircraft will debut on our April 15th flight from Honolulu, San Francisco before transitioning to flights between Honolulu, and Los Angeles as well as Maui in Los Angeles in May.

Peter Ingram: We'll need to see continued recovery in Japan point of sale demand to keep pace with this increasing supply, but the trend is encouraging and certainly a welcome change from where things stood at the beginning of the year. We also aren't slowing down on our execution of initiatives as we take important projects across the finish line and achieve major milestones on others. On a As a reminder, this is the beginning of a contractual relationship that envisions initial growth to a 10 aircraft fleet in the months ahead.

We have firm orders for 12 787 scheduled between early next year in 2027.

We also have several <unk> hundred 30 passenger aircraft leases ending in this timeframe, giving us options to balance growth and replacement.

We're excited to get this fleet in the air next year, it's not only the vehicle of growth for our passenger business for the next few years, but the larger 34 seat premium cabin allows us to expand this high performing margin enhancing element of the business.

Peter Ingram: The first flight this month was a significant milestone as we embark on this new venture to provide important diversified growth for our business. The first flight from Honolulu to San Francisco before transitioning to flights between Honolulu and Los Angeles, as well as Maui and Los Angeles in May. We have firm orders for 12 787 scheduled between early next year and 2027. We also have several A330 passenger aircraft leases ending in this time frame, giving us options to balance growth and replacement.

Earlier this month, we completed the installation of Sterling connectivity on an <unk> hundred 21 the.

The installation and testing was successful and we are currently completing the FAA certification process before installing the technology on the rest of the <unk> hundred 21 fleet.

We will go through the same process with the <unk> hundred 30 fleet next year.

As a reminder, we are the first major airline to deploy this product and it will be the fastest most capable Wi Fi available.

Our award winning hospitality already makes us the preferred carrier in the markets we serve comp.

Complementing this with an unparalleled Wi Fi experience will further set the Hawaiian experience apart and grow our revenue premium.

Peter Ingram: We're excited to get this fleet in the air next year. It's not only the vehicle of growth for our passenger business for the next few years, but the larger 34-seat premium cabin allows us to expand this high performing margin enhancing element of the business. Earlier this month, we completed the installation of Starlink connectivity on an A321. The installation and testing was successful, and we are currently completing the FAA solidification process before installing the technology on the rest of the A321 fleet.

I'm immensely proud of what our team is accomplishing and the dedication of our employees there were low off for one another and they're unmatched hospitality they extend to our guests and the communities. We serve will ensure Hawaii and success in the years ahead.

In a few weeks, we will celebrate <unk> 94 years of service to Hawaii.

As I reflect on this 94th year, which has had its share of challenges I note that all of those challenges whether engine issues or market issues or otherwise our near term and transient.

Peter Ingram: We'll go through the same process with the A330 fleet next year. As a reminder, we're the first major airline to deploy this product, and it will be the fastest, most capable Wi-Fi available. Our award-winning hospitality already makes us the preferred carrier in the markets we serve. Complementing this with an unparalleled Wi-Fi experience will further set the Hawaiian experience apart and grow our revenue premium. I'm immensely proud of what our team is accomplishing and the dedication of our employees.

The core strengths of our brand and business model and the effect of the major investments, we are making now will be durable and create value into the future.

Now, let me turn it over to Brent to go over our commercial performance and outlook in more detail.

Thank you Peter Aloha, everyone.

In the third quarter system RASM was in line with our revised guidance down just under 6% year over year.

Total revenue for the quarter was down about 2% and we operated 4% more capacity versus the same period in 2022.

Peter Ingram: There are low offer one another, and the unmatched hospitality they extend to our guests and the communities we serve will ensure Hawaiian success in the years ahead. In a few weeks, we will celebrate 94 years of service to Hawaii. As I reflect on this 94th year, which has had a share of challenges, I know that all of those challenges, whether engine issues or market issues are otherwise, are near term and transient. The core strengths of our brand and business model and the effect of the major investments we are making now will be durable and create value into the future.

Our capacity came in on the lower end of the guidance due to the reductions made to accommodate the Pratt Whitney engine shortfall.

As Peter mentioned, leading up to the Maui wildfires demand was strong and revenue is trending positively with RASM slightly ahead of guidance.

Immediately after the fires demand and market pricing to Maui rapidly declined resulting deceleration of RASM momentum.

Disproportionately concentrated in the Maui market.

The impact from the wildfires amounted to approximately $25 million in lost revenue.

Brent Overbeek: Now let me turn it over to Brent to go over our commercial performance and outlook in more detail. Thank you, Peter.

For context, leading up to the fires the Maui market represented approximately 22% of our system revenue.

Brent Overbeek: Aloha, everyone. In the third quarter, system rasm was in line with our revised guidance down just under 6% year over year. Total revenue for the quarter was down about 2% and we operated 4% more capacity versus the same period in 2022. Our capacity came in on the lower end of the guidance due to the reductions made to accommodate the pattern which Whitney engine shortfall. As Peter mentioned, leading up to the Malau wildfires, demand was strong and revenue was trending positively with rasm slightly ahead of guidance.

And looking specifically at the North America entity prior to the fires demand was strong and unit revenue was up about 3% year over year.

Following the Maui fires in early August there was a sharp deceleration in demand from OE travel over the remainder of the quarter.

This resulted in North America entity, PRASM, finishing down 10, 5% year over year for the post fire portion of the quarter.

Brent Overbeek: Immediately after the fires, demand and market pricing to Maui rapidly declined, resulting in deceleration of resin momentum, disproportionately concentrated in the Maui market. The impact from the wildfires amounted to approximately $25 million in lost revenue, and for context, leading up to the fires, the Maui market represented approximately 22% of our system revenue. In looking specifically at the North America entity prior to the fires, demand was strong, and unit revenue was up about 3% year-over-year.

And PRASM was down 41, 7% year over year for the Maui markets in the same period.

On our neighbor island routes the fires had a significant impact on both demand and average fare.

Third quarter load factor was 74% down five points year over year on a 9% increase in capacity.

The competitive dynamic in the market remains the same.

<unk> continued to compete strongly for volume and have maintained our significant lead over southwest and load factor and PRASM.

The most recent Dot's statistics for the second quarter show Us had a 75% load factor compared to 47% for southwest.

And our PRASM of $30, one compared to a sub 15 PRASM for southwest.

Brent Overbeek: Following the Maui fires in early August, there was a sharp deceleration and demand from Maui travel over the remainder of the quarter. This resulted in North America entity prasm finishing down 10.5% year-over-year for the post-fire portion of the quarter. Imprasim was down 41.7% year-over-year for the Maui markets in the same period. On our neighbor island routes, the fires had a significant impact on both demand and average fare. Third quarter load factor was 74%, down 5.0% year-over-year, on a 9% increase in capacity.

These results demonstrate clearly that we are the inter island carrier of choice.

Although we are now lapping southwest $39 fares with last seat availability from last year. The Mali wildfires had depressed average fares for a period of time.

That said, we are seeing recent improvement in average fares signaling that the low point for yields is likely behind us.

We saw tangible recovery in Japan during the third quarter.

Load factors were in the upper eighties and approaching historical norms on the smaller capacity base for Hawaiian and the industry.

Brent Overbeek: The competitive dynamic in the market remains the same. We continue to compete strongly for volume and have maintained our significant lead over Southwest and load factor and prasm. The most recent DOT statistics for the second quarter show us that a 75% load factor compared to 47% for Southwest. Interprasm of 30.1 cents compared to a sub-15 cent prasm for Southwest. These results demonstrate clearly that we are the inner island carrier of choice.

Third quarter industry capacity was about 56% of 2019, and we expect total Japan to Hawaii industry capacity to increase to almost 70% of 2019 levels by the end of the quarter.

With capacity, increasing we have seen sequential slowing in unit revenue, but anticipate that improves as we head into 2024, and Japan point of sale traffic continues to recover.

In our international network outside of Japan U S point of sale traffic remained very strong.

