Q1 2024 Hawaiian Holdings Inc Earnings Call
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Operator: Greetings and welcome to the Hawaiian Holdings Inc. 1st Quarter 2024 Financial Results Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your hosts, Jay Schaefer, Vice President and Treasurer. Thank you. You may begin.
Greetings and welcome to the Hawaiian Holdings, Inc. First quarter 2024 financial results call.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded it.
It is now my pleasure to introduce your host Jay Shafer, Vice President and Treasurer. Thank you you may begin.
Jay Schaefer: Hello everyone, and welcome to Hawaiian Holdings' first quarter 2024 results conference call. With me in Honolulu are Peter Ingram, President and Chief Executive Officer, Brent Overbeek, Chief Revenue Officer, and Shannon Okinaka, Chief Financial Officer.
Camilla: Thank you Camilla.
Camilla: Hello, everyone and welcome to Hawaiian Holdings first quarter 2024 results Conference call with me in Honolulu are Peter Ingram, President and Chief Executive Officer, Brent Overbeck, Chief revenue Officer, and Shannon <unk>, Chief Financial Officer Pete.
Jay Schaefer: Peter will provide an overview of our performance, Brent will discuss revenue, and Shannon will discuss costs and the balance sheet. At the end of the prepared remarks, we will open the call up for questions. By now, everyone should have access to the press release that went out 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, hawaiianairlines.com.
Camilla: Peter will provide an overview of our performance Brent 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.
Camilla: Now everyone should have access to the press release that went out 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.
Jay Schaefer: During our call today, we will refer, at times, to adjusted or non-GAAP numbers and metrics. A detailed reconciliation of GAAP to non-GAAP numbers and metrics can be found at the end of today's press release posted on the Investor Relations page of our website. As a reminder, the following prepared remarks contain forward-looking statements, including statements about our future plans and potential future financial and operating performance. Management may also make additional forward-looking statements in response to your question.
Camilla: During our call today, we will refer at times to adjusted or non-GAAP numbers and metrics a detailed reconciliation of GAAP to non-GAAP numbers and metrics can be found at the end of today's press release posted on the Investor Relations page of our website.
Camilla: As a reminder, the following prepared remarks contain forward looking statements, including statements about our future plans and potential future financial and operating performance management May also make additional forward looking statements in response to your questions.
Jay Schaefer: 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 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 statement. These include the most recent annual report filed on Form 10-K. I will now turn the call over to Peter.
Camilla: These statements are subject to risks and uncertainties and do not guarantee future performance and therefore undue reliance should not be placed upon them.
Camilla: We refer you to 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. These include the most recent annual report filed on Form 10-K.
Camilla: I will now turn the call over to Peter.
Peter R. Ingram: Mahalo Jay, aloha everyone, and thank you all for joining us today. As always, I want to thank our team for an incredible job in the first quarter.
Peter R. Ingram: Malo, Jay Hello, Hi, everyone and thank you all for joining us today.
Peter R. Ingram: As always I want to thank our team for an incredible job in the first quarter.
Peter R. Ingram: In a quarter that featured some operational and commercial challenges, we made great progress on major initiatives and saw important improvement in some key operational metrics. Early this year, a number of very important investments, ones like Starlink, our work for Amazon, and the 787 that we've been talking about on these calls for some time, began to come to fruition. I'll talk more about these in a moment.
Peter R. Ingram: In a quarter that featured some operational and commercial challenges, we made great progress on major initiatives and saw important improvement in some key operational metrics.
Peter R. Ingram: Early this year, a number of very important investments ones like starlink or work for Amazon and the 787 that we've been talking about on these calls for some time began to come to fruition.
Peter R. Ingram: I'll talk more about these in a moment.
Peter R. Ingram: Well, I'm sure the pending merger with Alaska Airlines is a topic of great interest. But we don't have anything material to share today beyond what we have already publicly disclosed. We received shareholder approval for the combination in February and are working diligently to respond to the Department of Justice's second request, which we received in early February. Our aim is to comply with that request as soon as possible, and we are making steady progress toward that goal.
Peter R. Ingram: While I am sure of the pending merger with Alaska Airlines is a topic of great interest, we don't have anything material to share today beyond what we have already publicly disclose.
Peter R. Ingram: We received shareholder approval for the combination in February.
Peter R. Ingram: And are working diligently to respond to the department of Justice second request.
Peter R. Ingram: Which we received in early February.
Peter R. Ingram: Our aim.
Peter R. Ingram: Is to comply with that request as soon as possible and we are making steady progress to that goal.
Peter R. Ingram: On March 27, Hawaiian and Alaska disclosed a timing agreement with the DOJ in which we agreed not to consummate the merger until 90 days after the date on which both parties have certified substantial compliance with the second request.
Peter R. Ingram: On March 27, Hawaii, and Alaska disclosed a timing agreement with the Doj in which we agreed not to consummate the merger until 90 days after the date on which both parties have certified substantial compliance with the second request.
Peter R. Ingram: More information about this and other recent merger-related events can be found in our SDC filings. The early part of this year has featured some major milestones in the development of our fleet. As of this month, we have two 787s in service, and we flew our first 787 revenue flight between Honolulu and San Francisco on April 15. Our second A330 freighter was also delivered and has commenced revenue operations. Freighter flying is going well, and we look forward to continued expansion of the fleet and network over the course of the year.
Peter R. Ingram: More information about this and other recent merger related events can be found in our SEC filings.
Peter R. Ingram: The early part of this year is featured some major milestones in the development of our fleet.
Peter R. Ingram: As of this month, we have $2 780 Sevens in service and we flew our first 787 revenue flight between Honolulu, and San Francisco on April 15th.
Our second <unk> hundred 30 freighter was also delivered and has commenced revenue operation.
Peter R. Ingram: Greater flying is going well and we look forward to continued expansion of the fleet and network over the course of the year.
Peter R. Ingram: We completed installing Starlink inflight connectivity on all 18 of our Airbus A321neos and are working towards certification for the A330 so that we can complete installations on that fleet later this year. As promised, the Starlink product sets a completely new standard for in-flight connectivity.
Peter R. Ingram: We completed installing starlink in flight connectivity on all 18 of our Airbus <unk> hundred 21, Nios and are working towards certification for the <unk> III 30, so that we can complete installations on that fleet later this year.
Peter R. Ingram: As promised the Starlink products, that's a completely new standard for in flight connectivity.
Peter R. Ingram: And the response from our guests has been incredibly positive. On another positive note, we expect our full A321neo fleet to be available for service within the next couple of weeks, based on current engine availability, including the return of some engines from overhaul. Brent will talk about our commercial performance in more detail, but I'll hit a couple of highlights. Overall, the topping of our revenue guidance in the first quarter reflects generally strong demand for travel to Hawaii in the majority of our markets. Well, some core parts of our network, notably Maui and Japan, have room to improve.
Peter R. Ingram: And the response from our guests has been incredibly positive.
Peter R. Ingram: On another positive note, we expect our full <unk> hundred 21, Neo fleet to be available for service within the next couple of weeks based on current engine availability, including the return of some engines from overhaul visits.
Peter R. Ingram: Brian will talk about our commercial performance in more detail, but I'll hit a couple of highlights.
Peter R. Ingram: Overall, the topping of our revenue guidance in the first quarter reflects generally strong demand for travel to Hawaii in the majority of our markets.
Peter R. Ingram: While some core parts of our network, notably Maui, and Japan have room to improve.
Peter R. Ingram: The aggregate demand we're seeing across our portfolio of routes is encouraging. With the additions to our fleet, we are launching some new service in May, and the initial customer response to our flights between Salt Lake City and Honolulu, as well as between Sacramento and both Kona and La Jolla, has been very encouraging. We're also seeing good demand for additional seasonal frequencies that we've added to existing routes like Austin, Boston, Las Vegas, LAX, and American Samoa. We've talked previously about some of the challenges we faced with operations in 2023, mostly rooted in factors outside of our control.
