Hawaiian Holdings(HA) - 2024 Q1 - Quarterly Results

Executive Summary & Q1 2024 Financial Highlights Hawaiian Holdings reported a net loss of $137.6 million and a diluted EPS of ($2.65) for Q1 2024, with an adjusted net loss of $143.5 million and adjusted diluted EPS of ($2.77) Q1 2024 Financial Performance Overview Hawaiian Holdings reported a net loss of $137.6 million and a diluted EPS of ($2.65) for Q1 2024, with an adjusted net loss of $143.5 million and adjusted diluted EPS of ($2.77) | Metric | GAAP | YoY Change | Adjusted (a) | YoY Change | | :---------------------- | :---------- | :---------- | :----------- | :---------- | | Net Loss | ($137.6M) | ($39.3M) | ($143.5M) | ($31.7M) | | Diluted EPS | ($2.65) | ($0.74) | ($2.77) | ($0.60) | | Pre-tax Margin | (23.7)% | (3.2) pts. | (24.8)% | (1.8) pts. | | EBITDA | ($109.0M) | ($20.8M) | ($116.0M) | ($12.6M) | | Operating Cost per ASM | 15.72¢ | 5.9% | 11.82¢ | 7.1% | | Operating Revenue per ASM | 12.78¢ | 2.6% | N/A | N/A | - The first quarter loss per share includes ($0.32) per share due to the reduction in the Company's effective tax rate from 21% to 10%[5] - As of March 31, 2024, the Company generated federal and state net operating losses (NOLs) of approximately $451 million and $969 million, respectively, which will be used to reduce future cash tax obligations[5] CEO Commentary Peter Ingram, President and CEO of Hawaiian Airlines, highlighted the team's focus on operational performance and guest experience, noting a positive start to 2024 with significant investments - Hawaiian Airlines President and CEO Peter Ingram stated, "2024 is off to a positive start as we work to start realizing the return on significant investments we've made in our business, including rolling out high-speed Starlink WIFI and taking delivery of our first Boeing 787"[3] First Quarter 2024 Operational Highlights Hawaiian Holdings advanced its merger, strengthened liquidity, expanded routes, enhanced guest experience, and developed its workforce in Q1 2024 Merger Update The Company's stockholders approved the merger with Alaska Air Group, Inc., and a timing agreement was established with the Department of Justice - The Company's stockholders voted in favor of the merger with Alaska Air Group, Inc. ("Alaska")[5] - The Company and Alaska entered into a timing agreement with the Department of Justice ("DOJ") not to consummate the merger before 90 days following substantial compliance certification with the DOJ's second request for additional information[6] Liquidity and Capital Resources As of March 31, 2024, Hawaiian Holdings maintained $897 million in unrestricted cash, cash equivalents, and short-term investments, with total liquidity reaching $1.15 billion - Unrestricted cash, cash equivalents and short-term investments: $897 million[7] - Liquidity: $1.15 billion, including an undrawn revolving credit facility of $235 million[7] - Outstanding debt and finance lease obligations: $1.75 billion[7] Routes and Network Expansion Hawaiian Airlines commenced Boeing 787-9 Dreamliner revenue service, announced new routes from Salt Lake City and Sacramento, and increased summer flights for several existing routes - Began Boeing 787-9 Dreamliner revenue service on April 15, 2024[8] - Announced new flying from Salt Lake City (SLC) to Honolulu (HNL) and Sacramento (SMF) to Lihu`e (LIH) and Kona (KOA)[8] - Announced increased summer flights between HNL and Austin (AUS), Boston (BOS), Las Vegas (LAS) and Pago Pago (PPG), and added a fourth daily flight between HNL and Los Angeles (LAX) from May 24 through September 2[8] - Hawaiian received its second A330-300 freighter from Amazon, which will operate between New York's JFK and San Bernardino (SBD)[8] Guest Experience Enhancements The company rolled out free Starlink inflight connectivity on all A321neo aircraft, expanded its Premium Airport Service in Honolulu, and signed a multi-year distribution agreement with Sabre - Starlink inflight connectivity is now available free of charge on board all 18 A321neo aircraft[9] - Expanded Premium Airport Service product in its Honolulu hub, offering seamless curb-to-aircraft experience with access to new airport private suite, Apt. 1929[9] - Signed a multi-year distribution agreement with Sabre that will provide Sabre-connected agencies with long-term access to the carrier's HA Connect™ NDC and traditional EDIFACT content through the Sabre travel marketplace[9] Workforce Development Hawaiian Airlines partnered with Universal Technical Institute to create expanded career opportunities for its airframe and powerplant graduates who obtain FAA certifications - Partnered with Universal