Brent Overbeek: Although we are now lapping Southwest $39 fairs with last seed availability from last year, the Maui wildfires had depressed average fares for a period of time. That said, we are seeing recent improvement in average fares signaling that the low-point for yields is likely behind us. We saw a tangible recovery in Japan during the third quarter. Load factors were in the upper 80s and approaching historical norms on a smaller capacity base for Hawaiian and the industry.

Our New Zealand, Australia, and Korea markets have not been significantly impacted by the Maui fires.

Passenger revenue for our international routes, including Japan is up over 90% for the third quarter of this year compared to 2022.

Korea in particular continues to be a strong market.

Average fares in Australia, and New Zealand are positive compared to 2019, but we're facing some difficult comps due to the surge of pent up travel demand in 2022.

Brent Overbeek: Third quarter industry capacity was about 56% of 2019, and we expect total Japan to Hawaii industry capacity to increase to almost 70% of 2019 levels by the end of the quarter. With capacity increasing, we've seen sequential slowing in the unit revenue, but anticipate that improves as we head into 2024, and Japan point of sale traffic continues to recover. In our international network outside of Japan, US point of sale traffic remained very strong.

Last week, we announced that we will turn our year round thrice weekly Honolulu to Auckland service into a seasonal route during the New Zealand summer.

Auckland demand remains strong in the summer season reinforced by strong U S point of sale traffic and this move to seasonal service reflects our focus on being more nimble and adaptable with schedules to address demand seasonality across our network.

Our co brand credit card had another good quarter with third quarter revenue up almost 2% over the same period in 2022.

Brent Overbeek: Our New Zealand, Australia, and Korea markets have not been significantly impacted by the Maui fires. Passengers revenue for our international routes including Japan is up over 90% for the third quarter of this year compared to 2022. Korea in particular continues to be a strong market. Average fares in Australia and New Zealand are positive compared to 2019, but we are facing some difficult comps due to the surge of pent-up travel demand in 2022.

This year's strong credit card performance, particularly on new card acquisition reinforces our confidence in the growth potential of this business and the deep demand for Hawaii vacations as a favorite reward for cardholders.

Looking ahead to the next quarter, none Maui bookings continue to improve albeit with lower fare levels in the main cabin.

Now the bookings have been improving especially closer to departure, although at significantly reduced yields.

Brent Overbeek: Last week, we announced that we will turn our year-round, Thrice Weekly, Honolulu, to Auckland Service, into a seasonal route during the New Zealand summer. Auckland demand remains strong in the summer season, reinforced by strong U.S, point of sale traffic. And this move to seasonal service reflects our focus on being more nimble and adaptable with schedules to address demand seasonality across our network. Our co-bank credit card had another good quarter, with 30 quarter revenue up almost 2% over the same period in 2022.

For International we are satisfied with the return of Japan point of sale demand, which is creating a larger overall demand pool for our service.

It fares in the short term that are sequentially lower than we anticipate going forward.

While we are seeing continued year over year improvements in international RASM the growth is sequentially slower compared to the third quarter of 2000.

2023.

Brent Overbeek: This year's strong credit card performance, particularly on new card acquisition, reinforces our confidence in the growth potential of this business and a deep demand for Hawaii vacations as a favorite reward for card holders. Looking ahead to the next quarter, non-Malley bookings continue to improve, albeit with lower fare levels in the main cabin. Maui bookings have been improving, especially closer to departure, although it significantly reduced yields. For international, we're satisfied with the return of Japan point of sale to the man, which is creating a larger overall demand pool for our service.

For the network as a whole we expect RASM to be down approximately 11, 5% on capacity growth of about 3% for the fourth quarter compared to the same period in 2022.

Headwinds to RASM are similar to those shared in previous quarters with the addition of short term effects of the Maui fires.

These headwinds include.

Six points from the deterioration in revenue due to the Maui fires, which we anticipate will improve over time.

About four points and spoilage and this should be the last quarter of a challenging comparison as we lapped last year's high watermark for spoilage.

And about one point from cargo as activity normalizes to 2019 levels from the highs of 2022.

Brent Overbeek: I'll be it at fairs in the short term that are sequentially lower than we anticipate going forward. While we are seeing continued year-over-year improvements in international rasm, the growth is sequentially slower compared to the third quarter of 2023. For the network as a whole, we expect Rasm to be down approximately 11.5% on capacity growth of about 3% for the fourth quarter compared to the same period in 2022. Headwinds to Rasm are similar to those shared in previous quarters, with the addition of short-term effects of the Maui fires.

Now that we have better clarity for the remainder of the year on the engine shortfall from Pratt and Whitney and the impact from the Maui fires our capacity guidance for the full year has been revised to up seven 5% to up eight 5%.

We continue to remain confident in the core revenue generating capability of our business.

We are the carrier of choice and outperformed competitors in each of the core Hawaii markets that we serve.

Brent Overbeek: These headwinds include six points from the deterioration and revenue due to the Maui fires, which we anticipate will improve over time. About four points in spoilage, and this should be the last quarter of a challenging comparison as we last year's high watermark for spoilage. And about one point from cargo is activity normalizes to 2019 levels from the highs of 2022. Now that we have better clarity for the remainder of the year on the engine shortfall from Pratt & Whitney and the impact from the Maui fires, our capacity guidance for the full year has been revised to up 7.5% to up 8.5%.

The headwinds on fares and demand we are facing from the Maui wildfires should be short term in nature, and we will overcome those in time.

<unk> hundred 21 engine engine issues, our near term challenge, but with the arrival of our 780 Sevens, we're looking forward to opportunities for longer haul growth in 2024.

Once we obtain certainty on our <unk> hundred 21 engines. We're also encouraged about the plans we can develop with our expanded fleet.

And with that I'll turn the call over to Shannon.

Thanks Brent.

Hello, everyone and thank you for joining us today.

We ended the third quarter with an adjusted EBITDA loss of about $12 million or an adjusted loss of $1 <unk> per share.

Which is about $40 million lower than we had forecast at the beginning of the quarter.

Brent Overbeek: We continue to remain confident in the core revenue-generating capability of our business. We are the carrier of choice and outperform competitors in each of the core Hawaii markets that we serve. The headwinds on fairs and demand we are facing from the Maui wildfires should be short-term in nature, and we will overcome those in time. The 8.321 engine issues are near-term challenge, but with the arrival of our 7.870s, we're looking forward to opportunities for longer-haul growth in 2024.

Barely driven by the impact of the Maui wildfires and increase in fuel prices.

Unit costs, excluding fuel came in at the higher end of the updated guidance range from September five primarily due to lower than expected capacity as a result of the <unk> hundred 21, Neil engine and operational challenges.

Given the close end nature of the cancellations it was difficult to significantly reduce our cost to match the decreased capacity.

Shannon Okinaka: Once we obtain certainty on our 8.321 engines, we're also encouraged about the plans we can develop with our expanded fleet, and with that, I'll turn the call over to Shannon. Thanks, Brent.

Though certain variable costs, such as steel consumption and landing fees were appointed.

With respect to our balance sheet and liquidity, our cash position decreased in the third quarter, resulting from normal ATL seasonality.

Shannon Okinaka: Hello, everyone, and thank you for joining us today. We ended the 3rd quarter with an adjusted EBITDA loss of about $12 million, or an adjusted loss of $1.06 per share, which is about $40 million lower than we had forecast at the beginning of the quarter, primarily driven by the impact of the Maui wildfires and increase in fuel prices. Unit costs, excluding fuel, came in at the higher end of the updated guidance range from September 5, primarily due to lower than expected capacity as a result of the A321 Neo Engine and operational challenges.

Masterbated by refunds and reduced bookings as a result of the Maui fires.

With that said, we have one $4 billion of liquidity, which includes a $235 million undrawn revolver, which is about 50% of our trailing 12 month revenue and twice our pre pandemic liquidity target.

While our liquidity remains strong we will likely finance the first several of our 77 deliveries.

Received proposals from several lenders and lessors.

Finalize our financing plan for 2024 soon.

In addition to our existing unencumbered assets.