Peter R. Ingram: The aggregate demand, we're seeing across our portfolio of routes is encouraging.
Peter R. Ingram: With the additions to our fleet, we are launching some new service in May and the initial customer response to our flights between Salt Lake City, and Honolulu, as well as between Sacramento and both Kona and Lihue has been very encouraging.
Peter R. Ingram: We're also seeing good demand for additional seasonal frequencies that we've added to existing routes like Austin, Boston Las Vegas lacked an American Samoa.
Peter R. Ingram: We have talked previously about some of the challenges we faced with operations in 2023.
Peter R. Ingram: Mostly rutin rooted in factors outside of our control.
Peter R. Ingram: A key theme for us this year is ensuring that we get back to industry-leading on-time performance and baggage delivery, things we know we excel at when not facing external headwinds. We saw some tangible results from these efforts in Q1, as reliability improved month by month through the quarter, including hitting 87% on-time arrivals in March, which should rank us near the top of the industry for the month. We're also working on initiatives to handle disruptions better, improve our call center experience, and introduce new self-service options for guests.
Peter R. Ingram: A key theme for US this year is ensuring that we get back to industry, leading on time performance and baggage delivery.
Peter R. Ingram: Things that we know we excel at when not facing external headwinds.
Peter R. Ingram: We saw some tangible results from these efforts in Q1 as reliability improve month by month through the quarter, including hitting 87% on time arrivals in March which should rank us near the top of the industry for the month.
Peter R. Ingram: We're also working on initiatives to handle disruptions better improve our call center experience and introduced new self service options for guests.
Peter R. Ingram: I'm excited about the progress we're making on this work, first, because it matters to our guests, and second, because running a smooth, reliable operation has a positive impact on costs. Shannon will speak more about our costs, but I want to emphasize that we continue to focus on returning to profitability. The investments that we are making and the initiatives that we are pursuing lay a strong foundation for financial resilience. There's a lot going on in 2024 with exciting new projects in addition to the pending merger.
I am excited about the progress we're making on this work first because it matters to our guests and second because running a smooth reliable operation has a positive impact on costs.
Peter R. Ingram: Shannon will speak more about our costs, but I want to underscore that we continue to focus on returning to profitability the.
Peter R. Ingram: The investments that we're making and the initiatives that we are pursuing lay a strong foundation for financial resilience.
Peter R. Ingram: There is a lot going on in 2024 with exciting new projects. In addition to the pending merger.
Peter R. Ingram: My focus is on making sure that we don't lose sight of the fundamentals, safety, running a great operation, and sharing aloha with our guests, while we execute against a lot of initiatives. I'm grateful to my leadership team and to all of the employees of Hawaiian for keeping a daily, unrelenting focus on those fundamentals, especially safety, during such a busy time. With that, I'll turn the call over to Brent to go over our commercial performance and outlook in more detail.
My focus is on making sure that we don't lose sight of the fundamentals.
Peter R. Ingram: Safety running a great operation and sharing Aloha with our guests, while we execute against a lot of initiatives.
Peter R. Ingram: I'm grateful to my leadership team and to all of the employees of Hawaiian for keeping a daily unrelenting focus on those fundamentals, especially safety during such a busy time.
Peter R. Ingram: With that I'll turn the call over to Brent to go over our commercial performance and outlook in more detail.
Brent A. Overbeek: Thank you, Peter, and aloha, everyone. As Peter mentioned, demand remained strong across most of our network in the first quarter. Total revenue was up 5.4% as we flew 2.7% more capacity versus the same period in 2023. We saw good close-in demand and strong fares driven by continued strength in our premium cabin. System RASM was up 2.6% year-over-year for the first quarter, which, as Peter mentioned, was above our guidance. Digging into our first quarter performance by geography,
Brent A. Overbeek: Thank you Peter and Aloha, everyone as Peter mentioned demand remains strong across most of our network in the first quarter.
Brent A. Overbeek: Total revenue was up five 4% as.
Brent A. Overbeek: As we flew to 7% more capacity versus the same period in 2023.
Brent A. Overbeek: We saw a good close in demand and strong fares driven by continued strength in our premium cabinet.
Brent A. Overbeek: System RASM was up two 6% year over year for the first quarter, which as Peter mentioned was above our guidance.
Brent A. Overbeek: Digging into our first quarter performance by geography.
Brent A. Overbeek: North America continues to perform well, and the overall healthy demand was augmented by two factors. First, accommodating other airlines' passengers impacted by the MAX 9 grounding, and second, by the timing of Easter, which on a year-of-year basis pushed more traffic into the first quarter. Turning to Japan,
Brent A. Overbeek: North America continues to perform well.
Brent A. Overbeek: And the overall healthy demand was augmented by two factors.
Brent A. Overbeek: First accommodating other airlines passengers impacted by the Max nine grounding and second by the timing of Easter, which on a year over year basis push more traffic into the first quarter.
Brent A. Overbeek: Turning to Japan after seeing demand ramp up through the third quarter of 2023, we have seen the Japan point of sale demand recovery flat.
Brent A. Overbeek: After seeing demand ramp up through the third quarter of 2023, we have seen the Japan point of sale demand recovery flatten, driven by the challenges of a weekend compounded by high lodging rates in Hawaii. Somewhat offsetting that weakness, we have been pleased with U.S. point-of-sale demand, which has backfilled some of the gap in Japan-originating demand. We expect that U.S. point-of-sale strength to remain robust while the exchange rate environment persists. The rest of our international markets are seeing similarly strong U.S. point-of-sale demand. However, international RASM is down year-over-year as lower yields offset improved load factors compared to a very strong first quarter of 2023.
Brent A. Overbeek: Driven by the challenges of a weekend.
Brent A. Overbeek: Founded by high lodging rates in Hawaii.
Brent A. Overbeek: Somewhat offsetting that weakness we have been pleased with U S point of sale demand, which is backfill some of the gap in Japan originating demand.
Brent A. Overbeek: We expect that U S point of sale strength to remain robust, while the exchange rate environment persists.
Brent A. Overbeek: The rest of our international markets are seeing similarly strong U S point of sale demand. However, international RASM is down year over year as lower yields offset improved load factors compared to a very strong first quarter of 2023.
Brent A. Overbeek: Neighbor Islands saw strong close-in demand and improved yields, which are driving unit revenue improvement. We are seeing the strongest unit revenue improvement since the second quarter of 2022, when the state of Hawaii reopened travel without COVID-19 restrictions. We continue to perform exceptionally well against the competition with a 28 point load factor differential and a prism that was roughly twice that of our competitor in the fourth quarter of 2023. Looking at our ancillary revenue performance, revenue generated from our extra comfort and preferred seat products remained strong and was up 16% year-over-year due to strong demand and price optimization.
Brent A. Overbeek: Neighbor Island saw strong close in demand and improving yields which are driving unit revenue improvement.
Brent A. Overbeek: We are seeing the strongest unit revenue improvements since the second quarter of 2022, when the state of Hawaii reopen travel without COVID-19 restrictions.
Brent A. Overbeek: We continue to perform exceptionally well against the competition with a 28 point load factor differential and a PRASM that was roughly twice that of our competitor in the fourth quarter of 2023.
Brent A. Overbeek: Looking at our ancillary revenue performance revenue generated from our extra comfort and preferred seat products remained strong and was up 16% year over year, driven by strong demand and price optimization.
Brent A. Overbeek: We continue to make good progress on our NDC distribution initiative and are now processing roughly 60% of eligible U.S. indirect transactions through NDC. Overall, the feedback from our distribution partners who have implemented this more modern distribution technology is positive, and we are pleased with the pace at which we are able to bring on new partners and expand NDC adoption. Looking forward, we anticipate our NDC penetration will continue to grow as we begin to offer NDC content through the Sabre GDS in the back half of this year.