Technical Institute to expand career opportunities for airframe and powerplant graduates who earn their FAA certifications[10] Outlook Hawaiian Holdings provided its Q2 and full-year 2024 outlook, forecasting changes in ASMs, RASM, CASM, fuel consumption, and capital expenditures Second Quarter 2024 Outlook For Q2 2024, Hawaiian Holdings anticipates Available Seat Miles (ASMs) to increase by 3.5% to 6.5% year-over-year, with Operating Revenue per ASM (RASM) ranging from a 1.5% decrease to a 1.5% increase Second Quarter 2024 Guidance (YoY Change) | Item | GAAP Second Quarter 2024 Guidance | Non-GAAP Second Quarter 2024 Guidance | | :---------------------------------------- | :-------------------------------- | :------------------------------------ | | Available Seat Miles (ASMs) | Up 3.5% to up 6.5% | | | Operating Revenue per ASM (RASM) | Down 1.5% to up 1.5% | | | Costs per ASM | Up 8.4% to up 10.7% | Up 5.0% to up 8.0% | | Gallons of Jet Fuel Consumed | Up 2.5% to up 5.5% | | | Average fuel price per gallon | $2.83 | $2.85 | | Effective Tax Rate | ~10% | | Full Year 2024 Outlook Hawaiian Holdings updated its full-year 2024 guidance, revising ASMs growth to 4.5% to 7.5% (previously 6.0% to 9.0%) and CASM increase to 4.1% to 6.3% (previously 0.7% to 3.0%) Full Year 2024 Updated Guidance (YoY Change) | Item | Prior GAAP Full Year 2024 Guidance | Updated GAAP Full Year 2024 Guidance | Prior Non-GAAP Full Year 2024 Guidance | Updated Non-GAAP Full Year 2024 Guidance | | :---------------------------------------- | :--------------------------------- | :----------------------------------- | :------------------------------------- | :--------------------------------------- | | Available Seat Miles (ASMs) | Up 6.0% to up 9.0% | Up 4.5% to 7.5% | | | | Costs per ASM | Up 0.7% to up 3.0% | Up 4.1% to up 6.3% | Flat to up 3.0% | Up 1.0% to up 4.0% | | Gallons of Jet Fuel Consumed | Up 4.0% to up 7.0% | Up 3.0% to up 6.0% | | | | Average fuel price per gallon | $2.55 | $2.80 | $2.59 | $2.83 | | Capital Expenditures | $500M to $550M | No change | | | Company Information This section details Hawaiian Holdings' investor conference call, company profile, and important forward-looking statements Investor Conference Call Hawaiian Holdings scheduled its Q1 2024 earnings conference call for April 23, 2024, at 4:30 p.m. Eastern Time, with a live audio webcast available on its investor relations section - Hawaiian Holdings' quarterly results conference call is scheduled for April 23, 2024, at 4:30 p.m. Eastern Time (USA)[16] - The conference call will be broadcast live over the Internet on the investor relations section of the Company's website at HawaiianAirlines.com, with a replay archived for 90 days[16][17] About Hawaiian Airlines Hawaiian Airlines, in its 95th year, is Hawaiʻi's largest and longest-serving airline, offering extensive inter-island and international flights - Hawaiian is Hawaiʻi's biggest and longest-serving airline, offering approximately 150 daily flights within the Hawaiian Islands and nonstop flights between Hawaiʻi and 15 U.S. gateway cities, as well as international service[18] - The airline has been recognized by Condé Nast Traveler, TripAdvisor, Forbes (Hawaiʻi's best employer in 2022), and Travel + Leisure (No. 1 U.S. airline for the past two years)[18] - Hawaiian has led all U.S. carriers in on-time performance for 18 consecutive years (2004-2021) as reported by the U.S. Department of Transportation[18] - The airline offers complimentary meals on transpacific routes, no change fees on Main Cabin and Premium Cabin seats, and HawaiianMiles with miles that never expire[19] Forward-Looking Statements This press release contains forward-looking statements regarding future events and financial performance, subject to various risks, uncertainties, and assumptions that could cause actual results to differ materially - The press release contains forward-looking statements regarding future events and financial performance, including expectations for investments, service routes, distribution agreements, and financial outlooks[20] - These statements are subject to many risks, uncertainties, and assumptions that may cause actual results to differ materially from those expressed or implied[20][21] - The Company does not undertake to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date hereof[21] Financial Statements & Reconciliations This section presents Hawaiian Holdings' condensed consolidated statements of operations, balance sheet, cash flows, selected statistical data, economic fuel expense, and non-GAAP financial reconciliations Condensed Consolidated Statements of Operations