Shannon Okinaka: Given the close in nature of the calculations, it was difficult to significantly reduce our costs to match the decreased capacity, although certain variable costs such as fuel consumption and landing fees were avoided. With respect to our balance sheet and liquidity, our cash position decreased in the third quarter, resulting from normal ATLC personality exacerbated by refunds and reduced bookings as a result of the Maui fires. With that said, we have $1.4 billion of liquidity which includes a $235 million undrawn revolver, which is about 50% of our trailing 12 month revenue and twice our pre-pandemic liquidity target.

<unk> seven is a very financeable airplanes, and Hawaiian is an attractive named to the financing community.

Our fourth quarter costs remain elevated as we approach the conclusion of preparations to bring the 77 and <unk> hundred 30 freighters into service throughout 2024.

We're currently carrying about 25% more pilots on our payroll than we did in 2019 for about the same amount of capacity.

As the capacity that we're planning for comes online our training bubble will deflate and pilot productivity will improve.

We expect this improvement to grow throughout 2024 and decrease from a CASM impact of 0.26.

Shannon Okinaka: While our liquidity remains strong, we will likely finance the first several of our 787 deliveries. We received proposals from several lenders and lessores and will finalize our financing plan for 2024 soon. In addition to our existing unencumbered assets, the 787 is a very financeable airplane and Hawaiian is an attractive name to the financing community. Our fourth quarter costs remain elevated as we approach the conclusion of preparations to bring the 787 and a 330 freighters into service throughout 2024.

In the fourth quarter of 2003.

<unk> 0.14 cents.

In the fourth quarter of 24 at the then current pilot rate.

Which is a 50% improvement.

We expect our fourth quarter unit costs, excluding fuel and special items to be about 8% higher than the same period in 2022.

With similar drivers to the prior quarter include.

Including approximately five percentage points from increases in labor costs and benefits, which resulted primarily from the new pilot contract and the higher number of pilots in training and other rate increases.

Shannon Okinaka: We're currently carrying about 25% more pilots on our payroll than we did in 2019 for about the same amount of capacity. As the capacity that we're planning for comes online, our training bubble will deflate and pilot productivity will improve. We expect this improvement to grow throughout 2024 and decrease from a chasm impact of 0.26 cents in the fourth quarter of 23 to 0.14 cents in the fourth quarter of 24 at the then current pilot rates, which is a 50% improvement.

About one point from a higher number of heavy maintenance events.

One point from higher airport right.

And two points for close in cancellations, which resulted in lower capacity.

Partially offset by Pratt <unk> Whitney compensation credits for grounded aircraft.

Commensurately, we expect our full year CASM ex guidance to be up four to five 5%.

We expect the benefits from initiatives such as our <unk> hundred 30 maintenance in sourcing our new passenger service system and CVA related work rule changes to ramp up in 2024 as these investments mature.

Shannon Okinaka: We expect our fourth quarter unit costs, excluding fuel and special items, to be about 8% higher than the same period in 2022, with similar drivers to the prior quarter, including approximately 5 percentage points from increases in labor costs and benefits, which result primarily from the new pilot contracts and the higher number of pilots in training and other rate increases. About one point from a higher number of heavy maintenance events, one point from higher airport rates, and two points for close-intensulations, which resulted in lower capacity.

And we will pursue further operating cost improvements due to continued investments in technology and analytics to drive increased productivity.

Turning to our fleet plan, we have executed two year extensions for four <unk> hundred 30 leases that would have otherwise expired in 2024.

In addition to ownership cost improvement.

The extensions will collectively enable us to maintain our network plans and mitigate the impact of the ongoing <unk> hundred 21 engine challenges.

Shannon Okinaka: Partially offset by Pratt & Whitney compensation credits for grounded aircraft. Commencementally, we expect our full-year chasm ex-guidance to be up 4 to 5.5%. We expect the benefits from initiatives such as our A330 maintenance in sourcing, our CBA-related work world changes to ramp up in 2024 as these investments mature, and we will pursue further operating cost improvement through continued investment in technology and analytics to drive increased productivity. Turning to our fleet plans, we have executed two-year extensions for 4A330 leases that would have otherwise expired in 2024.

Including the new lease terms on these aircraft we have a total of 12 aircraft leases that will expire between 2025 and 2029, if not extended.

It's exciting to be at a point where were.

Where we will soon start to see an acceleration of the benefits from investments that have been drivers of increased expense this year.

While we are facing a number of near term challenges the durable financial foundation that we have built enables us to endure them and emerge stronger.

In the last few years have taught us anything it's how to be nimble and adjust to circumstances.

We'll continue to do as long as necessary.

And with that we can open up the call for questions.

Thank you.

Shannon Okinaka: In addition to ownership cost improvements, the extensions will collectively enable us to maintain our network plans and mitigate the impact of the ongoing A321 engine challenges. Including the new lease terms on these aircraft, we have a total of 12 aircraft leases that will expire between 2025 and 2029 if not extended. It's exciting to be at a point where we'll soon start to see an acceleration of the benefits from investments that have been drivers of increased expense this year. While we're facing a number of near-term challenges, the durable financial foundation that we have built enables us to endure them and emerge stronger.

Ladies and gentlemen, we will now be conducting a question and answer session.

I would like to ask a question. Please press star and one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue.

You May press Star two if you 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.

Ladies and gentlemen, we request you to restrict to one question and one follow up question for participants.

Our first question comes from the line of Ghana.

Cunningham with Melius research. Please go ahead.

Shannon Okinaka: It's the last few years have taught us anything, it's how to be nimble and adjusted circumstances, which will continue to do as long as necessary.

Hi, Bryan Thank you.

When looking at passenger trends to Hawaii, It seems like inbound travelers from Japan.

Shannon Okinaka: And with that, we can open up the call for questions. Thank you.

That recovery is kind of stalled out the last two months or so.

Through October.

Curious if you're actually seeing that in the data right now and then you know maybe any thoughts on what the slowdown is I know Bryan you mentioned.

Operator: Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. Our confirmation tone will indicate your line is in the question queue. You may press star and two if you 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.

The lower fee lower fares and whatnot just on I was just curious on the recovery just seems like it should be doing better I don't know if theres any like Maui impact from that as well. Thank you.

Yes.

Japan had a really strong August holidays and so.

The front and middle part of the month there performed.

Exceptionally well.

Operator: Ladies and gentlemen, we request you to restrict to one question and one follow-up question for a participant.

And there was.

We had some of our own and there was some additional industry capacity in that window.

Conor Cunningham: Our first question comes from the line of Connor, cunning him with media's research. Please go ahead. Hi, everyone. Thank you. You know, when looking at passenger trends to Hawaii, it seems like inbound travelers from Japan, all that recovery is kind of stalled out the last two months or so, you know, through October. Just curious if you're actually seeing that in the data right now, and then maybe any thoughts on what this blood on is.

And so certainly that helped with arrivals.

They have and we were still running kind of load factors in the mid to upper <unk> and so demand overall remains strong.

Conor Cunningham: I know Brent, you mentioned the lower fairs and whatnot, just curious on the recovery. It just seems like it should be doing, but I didn't know if there's any like mally impact from that as well. Thank you. Yeah, Connor, Japan had a really strong August holidays, and so the front and middle part of the month there performed, you know, exceptionally well. And there was, we had some of our own, and there was some additional industry capacity in that window.

As we alluded to certainly we've got some more capacity online the industry has more capacity coming online in the fourth quarter.

That is generally getting filled up but like I said in my prepared remarks. It is we're starting we're seeing a little bit of what we believe is kind of short term pressure on on Japan point of sale yields is that.

As that capacity comes back online but.

We're also encouraged with the strength of the U S point of sale market and the amount of traffic that we're generating there.

Maybe just a follow up that a little bit and underscore something.

Brent said in his answer it's been a while since we.

Since we saw.

Strong traffic coming out of Japan, So, it's probably useful to remind people that there is a seasonality to it and that seasonality really has a pretty strong peak in late July throughout the month of August and into the early part of September and so some of what you may be seeing in.