Brent A. Overbeek: We continue to make good progress on our <unk> distribution initiative and are now processing roughly 60% of eligible U S indirect transactions through MDC.
Brent A. Overbeek: Overall, the feedback from our distribution partners, who have implemented this more modern distribution technology is positive and we are pleased with the pace at which we are able to bring on new partners and expand <unk> adoption.
Brent A. Overbeek: Looking forward, we anticipate our MDC penetration will continue to grow as we begin to offer NBC content through the sabre GDS in the back half of this year.
Brent A. Overbeek: Looking forward to the second quarter in North America, we're seeing a little bit of year-over-year revenue pressure in the front part of the quarter, mostly attributable to the Easter shift, and our expectations for the summer peak remain strong. As Peter mentioned, our new markets, including Salt Lake City and Sacramento da Cunha in Lihue, are building well into the summer. Specifically for Maui, we're seeing continued improvement in advanced bookings, narrowing the demand gap relative to Honolulu, and building off positive year-over-year PRASM improvement in the first quarter, we expect continued improvement in Neighbor Island performance.
Looking forward to the second quarter in North America, we're seeing a little bit of year over year revenue pressure in the front part of the quarter, mostly attributable to the Easter shift.
Brent A. Overbeek: And our expectations for the summer peak remained strong.
Brent A. Overbeek: As Peter mentioned, our new markets, including Salt Lake City, and Sacramento to Kona and Lihue are building well into the summer.
Brent A. Overbeek: Specifically for Maui, we are seeing continued improvement in advanced bookings narrowing the demand gap relative to Honolulu.
Brent A. Overbeek: And building a positive year over year PRASM improvement in the first quarter. We expect continued improvement in the neighborhood and neighbor Island performance.
Brent A. Overbeek: We have a lot to look forward to in the second quarter, with the recent introduction of the 787 and the revenue service, as well as the return to service of our entire A321 fleet, for their rollout of Starlink and strong performance on our new route. All of that combined with our authentic Hawaiian hospitality, and we continue to give travelers to Hawaii lots of compelling reasons to choose us over the competition. For the second quarter, we expect RASM to be about flat year-over-year on capacity growth of about 5%.
Peter R. Ingram: We have a lot to look forward to in the second quarter with the recent introduction of the 787 into revenue service.
Brent A. Overbeek: The return to service of our entire <unk> hundred 21 fleet.
Brent A. Overbeek: Further rollout of Starlink and strong performance on our new routes.
Brent A. Overbeek: All of that combined with our our authentic Hawaiian hospitality and we continue to give travelers to Hawaii lots of compelling reasons to choose us over the competition.
Brent A. Overbeek: For the second quarter, we expect RASM to be about flat year over year on capacity growth of about 5%.
Brent A. Overbeek: Looking out over the full year, ASMs are now expected to be up about 6% as the full impact of our previously announced Japan schedule reductions is incorporated into the forecast. With that, I'll turn the call over to Shannon.
Brent A. Overbeek: Looking out over the full year ASM are now expected to be up about 6% as the full impact of our previously announced Japan scheduled reductions are incorporated into the forecast.
Brent A. Overbeek: With that I'll turn the call over to Shannon.
Speaker Change: Thanks, Brent Hello, everyone and thank you for joining us today.
Shannon Lei Okinaka: Aloha, everyone, and thank you for joining us today. We ended the first quarter of the year with an adjusted EBITDA loss of $116 million, equating to an adjusted loss of $2.77 per share, which includes the impact of $0.32 per share due to a change in our effective tax rate that I'll discuss in a moment. Our CASM-X results for the first quarter were better than our expectations, even considering the slight reduction in ASM, primarily due to the shift in timing of heavy maintenance events, which will be incurred later this year.
Brent A. Overbeek: We ended the first quarter of the year with an adjusted EBITDA loss of $116 million.
Equating to an adjusted loss of $2 77 per share.
Shannon: Which includes the impact of 32 cents per share due to a change in our effective tax rate that I'll discuss in a moment.
Shannon: Our CASM X results for the first quarter were better than our expectation, even considering the slight reduction in ASM.
Shannon: Primarily due to the shift in timing of heavy maintenance events, which will be incurred later this year.
Shannon Lei Okinaka: As we mentioned on our last call, our year-over-year chasm change reflects the preparation for and ramp-up of our capacity throughout the year. Thus, the year-over-year change in CASM starts off larger in the first quarter and improves throughout the year.
Shannon: As we mentioned on our last call our year over year CASM change reflects our preparation for and ramp up of our.
Shannon: Our capacity throughout the year.
Shannon: The year over year change in CASM starts off larger in the first quarter and improve throughout the year.
Shannon Lei Okinaka: Pilot training and other fleet induction costs are being incurred now but will be offset by the capacity and revenue generated as we begin operating the new additions to our fleet. Additionally, significantly affecting our first quarter results and likely the remainder of 2024 is the reduction in our effective tax rate from 21% to 10%. Since 2020, we've generated significant federal and state debt operating losses, which will be used to reduce future cash tax obligations.
Pilot training and other fleet induction costs are being incurred now but will be offset by the capacity and revenue generated as we began operating the new additions to our fleet.
Shannon: Significantly affecting our first quarter results and likely the remainder of 2024 is the reduction in our effective tax rate from 21% to 10%.
Shannon: Since 2020, we've generated significant federal and state net operating losses, which will be used to reduce future cash tax obligations.
Shannon Lei Okinaka: Our analysis of the net operating losses under GAAP required us to increase the valuation allowance, lowering the effective tax rate, and decreasing our book tax benefit for the quarter. For the second quarter, we expect our unit costs, excluding fuel and special items, to be about 6.5% higher than the same period in 2023. About three points are due to the timing of heavy maintenance events, about a point related to Amazon operations, and another point related to increased labor costs.
Shannon: Our analysis of the net operating losses under GAAP required us to increase the valuation allowance lowering the effective tax rate and decreasing our book tax benefit for the quarter.
Shannon: For the second quarter, we expect our unit costs, excluding fuel and special items to be about $6, 5% higher than the same period in 2023.
About three points due to the timing of heavy maintenance events.
And about a point related to Amazon operations.
Shannon: And another point related to increased labor costs.
Shannon Lei Okinaka: For the full year, we expect our unit costs, excluding fuel and special items, to be up about two and a half percent. The change from our prior guidance of up one and a half percent is primarily due to the lowering of our capacity forecast.
Shannon: For the full year, we expect our unit costs, excluding fuel and special items to be up about two 5%.
Shannon: The change from our prior guidance of up one 5%, primarily due to the lowering of our capacity forecast.
Shannon Lei Okinaka: Turning to the balance sheet, Peter mentioned that we took delivery of our first two 787s, both of which we financed, one in the first quarter and one in April. We continue to receive competitive offers from financing companies for our future 787 deliveries as well, and we will make the decision whether and how best to finance them closer to their delivery. We're also evaluating the best path forward for our 2026 loyalty program bond maturity.
Shannon: Turning to the balance sheet, Peter mentioned that we took delivery of our first $2 77.
Shannon: Both of which we have financed one in the first quarter and one in April.
Shannon: We continue to receive competitive offers from financing companies for our future 77 deliveries as well and we will make a decision whether and how best to finance them closer to their deliveries.
Shannon: We're also evaluating the best path forward for our 2026 loyalty program bond maturity.
Shannon Lei Okinaka: While the closing of the merger with Alaska Airlines may render this moot, we're building a solid plan for our balance. While we are not satisfied with our current financial performance, we believe that we are taking the right actions and are starting to see some of the major investments we put in motion several years ago start to materialize. I want to reiterate our gratitude to all of the employees of Hawaiian Airlines who have persevered as we work our way back to sustainable profitability. And with that, we can open up the call for questions.
Shannon: While the closing of the merger with Alaska Airlines May render this mode. We are building a solid plan for our balance sheet.
Shannon: While we are not satisfied with our current financial performance. We believe that we are taking the right actions and are starting to see some of the major investments we put in motion several years ago start to materialize.
Shannon: I want to reiterate our gratitude to all of the employees. The plan, we have persevered as we work our way back to sustainable profitability.
Speaker Change: And with that we can open up the call for questions.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. And you may press star 2 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 start key.
Speaker Change: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate that your line is in the question queue and you May press star two if you'd 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.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: Thank you. Our first question is from Conor Cunningham with Melius Research. Please proceed with your question.
Operator: One moment, please, while we poll for questions. Thank you. Our first question is from Conor Cunningham with Milius Research. Please proceed with your question.
Conor T. Cunningham: Everyone. Thank you just wanted to see if you would impact the RASM forecast a little bit just trying to understand how the competitive landscape is changing.
Conor T. Cunningham: Everyone, thank you. I wanted to see if you could unpack the RASM forecast a little bit, just trying to understand how the competitive landscape is changing in the inter-island market and off the West Coast. And then I know you mentioned the issues with Japan, just curious about how the international entity is kind of playing out right now. Thank you.
Conor T. Cunningham: And then our island market in off the West Coast and then I'll.
Conor T. Cunningham: You mentioned that the issues with Japan, just curious on how that how the international entities kind of playing out right now thank you.
Conor T. Cunningham: So.
Thanks, Conor I think as we look at kind of sequentially coming out of <unk> in the Q.
Conor T. Cunningham: You have a little more international capacity coming online.
Brent A. Overbeek: Um, sure. Thanks, Conor. I think as we look at sequentially coming out of 1Q into 2Q, you have a little more international capacity coming online, which, as we talked about with Japan in particular, puts a little bit more of a challenging environment, some more difficult comps in 2Q. From a North America perspective, if you look at kind of the whole period and adjust for the Easter shift, I think we feel, and for the benefit we had in 1Q at max, we feel a pretty kind of similar trend rate as we come out of 1Q and into 2Q, and the good progress that we saw in Neighbor Island in 1Q, we continue to see that into the second quarter and maybe even improving a little bit as we get to the back half of the quarter.
Conor T. Cunningham: Which as we talked about with Japan in particular, it puts a little bit more of a challenging environment some more difficult comps in <unk>.
Conor T. Cunningham: From a North America perspective, if you look out kind of over the whole period and adjust for the Easter shift I think we feel.
And for the benefit we had in <unk>, we feel pretty kind of similar trend right as we come out of <unk> and into <unk>.
Conor T. Cunningham: And the good progress that we saw in our neighbor Island and <unk>, we continue to see that.
Into the second quarter, and maybe even improving a little bit as we get to the back half of the quarter.
Speaker Change: Okay helpful and then.
Speaker Change: Last call you talked a little bit about slowing hiring but I think you just mentioned that you are still hiring and training a fair bit of folks I missed.
Speaker Change: Curious on what are the hiring needs kind of stand today or do you need to hire more to fill.
Speaker Change: Thanks to all of the capacity planner or do you have enough people on campus at this point to kind of.
Conor T. Cunningham: Okay, a couple. And then on the last call, you talked a little bit about slowing hiring, but I think you just mentioned that you're still hiring and training a fair number of folks. I'm just curious about where the hiring needs kind of stand today. Do you need to hire more to fill the capacity plan? Or do you have enough people on campus at this point to kind of get through 2024 and so on? Thank you.
Speaker Change: Got to get through 2024, and so on thank you.
Speaker Change: Yes, thanks for that corner I'll I'll take that one.
Speaker Change: We are we are continuing to hire but it is at a slower pace than we've seen over the last 18 months to two years.
Speaker Change: We have we've got more aircraft coming in over the course of the year or another 787 delivery.
Speaker Change: Few more freighters should be online before the end of the year. We've done some of the hiring for that but we will be doing pilot hiring again at a reduced pace from where we were over 2022 and 2023.
Brent A. Overbeek: Yeah, thanks for that, Conor. I'll take that one.
Brent A. Overbeek: We are, we are continuing to hire, but it is at a slower pace than we've seen over the last 18 months to two years. We have, we've got, you know, more aircraft coming in over the course of the year, another 787 delivery, and a few more freighters should be online before the end of the year. We've done some of the hiring for that, but we will be doing pilot hiring again at a reduced pace from where we were over 2022 and 2023, as we set up into next year. Frankly, we are always hiring for airport operations.
As we set up into two next year frankly.
Speaker Change: We are always.
Speaker Change: Always hiring for our airports operation, that's an area, where we see a fair bit of natural turnover, but our staffing is in good shape today, thankfully and we're not dealing with some of the Deficit's we were in other areas.
Speaker Change: We've been doing some hiring on maintenance, but that's another area, where we've made good progress so I would characterize that as a more <unk>.
Speaker Change: Normalized environment environment of rap.
Brent A. Overbeek: That's an area where we see a fair bit of natural turnover, but our staffing is in good shape today, thankfully, and we're not dealing with some of the deficits we were in other areas. We've been doing some hiring on maintenance, but that's another area where we've made good progress. So I would characterize that as a more normalized environment of ramping up staffing for a little bit of growth going forward as well as dealing with more normalized attrition and not the sort of hyper-kinetic hiring environment that we had coming out of COVID. Appreciate it.
Speaker Change: Ramping up staffing for a little bit of growth going forward as well as dealing with.
Speaker Change: More normalized attrition and not the sort of hyper kinetic.
Speaker Change: Hiring environment that we had coming out of Covid.
I appreciate the thoughts thank you.
Speaker Change: Thanks Connor.
Speaker Change: Our next question comes from the line of Mike Lindenberg with Deutsche Bank. Please proceed with your question.
Oh, yes.
Good morning, everyone.
Michael John Linenberg: I guess two questions here for Shannon.
Michael John Linenberg: When we think about you.
Michael John Linenberg: Unit costs and how you portray it.
Shannon: Or are you treating the freighter operation to know.
Where are we.
Conor T. Cunningham: I appreciate the thoughts; thank you.
Operator: Our next question comes from the line of Mike Linenberg with Deutsche Bank. Please proceed with your question.
Shannon: The pilot costs dispatch cost and aircraft cost associated with those airplanes, but no ASM.
Shannon: Or are you going to carve that out or is that going to be in the queue.
Michael John Linenberg: Oh yeah, hey, um, good morning everyone, um, I guess I have two questions here for Shannon. When we think about unit costs and how you portray it. How are you treating the freighter operation? We're at two now. Where are we, you know, by year end? And, you know, obviously, pilot costs and dispatch costs and aircraft costs associated with those airplanes, but no ASMs. Are you going to carve that out, or is that going to be in the...
Speaker Change: Yeah. Thanks, Mike Yeah, I think part of your question I think was about how many will have by the end of the Erin I think right now the current plan is to have seven okay. Other freighters flying by the end of the year.
Speaker Change: So right now we just put it all together into CASM.
Speaker Change: So pretty small from a system perspective relative to the system.
To breakout.
Speaker Change: I think as it gets a little larger will probably verbally break it out just to give you a sense of how much of the chasm is due to the the Amazon costs.
Shannon Lei Okinaka: Yeah, thanks, Mike. Um, yeah, I think part of your question was about how many we'll have by the end of the year. And I think right now, the current plan is to have seven of the freighters flying by the end of the year. So right now, we just put it all together into a chasm. It's still pretty small from a system perspective relative to the system to break out.
Speaker Change: For this year just in general the Amazon Operation and financial results are pretty still felt pretty immaterial.
Speaker Change: So the companies that we don't plan to do segment reporting.
Speaker Change: This error based on.
Speaker Change: Outlook.
So I think the best we'd be able to deal with this.