Conor Cunningham: And so certainly that helped with arrivals. They have, you know, we were still running kind of load factors in the mid to upper 80s, and so demand overall remains strong. As we alluded to, certainly we've got some more capacity online. The industry has more capacity coming online in the fourth quarter. That is generally getting filled up, but like I said in my prepared remarks, we're seeing a little bit of what we believe is kind of short term pressure on Japan point of sale yields, is that is that capacity comes back online, but we're also encouraged with the strength of the US point of sale market and the amount of traffic that we're generating there.

The numbers partner is just reflecting of the run up towards very full flights on that peak and then a little acquired appeared it now before things pick up seasonally again towards the end of the year.

Okay, I'm much better with straight lines I know, it's a little bit easier for me.

<unk>.

Amit GTS staff.

Sure.

Youre scheduled capacity I think is down two points from just last week and I think you know your guidance today kind of implies another one point deceleration just I just is that the type of lead time that theyre, giving you just it seems really top from your from your standpoint that to manage the business with if they're only getting like a two week heads up on on one shot business may have happened.

Conor Cunningham: And maybe just to follow up that a little bit and underscore something that Brent said in his answer. It's been a while since we, since we saw a strong traffic coming out of Japan. So it's probably useful to remind people that there is a seasonality to it and that, you know, that seasonality really has a pretty strong peak in late July throughout the month of August and into the early part of September. And so some of what you may be seeing in the numbers, Conor, is just reflecting of the run-up towards very full flights on that peak.

Peter Ingram: And then a little quieter appeared in now before things pick up seasonally again towards the end of the year.

And then maybe within that is the Amazon flying included in your capacity guidance or is that something that's not friendly block hours or whatever.

Yes, let me, let me start with the the GTS and Brent can correct me, if I'm wrong, but.

Essentially.

What we've talked about on the call today in terms of our outlook for the schedule and having four.

The ability to withstand over the next few months.

For a O G.

Peter Ingram: Okay, I'm much better with straight lines. I don't know if it's a little bit easier for me then. Just on the GTF stuff, you know, your schedule capacity, I think, is down two points from just last week. And I think your guidance today kind of implies another one point acceleration. Just, you know, I just, is that the type of lead time that they're giving you? I just, it seems really tough from your standpoint that to manage the business with if they're only getting like a two week heads up on one shot business need to happen.

As reflected in the schedules that are published now that all of that information was published so theres not another.

<unk> to drop that we are aware of at this point from that.

I would say.

We had a pretty clear.

Picture.

<unk>.

What the inspection issue would drive for the back part of this year are those where a number of removals, we were required to make.

By September 15th which is the news we got just before our call three months ago.

What what changed in <unk>.

In late September and into October that has.

Peter Ingram: And then maybe within that is the Amazon flying included in your capacity. The answer is that something that's apparently block hours or whatever. Thank you. Yeah, let me, let me start with the GTF and Brent can correct me if I'm wrong. But essentially, what we've talked about on the call today in terms of our outlook for the schedule and having four, you know, the ability to withstand over the next few months for AOG is reflected in the schedules that are published now.

Required us to cut a little further here is we had some unscheduled removals, which can.

Which can and does happen on any fleet from time to time.

Both in the circumstance, we're in right now.

Where there are.

Limited to no spare engines available on the market to support that every one of those removals drives and other aircraft on ground, because we aren't sitting with a bunch of of spare engines and our hangar right now to be able to to accommodate that although candidly.

Peter Ingram: All that information was published. So there's not another shoe to drop that we are aware of at this point from that. I would say, you know, we had a pretty clear picture about what the inspection issue would drive for the back part of this year. Those were a number of removals that we were required to make by September 15th, which is the news we got just before our call. All three months ago, what would change in in late September and into October that has required us to cut a little further here is we had some unscheduled removals, which can, which can and does happen on any fleet from time to time.

A contractual standpoint, we should be.

Having that but we don't have those spare engines available. So we've tried to adjust the schedule now to provide a little bit of buffer. So we don't end up in a situation like we did over the last couple of months I will admit my Crystal ball is not perfect on this but we do feel better about the engine availability.

<unk> as we get.

Into the first quarter and really get the back part of the first quarter and further in the year. We have a number of engines that are in the MRO pipeline right now that are coming back so from our Hawaiian Airlines perspective.

Peter Ingram: But, you know, in the circumstance work in right now where there are limited to no spare engines available on the market to support that every one of those removals drives another aircraft on ground because we aren't sitting with a bunch of spare engines in our hangar right now to be able to accommodate that. Although, you know, candidly from a contractual standpoint, we should be having that, but we don't have those spare engines available.

Our engine availability should be improving as those come back.

But there.

Obviously, the situation has been frustrating and we have been.

Living a little bit too close to a razor's edge in terms of the ability of the market to withstand it and we really do need to.

To provide us with more certainty going forward.

Peter Ingram: So we've tried to adjust the schedule now to provide a little bit of buffer so we don't end up in a situation like we did over the last couple of months. I will admit my crystal ball is not perfect on this, but we do feel better about the engine availability situation as we get into the first quarter and really get, you know, the back part of the first quarter and further in the year.

The other part of your question was about the.

The Amazon.

Flying the freighter flying and whether that reflects our statistics and.

Certainly it wouldn't affect <unk> I think it is incorporated into our expectations about about fuel burn.

And our consumption and so it's built into the economics on the and the guidance as well the cost impact is reflected in the guidance, Yes. Connor obviously there are no seats on the air.

Peter Ingram: We have a number of engines that are in the MRO pipeline right now that are coming back so from a Hawaiian Airlines perspective, our engine availability should be improving as those come back. But there, you know, obviously the situation has been frustrating and we have been living a little bit too close to a razor's edge in terms of the ability of the market to withstand it and, you know, we really do need Pratt to provide us with more certainty going forward.

Aircrafts, so theyre not an ASM, we do have the impact included in our RASM CASM ex fuel guide.

Guidance.

But really for the fourth quarter, they're really small and then starts to have a bigger impact we'll break it out for you just to at least show what the direct cost impact is to CASM and revenue for RASM.

Thank you.

Peter Ingram: I think the other part of your question was about the Amazon flying the freighter flying and whether that affects our statistics and, you know, certainly it wouldn't affect ASMs. I think it is incorporated into our expectations about about fuel burn and our consumption. And so it's built into the economics and the guidance as well, the cost impact is reflected in the guidance. Yeah, Connor, obviously there are no seats on those aircrafts, so they're not in ASMs. We do have the impact included in our Ratham, Kazamax and fuel guidance. But really for the fourth quarter, they're really small.

Thank you.

Our next question comes from the line of Michael Lindenberg with Deutsche Bank. Please go ahead.

Hi.

This is hilary tuck in endocardial from Michael Lindenberg. Thank you for taking my questions. So you mentioned that you have any sense as.

At what time compensation agreement with pad on Whitney and last quarter. You said that you will get compensated in the form of credit is that still the case or has that changed at all to you know perhaps.

<unk>.

Could you talk about what the timing of that.

Thank you.

Yes, so the compensation is in the form of maintenance credits.

It gets recorded as an offset on our maintenance materials and repairs line and effectively it is.

Brent Overbeek: As it starts to get, have a bigger impact, we'll break it out for you just to at least show what the direct cost impact is to Kazamax and revenue for Ratham. Thank you.

It helps to offset payments, we would make for power by the hour charges.

And then will that be reflected for the fourth quarter in terms of timing.

Michael Linenberg: Our next question comes from the line of Michael Linenberg with Deutsche Bank, please go ahead Hi, this is Hillary Cacanando calling you for Michael Linenberg, thank you for taking my question. So, you mentioned that you have reached a short term, you know, compensation agreement with Pat and Whitney. And last quarter, we said that you get compensated in the form of maintenance credit. Is that still the case or has that changed at all?

It will be reflected as we.

As we use the credits.

As we start incurring being higher power by the hour charges.

We've been accruing that over the past couple of quarters. So it is reflected in in the third quarter and I think some may have been reflected in the second quarter as well and it does carry into the fourth.

Okay got it and then and then you announced that you your flight.

Shannon Okinaka: To, you know, past, you know, increased cash compensation and and to talk about what the timing of that payment will be. Thank you. Yeah, so the compensation is in the form of maintenance credits. We, it gets recorded as an offset on our maintenance materials and repairs line and effectively it, it helps offset payments we would make for power by the hour charges. And then will that be reflected for the fourth quarter, in terms of timing?