Speaker Change: Split out some of the direct cause I think right now to the cost are pretty hard to filter out because a lot of its pilot training and that's just intermingled with our regular passenger business.
Shannon Lei Okinaka: I think as it gets a little larger, we'll probably verbally break it out just to give you a sense of how much of the chasm is due to the Amazon costs. For this year, just in general, the Amazon operation and financial results are still pretty much immaterial to the company. So we don't plan to do segment reporting this year based on the outlook.
Speaker Change: But when the direct costs become a little larger we can break that out for you, okay, great and Mike I'll.
Speaker Change: I'll, just add a little bit to what Shannon a little more color to what chairman said on the Amazon fleet.
Speaker Change: The number of aircrafts in the pace of deliveries has been moving around a little bit.
Shannon Lei Okinaka: So I think the best we'd be able to do is just split out some of the direct costs. I think right now the costs are pretty hard to filter out because a lot of it's pilot training, and that's just intermingled with our regular passenger business. But when the direct costs become a little larger, we can break that out. Okay, great.
Speaker Change: Driven by.
Speaker Change: The pace at which.
Amazon has been able to get.
Speaker Change: Airplanes delivered from the vendor that is working on Reconfiguring the aircraft from passenger configuration to freighter configuration.
We had at one point expected fewer than the seven by the end of this year, then Shannon said a couple of those have now moved up. So we think we're getting more stability on that I would caution that they may not all be flying by the end of the year because during the peak period, our partner doesn't necessarily.
Michael John Linenberg: And Mike, I'll just add a little bit to what Shannon said about the Amazon fleet. The number of aircraft and the pace of deliveries have been moving around a little bit, driven by the pace at which Amazon has been able to get airplanes delivered from the vendor that is working on reconfiguring the aircraft from passenger configuration to freighter configuration. We had at one point expected fewer than seven by the end of this year than Shannon said.
Speaker Change: We wanted to introduce new lines of flying into the operation. So so will that number could move around a little bit, but but we do have.
Michael John Linenberg: A couple of those have now moved up, so we think we're getting more stability on that. I would caution that they may not all be flying by the end of the year because during the peak period, our partner doesn't necessarily want to introduce new lines of flying into the operation. So, that number could move around a little bit, but we do have a fair amount of ramp-up coming over the course of this year, and that business will become more significant as we go quarter to quarter through this year.
Speaker Change: Fair amount of ramp coming over the course of this year and that that business will become more significant as we go quarter to quarter through this year, Okay, great and then just follow up.
Speaker Change: Peter either you or Andrew or Brent.
Speaker Change: The 787 can you can you talk about.
Speaker Change: The difference of that premium product versus your <unk> hundred 30, your ability to monetize that it does seem like it is while the <unk> hundred 30 product is a good one it does feel like that this is a nice step up.
Speaker Change: And there's a nice opportunity to generate a lot more premium revenue with the new airplane.
Peter R. Ingram: Okay, great. And just follow up, Peter, either you or Brent, the 787, can you talk about, you know, the difference between that premium product versus your A330, your ability to monetize that? It does seem like it is, while the A330 product is a good one, it does feel like this is a nice step up, and there's a nice opportunity to generate a lot more premium revenue with the new airplane. Thanks for taking my question.
Speaker Change: Thanks for taking my question.
Speaker Change: Yes, Thanks, Mike I'll start on that and see if Brent has anything additional to add.
We're incredibly.
Im proud of the product our team has put together on that aircraft. It's.
Speaker Change: Our <unk> suites are.
Brent A. Overbeek: Probably by far and away, our leading business class product for any airline in North America, but but certainly.
Brent A. Overbeek: Easily the best product flying between the U S mainland and Hawaii on any of the.
The aircraft that come out this direction so we.
Peter R. Ingram: Yeah, thanks, Mike. I'll start on that and see if Brent has anything additional to add.
Brent A. Overbeek: We do think as people start flying it and the word of mouth starts to travel we're going to get a really positive response to that the other important thing to note.
Peter R. Ingram: You know, we're incredibly proud of the product our team has put together on that aircraft. Our Lehoku suites are, you know, probably by far and away a leading business class product for any airline in North America, but certainly easily the best product flying between the US mainland and Hawaii on any of the aircraft that come out this way. So we do think as people start flying it and the word of mouth starts to travel, we're going to get a really positive response to that.
Is that Theres a lot more of those seats on those airplanes as well with 34 in the front cabin compared to 18 on our <unk> hundred <unk>. So the success of.
Brent A. Overbeek: Premium revenue over the last few years has inspired us to allocate more of the real estate on the cabin to that and thats going to be very helpful, especially in some of our premium rich markets, especially as we we sort.
Peter R. Ingram: The other important thing to note is that there are a lot more of those seats on those airplanes as well, with 34 in the front cabin compared to 18 on our A330s. So the success of premium revenue over the last few years has inspired us to allocate more of the real estate in the cabin to that. And that's going to be, you know, very helpful, especially in some of our premium rich markets, especially as we sort of move away from the initial deployments on the West Coast and start flying it even longer haul in some of the real premium deep markets. We're incredibly encouraged about what the prospects are.
Brent A. Overbeek: Move away from the initial deployments on the West coast and start flying it even longer haul in some of the real premium deep markets, where we're incredibly encouraged about what the prospects are.
Speaker Change: Yes, I would say that word of mouth that Peter mentioned is already out there, we're seeing really strong demand in both Phoenix and Los Angeles, which are initial deployments.
I was reviewing just last week with the team.
Speaker Change: Despite nearly doubling the capacity on those trips.
Demand is and load factors are in line, if not a little bit up as we look into the summer and average fares remain really strong. So people are clearly searching out the product.
Brent A. Overbeek: Yeah, I would say that word of mouth that Peter mentioned is already out there. We're seeing really strong demand in both Phoenix and Los Angeles, which are the initial deployments. I was reviewing just last week with the team, you know, despite nearly doubling the capacity on those trips, demand is, and load factors are in line, if not a little bit higher. As we look into the summer and average fares remain really strong, so people are clearly searching out the product. You know, in addition to the great physical product that the team's designed, all the benefits of the 787 in terms of lower humidity or more humidity and lower capping pressure, I think have people really interested in flying the product.
Speaker Change: In addition to the great physical product that the team has designed all the benefits of the 787 in terms of.
Speaker Change: Lower humidity are more humidity and lower cabin pressure.
Speaker Change: I think people are really interested in flying the product.
Speaker Change: And as Peter mentioned, we're really looking forward to.
Being able to extend the missions beyond just some west coast operations and when we take airplane number three.
Speaker Change: We will be able to do that so overall, great start really encouraged with where we're going in both the customer and employee reception of it of the products has been fantastic so far.
Speaker Change: Great. Thanks, Thanks, guys.
Speaker Change: Thanks, Mike.
Brent A. Overbeek: And as Peter mentioned, we're really looking forward to being able to extend the missions beyond just some West Coast operations, and when we take airplane number three, we'll be able to do that. So overall, great start, really encouraged with where we're going, and both the customer and employee reception of the products has been fantastic so far.
Our next question comes from the line of Helane Becker with TD Cowen. Please proceed with your question.
Helane Renee Becker: Hi, Thanks, very much operator.
Helane Renee Becker: Hi team I, just have a couple of questions.
Helane Renee Becker: When you talk about strong close in demand.
Can you define that a little better.
Maybe refine that.
Michael John Linenberg: Great. Great. Thanks. Thanks, guys.
Helane Renee Becker: Yes, I think Helane, what we've seen.
Operator: Our next question comes from the line of Helane Becker with TD Cowan. Please proceed with your question.
Speaker Change: Post pandemic and really kind of it's a continuation is.
Speaker Change: People's decision, making about Hawaii vacations continues to move closer in.
Helane Renee Becker: Thanks very much, Operator. Hi, team. I just have a couple of questions. When you talk about strong close-in demand, can you define that a little better, maybe refine it?
Speaker Change: Traditionally our booking curve was highly correlated with stage length. So.
Speaker Change: Our east Coast services, and international services had a longer booking curve than our west coast services.
Brent A. Overbeek: Yeah, I think, Helane, what we've seen. Post-pandemic and really kind of it's a continuation is people's decision making about Hawaii vacations continues to move closer in. Traditionally, our booking curve was highly correlated with stage length, so our East Coast services and international services had a longer booking curve than our West Coast services. I think we're seeing broadly across the board, both domestic and international, that some of that is just continuing to move closer to departure and, you know, while we would have a really good idea 30-45 days out on some of our leisure markets, we still do, but we're seeing, you know, more people make those decisions and more people choose to fly Hawaiian within that last month, month and a half prior to departure.
Speaker Change: I think we're seeing broadly across the board both domestic international.
That's some of that is just continuing to move closer to departure.
Speaker Change: And.
Speaker Change: While our.
Speaker Change: Well, yeah, we would have a really good idea 30 45 days out on some of our leisure markets, we still do but we're seeing kind of more people make those decisions and more people to choose to fly Hawaiian kind of within that last month month and a half prior to departure.
Speaker Change: Okay. That's helpful. But has that caused you to make different pricing decisions.
Speaker Change: No I don't I don't think so I think it's probably more of a.
Speaker Change: How is the revenue management system accommodating that then then discrete pricing decisions and so it's something that as we have.
Speaker Change: Implemented more willingness to pay solutions with our revenue management solution provider.
Speaker Change: The team keeps a keen eye on but I wouldn't I wouldn't say, there's a tangible.
Speaker Change: One to one view of how Thats changed.
Helane Renee Becker: Okay, that's helpful, but has that caused you to make different pricing decisions?
<unk> behavior.
Okay. That's really helpful. Thank you and then just for my follow up question.
Speaker Change: Maybe for Sean and do you have any goals on what you want your liquidity today, and where you know you feel it's not enough for where I don't think I would ever be too much.
Brent A. Overbeek: No, I don't. I don't think so.
Brent A. Overbeek: I think, you know, it's probably more of a, you know, how is the revenue management system accommodating that than discrete pricing decisions. And so it's something that as we've implemented more willingness-to-pay solutions with our revenue management solution provider, it's something the team keeps a keen eye on, but I wouldn't say there's a tangible, one-to-one view of how that's changed pricing behavior.
Speaker Change: But.
Speaker Change: You mentioned that.
Speaker Change: Loyalty program has to be refinanced in one Q2 thousand six I think.
Speaker Change: But how should we think about your goals for liquidity. However, you want to measure that.
Sean: Yeah, Thanks, Lee and Dan I would agree with you, there's probably never too much liquidity.
Sean: Okay.
Sean: [laughter].
Well a couple of things so or yes, our loyalty program bond becomes due in January 2026, and so we're starting to take a look at our at.
Brent A. Overbeek: Okay, that's really helpful. Thank you. And then just for my follow-up question, maybe for Shannon, do you have any goals on what you want your liquidity to be and where you feel it's not enough or where it would, I don't think it would ever be too much? But, you know, you mentioned that the loyalty program has to be refinanced in 1Q26. I think, but how should we think about your goals for liquidity, however?
Sean: At that as well as our balance sheet with all of the seven.
Sean: 77 deliveries coming up.
Sean: So pre pandemic I think we talk a lot about our cash target of $500 million and while we haven't done a.
Sean: Redone the full analysis of that we know about our cost target at this point is higher.
Sean: Then $500 million just based on what happened during the pandemic.
Sean: We throw around a number like 750, but there's not a full analysis.
Shannon Lei Okinaka: Yeah, thanks Helane, and Jay and I would agree with you that there's probably never too much liquidity. Well, a couple things.
Sean: Hind that.
Sean: And so right now we're focused on probably the next two years looking at Capex and our debt maturities, we don't have anything to announce today, but.
Shannon Lei Okinaka: So, yes, our loyalty program bond becomes due in January 2026, and so we're starting to take a look at that, as well as just our full balance sheet with all of the 787 deliveries coming up. So, pre-pandemic, I think we've talked a lot about our cash target of $500 million, and while we haven't done, you know, re-done the full analysis of that, we know that our cash target at this point is higher than $500 million, just based on what happened during the pandemic. You know, we throw around a number like 750, but there's not a full analysis behind that.
Sean: This is partially why you hear us talking about financing or the 700 seventeens.
Sean: And it's all kind of in preparation for what we're going to do with our loyalty program by which.
Sean: Really is probably something we're looking at doing mirror near term not necessarily waiting until 'twenty five 'twenty six.
Sean: So I think maybe by this summer we would have more to talk about were right in the middle of.
Sean: Looking at our balance sheet plans and really strategizing, what we do there.
Speaker Change: Okay. Thanks, Shannon that's hugely helpful.
Speaker Change: Our next question comes from the line of Dan Mckenzie with Seaport Global. Please proceed with your question.
Daniel J. McKenzie: Oh, hi, thanks, guys.
Daniel J. McKenzie: Going back to the script the full E 321 fleet in the next couple of weeks, including engines from overhaul visits.
Shannon Lei Okinaka: And so right now, we're focused on the next two years, looking at CapEx and our debt maturities. We don't have anything to announce today, but this is partially why you hear us talking about financing for the 787s, and it's all kind of in preparation for what we're going to do with the loyalty program bond, which really is probably something we're looking at doing near term, not necessarily waiting until 25 or 26. So I think maybe by this summer, we'll have more to talk about. We're right in the middle of looking at our balance sheet plans and really strategizing on what we should do there. Okay. Thanks, Shannon.
Daniel J. McKenzie: That's that's kind of a surprise does that mean the G. T F issues are.
Daniel J. McKenzie: In the rear view mirror for you guys and I think that was just a couple of aircraft, but can you help us size the earnings impact from those <unk>.
Speaker Change: Yeah, Hey, Dan so.
Speaker Change: I would hesitate to use the term in the rear view mirror because clearly there still is a global shortage of engines.
Speaker Change: I think what.
Speaker Change: You are seeing reflected in our fleet as a number of our aircrafts had gone into the overhaul shop.
Daniel J. McKenzie: Over the course of the last couple of years and in fact, we bore the brunt of a lack of <unk> hundred 21 spare engine availability earlier in 2023, even before the.
Helane Renee Becker: Okay. Thanks, Shannon. That's hugely helpful.
Operator: Our next question comes from the line of Dan McKenzie with Seaport Global. Please proceed with your question. Oh, hi.
Daniel J. McKenzie: Oh, hi. Thanks, guys.
Daniel J. McKenzie: <unk> powder metal problems forced a lot of inspections in the summer of last year and so.
Daniel J. McKenzie: Going back to the script, the full A321 fleet in the next couple of weeks, including engines from overhaul visits, that's kind of a surprise. Does that mean the GTF issues are in the rearview mirror for you guys? And I think it was just a couple of aircraft, but can you help assign the earnings impact from those being out?
Daniel J. McKenzie: Having taken some of that pain in 2023, we're now seeing engines returning from the overhaul shop and that has left us.
Daniel J. McKenzie: At Hawaiian N a.
Daniel J. McKenzie: Relatively more enviable position than some other carriers that are.
Daniel J. McKenzie: I have dealt with the aftermath of engines that have had to go in for inspections, a little bit later.
Peter R. Ingram: Yeah, hey, Dan. So I would hesitate to use the term in the rearview mirror because, clearly, there is still a global shortage of engines. I think what you're seeing reflected in our fleet is that a number of our aircraft have gone into the overhaul shop over the course of the last couple of years. And in fact, we bore the brunt of the lack of A321 spare engine availability earlier in 2023, even before the powder metal problems forced a lot of inspections in the summer of last year.