Tokyo Haneda I was just wondering if you could talk about how the bookings have been helpful.

Yes, I would say bookings are certainly looking solid haneda in particular, it looks looks quite good as we continue to ramp our capacity up.

In the fourth quarter and I think overall, we're encouraged with demand, particularly the strength of U S point of sale demand and we will continue to build on Japan point of sale. So I think overall, we feel we feel positive with where we're at in another.

Shannon Okinaka: It'll be reflected as we, as we use the credits. So as, as we start incurring, being her power by the hour charges will also credit, we've been accruing that over the past couple of quarters. So it is reflected in in the third quarter. And I think some may have been reflected in the second quarter as well. And it does carry into the fourth.

Great. Thank you very much.

Thank you.

Our next question comes from the line of Catherine O'brien with Goldman Sachs. Please go ahead.

Hi, everyone. Thanks for the time I guess first I want to thank my thoughts of them with you all since the Maui.

Shannon Okinaka: Okay, got it. And then, and then you announced that you, you flight, you know, to Tokyo, Haneda, I was just wondering if you could talk about how the bookings have been looking. Yeah, I would say bookings are certainly looking solid. Haneda in particular, it looks, looks quite good as we continue to ramp our capacity up in the fourth quarter. And I think overall we're, you know, we're encouraged with demand, particularly the strength of US point of sale demand and will continue to build on Japan point of sale. So I think overall, you know, we feel, we feel positive with where we're at in Haneda.

Sally wildfires.

Hum.

And I had a question on Maui.

You've spoken to the impact on demand and loss revenue in the quarter with things still trending below normal historical but that's starting to pick up can you speak to how bookings look for Maui for the holidays and any early look on spring break into next year.

Shannon Okinaka: Great. Thank you very much.

Yes, so right now the holidays, both kind of Thanksgiving and Christmas generally look pretty good.

Pricing Thats those are really strong demand periods and so.

Average fares and those remain pretty strong so I think where.

We're encouraged with that I would say in the context of spring break it is still a little early on that.

Catherine O'brien: Thank you. Our next question comes from the line of Catherine O'Brien with Goldman Sachs. Please go ahead. Hi, everyone. Thanks for the time.

Load factors and at the end of the first quarter. There are still relatively low and there was a bit of a pause around the event, where folks were a little bit uncertain about planning further out travel.

Peter Ingram: I guess, first, you know, I want to say my thoughts have been with you all since the, being Maui wildfires. And I had a question on Maui, so I know you've spoken to the impact on demand and lost revenue in the quarter with things still trending below normal historical, but starting to pick up. Can you just speak to how bookings look from Maui for the holidays and any early look on spring break into next year.

We have seen as we mentioned in our prepared remarks, Katie that in close demand has been pretty strong and so I think things have been pretty had been fine for the spring.

But as we get out of the fourth quarter and into the first quarter. We anticipate those will continue to strengthen.

Peter Ingram: Yeah, so right now the holidays, both kind of Thanksgiving and Christmas generally look pretty good, you know, pricing that those are really strong demand periods. And so average shares and those remain pretty strong. So I think we're, we're encouraged with that. I would say in the context of spring break. It's still a little early on that, you know, we're load factors and at the end of the first quarter there are still relatively low and there was a bit of a pause around the event where folks were a little bit uncertain about planning further out travel.

Great. Thanks for that and then.

Two part question on 77 of you'll allow it I guess the first quickly why is that starting service on the West Coast is there sounds like operational consideration or.

I just figured that would ultimately be deployed.

Our National and then and then maybe one for Shannon just like you know as you send out the rfps for the financing of those first couple of 77.

There are initially looking attractive sale.

Leasebacks have gotten a bit more expensive over the last six months, but but not sure. If on a relative basis is that still more attractive than traditional debt financing given where interest rates are today I appreciate all the time everyone.

Yes, why don't I.

Take the <unk>.

First part of that and then turn it over to Shannon to talk about.

Peter Ingram: We have seen as we mentioned in our prepare remarks, Katie, that in close demand has been pretty strong. And so I think things have been pretty, you know, have been fine for the spring. But as we get out of the fourth quarter and the first quarter, we anticipate those will continue to strengthen. Great things for that.

The financing.

It's actually quite an insightful.

Question, Katy because I.

I think about the.

787, it is our most fuel efficient will.

It will be our most fuel efficient long haul airplane, it's got greater capacity and it's got a big premium cabin. So you want to put it in a market like New York, where you really check every.

Catherine O'brien: And then a two part question on 787, if you'll allow it. I guess, first, quickly, why is that starting service on the West Coast? Is there some, like, operational consideration? Or, you know, I just figured that would ultimately be deployed international and then maybe one for Shannon, just like, you know, as you send out the RFPs for the financing of those first couple of 787s, you know, what markets are initially looking attractive?

Every box.

Hi, premium demand ability to full up fill up the airplane even on.

Days in the middle of the week and really take advantage of the fuel efficiency.

Our operational considerations that compel us to put the first one on the West Coast. One is we need a place where we can do overnight maintenance on the aircraft and that is initially going to be in.

Catherine O'brien: You know, I've heard Sally Specks have gotten a bit more expensive over the last six months, but not sure if on a relative basis, maybe that's still more attractive than, you know, traditional, that financing, you know, given where interviews are today. Appreciate all the time, everyone.

In Los Angeles, as we start ramping up and we need a place where the aircraft is going to be on the ground for eight to 10 hours a night so that every <unk>.

Peter Ingram: Yeah, why don't I take the first part of that and then turn it over to Shannon to talk about the financing? It's actually quite an insightful question, Katie, because, you know, as I think about the 787, it is our most fuel efficient, will be our most fuel efficient long haul airplane. It's got greater capacity and it's got a big premium cabin, so you want to put it in a market like New York where you really check every, every box of high premium demand, ability to fill up, fill up the airplane, even on, you know, days in the middle of the week and really take advantage of the fuel efficiency.

Third there so we can get some maintenance attention on it and we don't have that on our longer haul flights, where the aircrafts tender.

After being on the ground for just just a couple of hours. The other thing it helps us with is building up.

Initial experience for our pilots on that aircraft.

They are having a shorter route to the west coast gives us more takeoffs and landings and the ability to.

To build up that experience and so.

Those two factors push us to starting on the West coast, but we're definitely going to want to stretch the legs of that aircraft as we get deeper into 'twenty four and into 2025.

Peter Ingram: There are operational considerations that can tell us, but the first one on the west coast, though, one is we need a place where we can do overnight maintenance on the aircraft and that is initially going to be in Los Angeles as we start ramping up and, you know, we need a place where the aircraft is going to be on the ground for eight to 10 hours a night so that every third day or so we can get some maintenance attention on it. And we don't have that on our longer haul flights where the aircraft can turn after being on the ground for just just a couple of hours.

And I'll I'll take up the RFP on financing.

To your point, we are looking at a variety of.

Different vehicles, Unfortunately, we're not going to get to the sub 1% Jonathan.

Japanese he hadn't had that we did back with the <unk> hundred 21 Neo.

But we're finding that there is a lot of opportunity, albeit a little bit more expensive than what we've had them on our books prior but we see the regular debt financing markets public markets as well as some opportunities in Japan that we're pursuing so we're still in some of the initial phases of the process, but we will provide updates.

Peter Ingram: The other thing it helps us with is building up initial experience for our pilots on that aircraft. You know, they having a shorter route to the west coast gives us more takeoffs and landings and the ability to build up that experience. And so those two factors push us to starting on the west coast, but we're definitely going to want to stretch the legs of that aircraft as we get deeper into 24 and into 2025.

As we progress.

Or we'd all love to have 1% financing alright. Thank you so much for your time.

Thank you.

Our next question comes from the line of Andrew <unk> with Bank of America. Please go ahead.

Hi, Good afternoon, everyone first question for Brent just wanted to ask about.

Shannon Okinaka: Yeah, and I'll take up the RFP on financing. To your point, we are looking at a variety of different vehicles. Unfortunately, we're not going to get to the sub one percent Japanese the end that we did back with the A321 news, but we're finding that there is a lot of opportunity. We albeit a little bit more expensive than what we've had on our books prior, but we see, you know, the regular debt financing markets, the public markets as well as some opportunities in Japan that we're pursuing.

Pan and the cadence.

The recovery expectations. There I think you said in your prepared remarks that Japan would be kind of bank capacity would be 70%, 70% recovered by the end of the fourth quarter relative to 2019, how are you thinking about the build back there in 2024.

And when do you think your Japan actually it could be back to 2019 levels of capacity.

So we.

Shannon Okinaka: So we're still in some of the initial phases of the process, but we'll provide updates as we progress. We all love sub one percent financing. All right.

And we think that kind of industry 2019 ends up with a little bit of a strange comp as you flip from.

From <unk> to <unk>.

Catherine O'brien: Thank you so much for the time. Thank you.

We.

From what we see in kind of industry schedules industry capacity excluding us.

Andrew Didora: Our next question comes from the line of Andrew Dedora with Bank of America. Please go ahead. Hi, good afternoon, everyone.

Is is pretty flat quarter to quarter as we go from December into the first quarter.

Brent Overbeek: First question for Brent. I just wanted to ask about Japan and the cadence of the recovery expectations there. I think you said in your prepared remarks that Japan would be, Japan capacity would be 70 percent recovered by the end of the fourth quarter of 2019. How are you thinking about the build back there in 2024? And when do you think your Japan energy could be back to 2019 levels of capacity? So, we think that kind of industry, 2019 ends up with a little bit of a strange comp as you flip from 4Q to 1Q.

We ramp up a little bit more capacity in terms of our night slot in service.

To Kona and.

And our our midnight frequency to Honolulu, and so that will ramp itself up over the first quarter and have a little bit more growth in.

In Japan capacity.

Obviously the longer the further we get away from Japan opening up is allows a greater time for booking curve.

<unk> allows more traffic to come on the books and so.

We're trying to match our capacity coming back in line with with Japan point of origin travel in particular continuing to strengthen.

Okay. Thank you for that and then maybe a two parter for first Shannon.

Brent Overbeek: You know, we, from what we see in kind of industry schedules, industry capacity excluding us is pretty flat quarter to quarter as we go from December into the first quarter. We ramp up a little bit more capacity in terms of our night slot and service to Kona and our midnight frequency to Honolulu. And so that will ramp itself up over the first quarter and have a little bit more growth in Japan capacity.

Thank you for the color around liquidity in your prepared remarks.

Do you have what percentage of your assets are currently unencumbered.

And then the second part of my question are you seeing any credit card hold backs given the cancellations you're experiencing thanks.

Yes, I don't know the exact percentage, but we've got a number of aircraft that remain unencumbered to the value of about $560 million.

On the credit card Holdback no we're.

Brent Overbeek: Obviously the longer the further we get away from Japan opening up is allows greater time for booking curve and allows more traffic to come on the books. And so we're, you know, we're trying to match our capacity coming back in line with which Japan point of course and travel in particular, continuing to strengthen. Okay. Thank you for that.

We're not seeing anything like that I think we've still got a very strong business.

<unk> are beginning to build back so we haven't had any discussions.

Thanks, Thanks Opex.

Got it thank you.

Thank you.

Next question comes from the line of Helen Becker with.

Shannon Okinaka: And then maybe a two-parter for Shannon. Thank you for the color around liquidity in your prepared remarks. Do you have what percentage of your assets are currently unencumbered? And then the second part of my question, are you seeing any credit card holdbacks given the cancellations you're experiencing? Thanks. Yeah, I don't know the exact percentage but we've got a number of aircraft that remain unencumbered to the value of about $560 million. On the credit card holdbacks, no, we were not seeing anything like that. I think we still got a very strong business. Bookings are beginning to build back. So we haven't had even any discussions about things like fullbacks. Got it.

Colin Please go ahead.

Thanks, very much operator, hi, everybody and thank you very much for the time.

Shannon Okinaka: Thank you.

I just have a couple of clarification questions actually I saw an article this morning that talked about you guys signing up Lufthansa Technik to do <unk> hundred 30, <unk> hundred 21 maintenance and I'm just kind of wondering if that article is accurate and what the timing of that will be.

Yes, the articles are accurate.

I believe the agreement there is four <unk>.

<unk> as a technique to provide components support for <unk> hundred 20 ones and <unk> hundred <unk> and I think we're also going to use them for our 787. So this was a <unk>.

Business that we had we had elsewhere previously and when we did our <unk> hundred 30 and sourcing it gave us an opportunity to run a comprehensive RFP and get the best market terms that were available and so we've done that so it's really around providing.

Helen Becker: Our next question comes from the line of Helen Becker with TD Coven. Please go ahead. Thanks very much operator. Hi everybody. And thank you very much for the time. I just have a couple of clarification questions actually. I saw an article this morning that I talked about you guys signing up. Lufthansa Technic to do a 330 and a 321 maintenance. And I'm just kind of wondering if that article is accurate and what the timing of that will be.

Components support for various.

Various pieces of equipment on the aircraft.

Okay. That's really helpful. Thank you and then for my follow up question.

So you have one aircraft that started service for Amazon and I'm, just kind of wondering if you could talk about you know its been about two weeks.

Talk about the performance and whether youre going to in 'twenty I guess it would be 2025 breakout.

Helen Becker: Yeah, the article is accurate. I believe the agreement there is for Lufthansa Technic to provide component support for a 321s and a 330s. And I think we're also going to use them for our 787. So this was a business that we had we had elsewhere previously. When we did our a 330 and sourcing it gave us an opportunity to run a comprehensive RFP and get the best market terms that were available. And so we've we've done that. So it's really around providing, you know, component support for for various. Various pieces of equipment on the aircraft. Okay, that's really helpful.

Helen Becker: Thank you, and then for my follow-up question.

Break out that revenue line or included in cargo and other revenue I don't know how should we think about like parsing that out if at all.

Yes, well, let me let me let me start and then Shannon can can follow up or correct me if I get anything wrong here in terms of the operating performance. We were pleased how things of.

I've been going so far it's great to to get into a place where.

Instead of just incurring startup costs and no revenue were operating revenue flights and getting the business growing our on time performance has been very good so far which is crucial in this arrangement part of the reason.

Helen Becker: So you have one aircraft that started service for Amazon, and I'm just kind of wondering if you could talk about, you know, it's been what, two weeks. Any other revenue? I don't know. How should we think about, like, parsing that out, if at all?

Why we were sought out to bid for this work so.

It's great to be up and running in terms of of how it appears on the <unk>.

On the income statement I'll, let Shannon go through it in.

And more <unk>.

Detail.

But.

Essentially.

Right now, it's not particularly material. So we're not breaking anything out as it becomes more material over time, we're going to look at the best way to break it out and Shannon can talk about things that we're thinking about yeah. So for sure Helane It would be part of other revenue, but as it gets more material right now we're anticipating.

Peter Ingram: Yeah, let me, let me start, and then Shannon can follow up or correct me if I get anything wrong here. In terms of the operating performance, we're pleased how things have been going so far. It's great to get into a place where, you know, instead of just incurring start-up costs and no revenue, we're operating revenue flights and getting the business growing or on-time performance has been very good so far, which is crucial in this arrangement, part of the reason why we were sought out to bid for this work. So it's great to be up and running.

In 2025 to your point.

Actually move ourselves into segment reporting and we haven't quite finalized exactly how we define the segments, but I.

I would think that however, we do the segment reporting you should see more clearly what part of our direct revenues and costs are our Amazon related and then we'll have to do some allocations in that accounting as well, but it'll come through the segment reporting piece of R. F.

Shannon Okinaka: In terms of how it appears on the income statement, I'll let Shannon go through it in more detail. But essentially, right now, it's not particularly material, so we're not breaking anything out. As it becomes more material over time, we're going to look at the best way to break it out and Shannon can talk about what things that we're thinking about. Yeah, so for sure, Helen, it would be part of, you know, other revenue, but as it gets more material right now, we're anticipating 2025 to your point.