Speaker Change: I will caution it's a that's a fluid situation.
Speaker Change: Some of the removals, we can we anticipate and we do anticipate and we have planned.
Speaker Change: Engine replacements for those.
Speaker Change: We know we've got some more engines coming back from the overhaul shop over the course of this year.
Speaker Change: But there is always the risk of.
Speaker Change: An unexpected engine renewable something thats not in our plans that we have to have to account for as well so.
Peter R. Ingram: And so having taken some of that pain in 2023, we're now seeing engines returning from the overhaul shop, and that has left us at Hawaiian in a relatively enviable position than some other carriers that have dealt with the aftermath of engines that have had to go in for inspections a little bit later. But I will caution you, it's a fluid situation.
Speaker Change: We will continue to monitor that going forward in terms of the impact on our business.
Speaker Change: Candidly.
Speaker Change: It has been challenging to deal with we've had <unk> hundred 30, <unk> deployed in an on routes that we would prefer to fly and <unk> hundred 21 based on the level of underlying demand and and that has.
Peter R. Ingram: You know, some of the removals we can anticipate and we do anticipate, and we have planned engine replacements for those. We know we've got some more engines coming back from the overhaul shop over the course of this year. But there is always the risk of an unexpected engine renewal, something that's not in our plans that we have to have to account for as well. So we'll continue to monitor that going forward.
Speaker Change: Produced a higher level of cost on those routes that that is not offset by the commensurate revenue you would expect because the market's just not deep enough to.
Speaker Change: Absorb that we.
Speaker Change: We have underutilized.
Speaker Change: Some of our crew as we've had.
Speaker Change: Available crew to be able to fly the <unk> hundred 20 ones and have time as I've been flying 14, or 15 or 16, depending on what was available. So I think all of that accrues to two a benefit for us going forward. If we can keep the full fleet operational.
Peter R. Ingram: In terms of the impact on our business, I mean, candidly, it has been challenging to deal with. We've had A330s deployed on routes that we would prefer to fly an A321 based on the level of underlying demand. And that has, you know, produced a higher level of cost on those routes that is not offset by the commensurate revenue you would expect because the market's just not deep enough to absorb that.
Speaker Change: Oh I see okay, I guess or is going with that is just the path back to normalized margins and the returns that you're targeting this next cycle and I guess, if you just look at the key sources of revenue so ramping up to 10 aircraft with Amazon in 2025, I think ancillary upsell from MDC, you've got network.
Peter R. Ingram: We have underutilized some of our crew as we've had, you know, available crew to be able to fly 18 A321s and, if time permits, have been flying 14 or 15 or 16 depending on what was available. So I think all of that accrues to a benefit for us going forward if we can keep the full fleet operational.
Speaker Change: Adjustments Starlink are those enough to offset the weaknesses from inter island, Japan in Maui, I guess and if not can you think help us think about what has to happen to get back to the profit to profitability just going back to the script and the confidence that you guys are taking the right steps to get there.
Daniel J. McKenzie: I see. Okay.
Peter R. Ingram: I guess, you know, where I was going with that is just, you know, the path back to normalized margins in the returns that you're targeting this next cycle. And I guess you just look at the key sources of revenue. So, you know, ramping up to 10 aircraft with Amazon 2025, I think ancillary upsell from NDC, you've got network adjustments, and Starlink. Are those enough to offset the weaknesses from Inner Island, Japan, and Maui, I guess?
Speaker Change: Yeah.
Speaker Change: I am confident we are taking the right steps I think.
Speaker Change: Getting past the investment phase on some of the big initiatives. We've had like the 787 as we are now getting into flying the aircraft and generating revenue from it like.
Peter R. Ingram: And if not, can you help us think about what has to happen to get back to profitability, just going back to the script and the confidence that you guys are taking the right steps to get there?
The freighter operation where.
Speaker Change: We are.
Speaker Change: Beginning to get the aircraft in that drive the revenue drive the flying that that.
Peter R. Ingram: Yeah, I mean, I'm confident we are taking the right steps. I think, you know, getting past the investment phase on some of the big initiatives we've had, like the 787, as we're now getting into flying the aircraft and generating revenue from them, like the freighter operation, where we are beginning to get the aircraft in that drive the revenue, drive the flying that will make us more productive with the pilots that we have trained and the investments that we have made preparing for that. All of those things are going to help us. We do certainly need some help from the operating environment.
Speaker Change: Will make us more productive with the pilots we have trained and the investments that we have made preparing for that.
Speaker Change: All of those things are going to help us.
Speaker Change: We do.
Speaker Change: Certainly need.
Speaker Change: Some are some help from the operating environment, but even there we've got some things that are moving in a positive direction Brent talked this.
Speaker Change: This quarter and last quarter about some of the.
Speaker Change: Improvements in the neighbor island revenue environment, we've consistently been winning competitively, but now we're winning competitively and an improving revenue environment I wouldn't say it's.
Peter R. Ingram: But even there, we've got some things that are moving in a positive direction. Brent talked this quarter and last quarter about some of the improvements in the neighbor island revenue environment. We've consistently been winning competitively, but now we're winning competitively in an improving revenue environment. I wouldn't say it's where we expect it to be for the long term, but it certainly has moved in the right direction. I would say the one environmental factor that is probably even a bigger wildcard right now is Japan, where we're disappointed with how revenue performance has flattened out a little bit in that market.
<unk>, where we expect it to be for the long term, but it certainly has moved in the right direction.
Speaker Change: I would say the one environmental factor that is probably even a bigger wildcard right now is.
Speaker Change: Is Japan.
We're we're disappointed where how the revenue performance has.
Speaker Change: Has flattened out a little bit in that market and I really think we're well beyond the point, where the Japanese travelers werent willing to venture out internationally I think it is more a case of pure economics, right now where the yen at something between $154.
Speaker Change: 155 yen to the dollar today is just.
Peter R. Ingram: And I really think we're well beyond the point where Japanese travelers weren't willing to venture out internationally. I think it is more a case of pure economics right now, where the yen, at something between 154 and 155 yen to the dollar today, is just really depreciated against the dollar, and it makes it more expensive for visitors originating in Japan to travel to the United States.
Speaker Change: Really depreciated against the dollar and it makes it more expensive for visitors.
Speaker Change: <unk> in Japan to travel to the United States.
Speaker Change: But I'm confident we're moving in the right direction I really think a lot of those things are starting to pay off I don't have a specific.
Speaker Change: Forecast im not going to try and look into the Crystal ball and tell you what the timing is of returning to profitability, but I am.
Speaker Change: I'm really confident that we are moving a lot of things in the right direction and some of the investments and initiatives. We have made over the last couple of years are starting to take hold.
Daniel J. McKenzie: But I'm confident we're moving in the right direction. I really think a lot of those things are starting to pay off. I don't have a specific forecast. I'm not going to try and look into the crystal ball and tell you what the timing is for returning to profitability. But I'm really confident that we are moving a lot of things in the right direction, and some of the investments and initiatives we have made over the last couple of years are starting to take hold. Okay, good. Thanks for the time.
Speaker Change: Okay. Good thanks for the time you guys.
Speaker Change: Thanks, Dan.
Speaker Change: Thank you and our next question comes from the line of Chris <unk> with Susquehanna International. Please proceed with your question.
Chris: Thanks for taking my question. So Peter I appreciate all the color around your thoughts on getting back to sustained profitability, but if we could dig into the revenue environment here.
Speaker Change: Put a finer point or tie.
Speaker Change: It is four or five sort of.
Chris: Outlook. So on the U S piece I think you said point of sales strong if you could speak to perhaps how much of summer is booked at this point and how that fares versus typical seasonality and then color on your other international POS markets, New Zealand, Australia, South Korea, and then on the Premier.