Let's see reports.

Okay. Thank you when you when you just one other clarification question. When you report form on form 41 cargo volumes.

The Amazon volumes be included in that or the separated.

I am going to have to follow up with you on that question yes.

Yes, we'll follow up with you.

Elena just circling back on your.

First question I want to clarify one thing.

The Lufthansa technique agreement is covering 80, 321, and 330 components for it it's not 787.

Shannon Okinaka: We actually move ourselves into segment reporting and we haven't quite finalized exactly how we define the segments, but I would think that however we do, the segment reporting, you should see more clearly what part of our direct revenues and costs are Amazon related. And we'll have to do some allocations in that accounting as well, but it'll come through the segment reporting piece of our SC reports.

Different.

Contract for that one.

Okay, Alright, Thats really helpful. Thanks team.

Okay. Thanks, a lot.

Thank you. Our next question comes from the line of Chris <unk> with <unk>.

Susquehanna International Group. Please go ahead.

Thank you for taking my question. So Peter there as we think about 2024 I know you're still in your planning phase here, but.

Shannon Okinaka: Okay, thank you. When you just want other clarification question, when you report form on form 41 cargo volumes, will the Amazon volumes be included in that or are they separated? I am going to have to follow up with you on that question. Yeah, we'll follow up with you.

A lot of moving pieces here with the 787 <unk> hundred <unk>.

Where japan will be at that point.

With its recovery so as we think about all that.

Stage gauge and departures any color, how we should think about capacity for <unk>.

Peter Ingram: And Helen, Elaine, just circling back on your first question, I want to clarify one thing. The, the Lefkanzah technique agreement is covering a 321 and 330 components for it's not 787. That's a, that's a different contract for that one. Okay, all right, that's really helpful. Thanks, team. Okay, thanks a lot. Thank you.

Next year.

We put those pieces together thank you.

Yes.

Let me let.

Let me start and then hand it over to Brent I think we will we've got an opportunity for some growth next year, we've got we've got.

780 Sevens.

Coming.

Throughout the.

Chris Chetopoulos: Our next question comes from the line of Chris Chetopoulos with the square now international group. Please go ahead. Thank you for taking my question. So Peter, as you think about 2024, I know you're still in your planning phase here, but there's a lot of moving pieces here with the 787-830s, where Japan will be at that point with its recovery. So, we think about all that and stage gauge in departures, any color of how we should think about capacity for next year as we produce pieces together. Thank you.

The year I think we have.

At least three in service by the end of the year on a fourth one coming late in the year. So there will be some contribution from that.

It's.

I would like to think that as we get fully into the year, we're going to have all the the.

320 ones.

Lying again, that's obviously subject to discussions for the reasons, we've talked about earlier, but we do feel better as I mentioned in my prepared remarks about the aircrafts are the engine availability as we start getting some of those those MRO returns. So we're not.

Going to be providing guidance at this time, but we do see.

Peter Ingram: Yeah, let me start and then hand it over to Brent. I think we will. We've got an opportunity for some growth next year. We've got 787s coming throughout the year. I think we have at least three in service by the end of the year on a fourth one coming late in the year, so there will be some contribution from that. I would like to think that as we get fully into the year, we're going to have all the 321s flying again.

Things growing as we have the annual ovation of bringing Japan back this year and then the incremental fleet availability coming into next year. So it does position it as a year for capacity growth for us.

Okay.

Follow up Shannon I think you said on the 60% impact.

For for Q, you actually gave a percent per ASM.

Number there.

Is that just on <unk>.

A larger capacity base does that include any.

Productivity within the network just wanted to understand how we're getting to that I think it was 50%.

Peter Ingram: That's obviously subject to discussions for the reasons we've talked about earlier, but we do feel better, as I mentioned, in my prepared remarks about the aircraft or the engine availability, as we start getting some of those MR overturned.

Number by the end of <unk>.

<unk> next year. Thank you.

That was when I was talking about the pilot productivity and the number of excess pilots we have on property due to all of the training.

Shannon Okinaka: So, we're not going to be providing guidance at this time, but we do see things growing as we have the annualization of bringing Japan back this year and then the incremental fleet availability coming into next year, so it does position it as a year for capacity growth for us. Okay, and as a follow up, Shannon, I think you said on the 50 percent impact for 4Q, you actually gave a percent for ASM number there.

Get ready for the 77.

Deliveries in 83 freighters. So when it refers to is just that CASM impact from having that excess number of pilots versus 2019 and so we.

Decrease that CASM impact by 50%.

From the end of 2003 to the end of 'twenty four so thats what that referred to.

Shannon Okinaka: Is that just on a larger capacity base? Does that include any productivity within the network? Just want to understand how we're getting to that. I think it was 50 percent number by the end of 4Q next year. Thank you. Yeah, that was when I was talking about the pilot productivity and the number of excess pilots we have on property due to all of the training to get ready for the 787 deliveries and 823 freighters.

Okay. Thank you.

Thank you.

Our next question comes from the line of Dan Mckenzie with Seaport Global. Please go ahead.

Oh, Hey, Thanks, guys couple.

Couple of questions here I guess my first question is really a schedules versus a revenue question with respect to California.

So I guess just setting aside the Maui wildfires, you know it looks like San Francisco and Los Angeles, Our cities were flying has not yet recovered to 2019 levels and so I guess my question is it seems like an important part of the network.

Shannon Okinaka: So, what it refers to is just that chasm impact from having that excess number of pilots versus 2019. And so, we decrease that chasm impact by 50 percent from the end of 23 to the end of 24. So, that's what that referred to. Okay, thank you.

Shannon Okinaka: Thank you.

And I'm wondering what's holding the recovery back to these cities from a network perspective is it a delay or is it structural in nature and if these cities could get back to a normal schedule, what would that possibly what could that mean for revenue.

Yes, Dan.

Frankly, the scheduled cuts that we've had to make in terms of putting capacity back in.

Dan Mckenzie: Our next question comes from the line of Dan McKenzie with Seaport Global. Please go ahead. Oh, hey, thanks, guys. A couple questions here. I guess my first question is really a schedule versus a revenue question with respect to California. So, I guess, you know, just setting aside the Maui wildfires, you know, it looks like San Francisco and Los Angeles are cities where flying has not yet recovered to 2019 levels. And so, I guess, you know, my question is it seems like an important part of the network and I'm wondering what's holding the recovery back to these cities, you know, from a network perspective. Is it a delay or is it structural in nature? And, you know, if these cities could get back to a normal schedule, you know, what would that possibly, what could that mean for reference?

Are things that we.

<unk> been really frustrating to do frustrating for us financially frustrating for our guests and really almost exclusively related to <unk> hundred 21 availability and so where we've had to make some reductions.

Particularly in the Bay area.

Haven't been things that we wanted to do and we're going to have to temporarily suspend long beach Maui for a period. This this winter.

Not something we want to do but really kind of given where we're at with.

With the <unk> situation or things that are really necessitated more than anything.

By that if we look kind of in terms of kind of industry recovery.

Of of kind of California versus other metros, let's say the bay areas, maybe a little behind the basin in Seattle, and the kind of other big metros, but not not material as we look out at kind of industry volumes in particular, you're looking at at second quarter D. O T data.

Peter Ingram: Yeah, Dan, frankly, the scheduled cuts that we've had to make in terms of putting capacity back in are things that we've been really frustrated to do, frustrating for us financially, frustrating for our guests and are really almost exclusively related to A321 availability. And so where we've had to make some reductions, particularly in the Bay Area, these haven't been things that we wanted to do and we're going to have to temporarily suspend long each mow for a period this winter, not something we want to do, but really kind of given where we're at with the Pratt situation or things that are really necessitated more than anything by that.

Maybe it's a percentage point or two behind.

Behind some of the other metros in the bay, but but overall.

I would say just a little bit slower.

And just to follow up on that.

Dan.

California is a.

Super important.

But for US Los Angeles is is the biggest concentration of our flying outside of the Hawaiian Islands of if you look at what we've done since pre pandemic. Some of the flying we added in 2020 coming out of the pandemic, where things like long beach to <unk>.