Daniel J. McKenzie: Okay, good. Thanks for the time, you guys.
Operator: Thank you. And our next question comes from the line of Chris Stathoulopoulos with Escort Hanna International. Please proceed with your question.
Christopher Nicholas Stathoulopoulos: Thanks for taking my question. So, Peter, I appreciate all the color around your thoughts on getting back to sustained profitability, but if we could dig into the revenue environment here, and give a finer point or tie, you know, what are the four or five sort of outlooks. So, on the U.S. piece, I think you said point of sale strong. If you could speak to perhaps how much of summer is booked at this point and how that, you know, fares versus typical seasonality,
Chris: <unk> contribution from the 787 should we think of that as more of a 2025 benefit or kind of a late 2024.
Speaker Change: Benefit thank you.
Speaker Change: Yes.
Speaker Change: Yes, let me, let Brent touch on those.
Brent A. Overbeek: Alright, I'll try and get to all those Chris Thanks.
Brent A. Overbeek: In terms of advanced book for the summer.
Christopher Nicholas Stathoulopoulos: And then color me in on your other international POS markets, New Zealand, Australia, South Korea. And then on the premium contribution from the 787, should we think of that as more of a 2025 benefit or kind of a late 2024 benefit? Thank you.
Speaker Change: We're comfortable with where we're at.
Brent A. Overbeek: Relative to kind of pre pandemic levels, where we are in a pretty good shape.
Brent A. Overbeek: We're a little bit lower on more capacity in North America overall, as we look into the summer, but given some of the later build I mentioned earlier I am pretty happy with where we sit and where average fares sit there.
Peter R. Ingram: Yeah, let me let Brent touch on those. All right, I'll
Brent A. Overbeek: All right, I'll try and get to all of those, Chris. Thanks.
Brent A. Overbeek: International point of sale on international markets.
Brent A. Overbeek: In terms of advanced booking for the summer, I think we're comfortable with where we are relative to kind of pre-pandemic levels. We're in pretty good shape. We're a little bit lower on more capacity in North America overall as we look into the summer. Given some of the later build I mentioned earlier, I'm pretty happy with where we sit and where average fares sit there, at the international point of sale on international markets.
Brent A. Overbeek: 2023 was a pretty strong, particularly first half of the year in many of those markets, particularly Australia and New Zealand South Korea, we are off some of those high isn't so we do have a little bit of a headwind there, but again, we're pretty comfortable with how strong U S point of sale outbound.
Brent A. Overbeek: <unk> is unfortunately for us that's a relative historically was a relatively small portion of our network but has.
Brent A. Overbeek: But it has grown to be fairly significant now in most in many cases now as is.
Brent A. Overbeek: You know, 2023 was a pretty strong year, particularly in the first half of the year in many of those markets, particularly Australia, New Zealand, and South Korea. We are off some of those highs. And so we do have a little bit of a headwind there. But again, we're pretty comfortable with how strong US point of sale, outbound demand is. Unfortunately, for us, that's historically been a relatively small portion of our network but has, and is growing to be fairly significant now.
Brent A. Overbeek: Approaching half of the aircraft relative to where we previously had been.
Brent A. Overbeek: And 787.
Brent A. Overbeek: On premium cabin, there I think I wouldn't characterize that as <unk>.
Brent A. Overbeek: Good early results right now we've got we've got two airplanes in the schedule.
Brent A. Overbeek: As we take more of those and are able to use the airplane to fly longer missions, where we get the benefits.
Brent A. Overbeek: Greater benefits of from both a cost perspective on fuel burn and revenue generating capabilities, it's probably a little bit more of a 25 story.
Brent A. Overbeek: And in most cases, in many cases now, it is approaching half of the aircraft relative to where we previously had been. And 787, in the premium cabin there, I think I would characterize that as good early results. Right now, we've got, you know, we've got two airplanes in the schedule as we take more of those and are able to use the airplanes to fly longer missions where we get the benefits, greater benefits from both a cost perspective on fuel burn and revenue generating capabilities.
Brent A. Overbeek: We will take what we can get in 'twenty four but it certainly is the fleet builds up and we have greater greater deployment and long haul in 'twenty five the.
Brent A. Overbeek: The benefits will grow a bit more there.
Brent A. Overbeek: Yes.
Speaker Change: And as a follow up could you just remind us of the cadence of the 787 deliveries. There was some news earlier this week around potentially slower production rates and deliveries for that aircraft from Boeing. Thank you.
Speaker Change: Yeah. So so we've got the <unk>.
Speaker Change: Two aircraft delivered now with one line of flying in the next month, we go into two lines of flying with those aircraft, we expect to get a third airplane before the end of this year and my.
Brent A. Overbeek: It's probably a little bit more of a 25 story. We'll take what we can get in 24, but certainly, as the fleet builds up and we have greater deployment and long haul in 25, the benefits will grow a bit more there.
Speaker Change: My expectation right now is we'll have five by the end of next year.
Christopher Nicholas Stathoulopoulos: Okay. And as a follow-up, could you just remind us of the cadence of the 787 deliveries? There was some news earlier this week around potentially slower production rates and delivery times for that aircraft from Boeing. Thank you.
Speaker Change: But it is there is some risk there I would say that.
Speaker Change: But we do know that some of the 787.
Speaker Change: Deliveries could slide a little bit based on the reports that you have probably seen over the last couple of days of some supply chain challenges. So I think we're going to.
Peter R. Ingram: Yeah, so we've got the two aircraft delivered now with one line of flying, and then next month we go to two lines of flying with those aircraft. We expect to get a third airplane before the end of this year, and my expectation right now is that we'll have five by the end of next year.
Really have to take a closer look at what our expectation is for 2025 over the course of.
Peter R. Ingram: But there is some risk there, I would say, that we do know that some of the 787 deliveries could slip a little bit based on the reports that you've probably seen over the last couple of days of some supply chain challenges. So, I think we're going to really have to take a closer look at what our expectation is for 2025 over the course of the next several weeks as we firm that up with Boeing.
Speaker Change: The next several weeks as we firm that up with with Boeing I think we've got some flexibility which is a good thing with <unk> hundred <unk> that are <unk>.
Speaker Change: Summing.
Speaker Change: To the end of their lease terms over the next few years, so as we ramp up to 12 780 sevens between.
Speaker Change: The two we have now end and into 2027, we've got.
Peter R. Ingram: I think we've got some flexibility, which is a good thing with A330s that are coming to the end of their lease terms over the next few years. So, as we ramp up to 12 787s between the two we have now and into 2027, we've got about. There's not quite half of our A330 fleet that comes up for lease decisions at some point in that period. And I think that gives us flexibility to manage what has been a sort of dynamic aircraft delivery environment.
Speaker Change: About.
Speaker Change: Not quite half of our <unk> hundred 30 fleet that comes up for four lease decisions at some point in that period.
Speaker Change: And I think that gives us flexibility to manage what has been a.
Speaker Change: Sort of dynamic aircraft delivery environment.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you there are no further questions at this time I would like to turn the floor back over to Mr. Peter Ingram for any closing comments.
Peter R. Ingram: Thank you Camilla mahalo to everyone for joining us today amidst a dynamic environment our team.
Operator: Thank you. There are no further questions at this time. I would like to turn the floor back over to Mr. Peter Ingram for any closing comments.
Peter R. Ingram: Continues to deliver meaningful accomplishments that position us well for the future while continuing to take care of our guests with the unparalleled hospitality for which we are known we appreciate your interest and look forward to updating you on our progress in the months ahead.
Peter R. Ingram: Thank you, Camilla. Mahalo to everyone for joining us today. Amidst the dynamic environment, our team continues to deliver meaningful accomplishments that position us well for the future, while continuing to take care of our guests with the unparalleled hospitality for which we are known. We appreciate your interest and look forward to updating you on our progress in the months ahead.
Peter R. Ingram: Aloha.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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