Peter Ingram: If we look kind of in terms of kind of industry recovery of kind of California versus other metros, let's say the Bay Area is maybe a little behind the basin and Seattle and kind of other big metros, but not material as we look out at kind of industry volumes and particularly looking at second quarter DOT data, you know, maybe it's a percentage point or two behind some of the other metros in the Bay. But, but overall, you know, I would say just a little bit slower and just just to follow up on that.

And adding our flight to Ontario, which which werent there.

There before that time period. So we're really again once we have.

Full availability of our <unk> hundred 21 fleet I think if you looked at our flying 2019 versus <unk>.

<unk>, what wed like to be flying now we'd be flying more not less to California.

Well okay.

And then I guess, Peter can you remind us of what percentage of the bookings were sold through blocks with the travel Japanese travel agencies in 2019.

Peter Ingram: Dan, I mean, you know, California is a super important marker for us, you know, Los Angeles is the biggest concentration of our flying outside of the Hawaiian Islands. If you look at what we've done since pre pandemic, you know, some of the flying we added in 2020 coming out of the pandemic were things like Long Beach to Maui and adding our flight to Ontario, which weren't there there before that time period.

And just what is the expectation.

Going forward and what could that possibly mean for revenue.

Yeah, Let me, let me start and then hand it over to Brent.

I know I don't have the specific percentage at my fingertips, right now Brent Brent, but maybe a little more willing than me to go take a stab at a number what.

What I would say generally is that the travel distribution market travel distribution market has been evolving globally. I think it has evolved more gradually in Japan than a lot of places and there has been a lot of third party intermediary as intermediaries that continued to be.

Peter Ingram: So, you know, we're really, again, once we have full availability of our A321 fleet, I think if you looked at our flying 2019 versus versus what we'd like to be flying now, we'd be flying more or not less to California. Yeah. Well, okay.

Part of the distribution picture in Japan that was starting to change and one of the trends we have seen over the course of the last couple of years is as.

Peter Ingram: And then, you know, I guess Peter, can you remind us of what percent of the bookings were sold through blocks with the travel Japanese travel agencies saying 2019. And just, you know, what is the expectation, you know, going forward and what could that possibly mean for revenue. Yeah, let me, let me start and then hand it over to Brent. I know I don't have the specific percentage of my fingertips right now Brent Brent, maybe a little more willing than me to go take a stab at a number.

Travel resumed internationally from Japan.

The big travel retailers have not grown back their business as fast as they had and we've.

Made a lot of strides in advancing our own direct distribution, particularly over our websites and also but also working with some of the online travel agencies, who who distribute things on a more of a digital platform in a brick and mortar platform. So.

Peter Ingram: What I would say generally is that the travel distribution market, I mean travel distribution market has been evolving globally. I think it has evolved more gradually in Japan than a lot of places. And there's been a lot of, you know, third party intermediate areas, intermediate areas that continued to be a big part of the distribution picture in Japan. That was starting to change. And one of the trends we have seen over the course of the last couple of years is as travel resumed internationally from Japan, the big travel retailers have not grown back their business as fast as they had.

While we expect the brick and mortar agencies to still be a play an important role and theyre going to be important partners for us going forward. It is it is going to be.

A less significant than it was and we really think that the market was moving away from blocks and probably won't go block back to blocks going forward and net net I think that's probably a good thing for us.

Yes, Dan I think back to 2019.

We were probably in the mid to high <unk> in terms of blocks and.

Those were at.

They were at a discount to our average Japan revenue Alright, Japan average fare as well in terms of that commitment forgiving for folks selling spaces. They were getting a little bit of a discount but as Peter mentioned the <unk>.

Peter Ingram: And we've made a lot of strides in advancing our own direct distribution, particularly over our websites and also, but also working with some of the online travel agencies who distribute things on more of a digital platform than a brick and mortar platform. So while we expect the brick and mortar agencies to still be play an important role and they're going to be important partners for us going forward, it is, it is going to be less significant than it was.

It's evolved we've seen a lot of changes in distribution. There. It was an evolution that was happening.

And the pandemic has clearly accelerated that and so.

I don't know that that's an endeavor, we will get back into.

But it is.

We're really focused on how we sell and how we distribute our products in Japan to make sure to ensure we're successful going forward.

Peter Ingram: And we really think that the market was moving away from blocks and probably won't go black back to blocks going forward and net net. I think that's probably a good thing for us. Yeah, I think back to 2019, we were probably in the high 20s in terms of blocks, and those were at a discount to our average Japan revenue or at Japan average fair as well, in terms of that commitment for giving for folks selling spaces, they were getting a little bit of a discount.

Yeah, and if I could just.

Tack on one fast third question going back to Peter's comment that the the direct distribution is a good thing.

Can you elaborate just a little bit on what that means from a your ability to commercialize fares differently than what you were able to do before.

Yes, I think probably the biggest benefit to two benefits one we have a direct relationship with the customer and be able to sell them <unk>.

Ancillary to sign them up for Hawaiian miles and get even more kind of future loyalty there in terms of ancillary as themselves the biggest benefit for us is.

Peter Ingram: But as Peter mentioned, the markets evolved. We've seen a lot of changes in distribution there. It was an evolution that was happening, and the pandemic has clearly accelerated that, and so I don't know that that's an endeavor we'll get back into, but we're really focused on how we sell and how we distribute our products in Japan to make sure we're successful going forward.

Is selling extra comfort seats and that was a product that.

We can sell through through a third party in brick and mortar.

Agencies, but it was it was not very efficient or effective for us the agency or the customer.

Brent Overbeek: Yeah, and if I could just tack on one fast third question, going back to Peter's comment that the direct distribution is a good thing, can you elaborate just a little bit on what that means from your ability to commercialize fairs differently than what you were able to do before? Yeah, I think probably the biggest benefit, two benefits. One, we have a direct relationship with the customer and be able to sell them.

And so being able to handle that directly with us when that time of booking or.

A follow up post booking is a much easier process. So the biggest benefit I think we will see is greater extra comfort sales in Japan as we continue to grow there.

Perfect. Thanks for the time you guys.

Thanks.

Okay.

Thank you.

Ladies and gentlemen, as there are no further questions I will now hand, the conference over to Peter Ingram.

President and CEO for closing comments.

Brent Overbeek: Ancillary, you sign them up for Hawaiian miles and get even more kind of future loyalty there. In terms of ancillary themselves, the biggest benefit for us is selling extra comfort seats. And that was a product that we could sell through through a third party brick and mortar agencies, but it was it was not very efficient or effective for us, the agency or the customer. And so be able to handle that directly with us when the time of booking or follow-up post booking is a much easier process. So the biggest benefit I think we'll see is greater extra comfort sales in Japan as we continue to grow there. Perfect, thanks for the time you guys. Thanks. Thank you.

Hello, again to everyone for joining us today, I, obviously wish that the third quarter's financial outcomes more appropriately reflected the outstanding work of our team.

While we are financially secure to continue investing for the long term, we know that we need to deliver better near term performance in spite of the external challenges we face the initiatives that are coming on now and early next year will help us achieve this we appreciate your interest and look forward to updating you on our progress in the months ahead.

Aloha.

Thank you.

The conference of Hawaiian Holdings has now concluded. Thank you for your participation you may now disconnect your lines.

Okay.

[music].

Peter Ingram: Ladies and gentlemen, as there are no further questions, I would now hand the conference over to Peter and Graham. President and CEO for closing comments. Hello again, everyone for joining us today. I obviously wish that the third quarter's financial outcomes more appropriately reflected the outstanding work of our team. Well, we are financially secure to continue investing for the long term. We know that we need to deliver better near term performance in spite of the external challenges we face. The initiatives that are coming on now and early next year will help us achieve this. We appreciate your interest and look forward to updating you on our progress in the months ahead.

Peter Ingram: Aloha. Thank you.

Hum.

Yeah.

Yeah.

[music].

Operator: The conference of Hawaiian holdings has now concluded. Thank you for your participation. You may now disconnect your lines. Thank you.

Yes.