For the three months ended March 31, 2024, Hawaiian Holdings reported total operating revenue of $645.6 million, a 5.4% increase year-over-year, driven by a 6.4% rise in passenger revenue Condensed Consolidated Statements of Operations (Three Months Ended March 31) | Operating Revenue: | 2024 (in thousands) | 2023 (in thousands) | % Change | | :----------------------------- | :------------------ | :------------------ | :------- | | Passenger | $583,448 | $548,526 | 6.4% | | Other | 62,119 | 64,077 | (3.1)% | | Total Operating Revenue | $645,567 | $612,603 | 5.4% | | Operating Expenses: | | | | | Wages and benefits | 261,935 | 241,933 | 8.3% | | Aircraft fuel | 188,778 | 197,625 | (4.5)% | | Maintenance, materials, repairs | 70,971 | 50,287 | 41.1% | | Special items | 8,482 | — | 100.0% | | Total Operating Expenses | $794,213 | $730,030 | 8.8% | | Operating Loss | ($148,646) | ($117,427) | 26.6%| | Net Loss | ($137,565) | ($98,257) | | | Diluted Net Loss Per Share | ($2.65) | ($1.91) | | Consolidated Balance Sheet As of March 31, 2024, total assets for Hawaiian Holdings were $3,790.9 million, an increase from $3,733.5 million at December 31, 2023 Consolidated Balance Sheet (as of March 31, 2024 vs. December 31, 2023) | Item | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :---------------------------------------------------------------- | :---------------------------- | :------------------------------- | | ASSETS | | | | Cash and cash equivalents | $230,865 | $153,273 | | Short-term investments | 666,432 | 755,224 | | Total Current Assets | 1,160,054 | 1,170,940 | | Property and equipment, net | 2,104,442 | 2,013,616 | | Total Assets | $3,790,913 | $3,733,525 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Air traffic liability and current frequent flyer deferred revenue | 757,855 | 633,345 | | Current maturities of long-term debt | 75,132 | 43,857 | | Total Current Liabilities | 1,301,337 | 1,145,401 | | Long-Term Debt | 1,612,235 | 1,537,152 | | Total Shareholders' Equity | (40,221) | 95,425 | | Total Liabilities and Shareholders' Equity | $3,790,913 | $3,733,525 | Condensed Consolidated Statements of Cash Flows For the three months ended March 31, 2024, net cash provided by operating activities was $254 thousand, a significant decrease from $118.3 million in the prior year Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31) | Item | 2024 (in thousands) | 2023 (in thousands) | | :------------------------------------------ | :------------------ | :------------------ | | Net cash provided by Operating Activities | $254 | $118,291 | | Net cash used in Investing Activities | ($33,252) | ($49,389) | | Net cash provided by (used in) Financing Activities | $110,590 | ($26,019) | | Net increase in cash and cash equivalents | $77,592 | $42,883 | | Cash, cash equivalents, and restricted cash - End of Period | $248,115 | $289,503 | Selected Consolidated Statistical Data In Q1 2024, Hawaiian Holdings reported a 1.1% increase in revenue passengers flown and a 5.9% increase in Revenue Passenger Miles (RPM) year-over-year Selected Consolidated Statistical Data (Three Months Ended March 31) | Metric | 2024 | 2023 | % Change / Pts. Change | | :--------------------------------------- | :---------- | :---------- | :--------------------- | | Revenue passengers flown | 2,620 | 2,592 | 1.1% | | Revenue passenger miles (RPM) | 4,072,473 | 3,844,061 | 5.9% | | Available seat miles (ASM) | 5,049,598 | 4,914,619 | 2.7% | | Passenger load factor (RPM/ASM) | 80.6% | 78.2% | 2.4 pts. | | Passenger revenue per ASM (PRASM) | 11.55¢ | 11.16¢ | 3.5% | | Operating revenue per ASM (RASM) | 12.78¢ | 12.46¢ | 2.6% | | Operating cost per ASM (CASM) | 15.72¢ | 14.85¢ | 5.9% | | CASM excluding aircraft fuel and non-recurring items | 11.82¢ | 11.04¢ | 7.1% | | Aircraft fuel expense per ASM | 3.74¢ | 4.02¢ | (7.0)% | | Gallons of jet fuel consumed | 67,651 | 64,853 | 4.3% | | Average cost per gallon of jet fuel (actual) | $2.79 | $3.05 | (8.5)% | Economic Fuel Expense Economic fuel expense, defined as GAAP fuel expense plus realized losses/gains from fuel hedge derivative contracts, decreased by 4.0% to $191.2 million in Q1 2024 - Economic fuel expense is defined as GAAP fuel expense plus losses/(gains) realized through actual cash (receipts)/payments received from or paid to hedge counterparties for fuel hedge derivative contracts settled during the period[28] Economic Fuel Expense (Three Months Ended March 31) | Item | 2024 (in thousands) | 2023 (in thousands) | % Change | | :----------------------------------------- | :------------------ | :------------------ | :------- | | Aircraft fuel expense, including taxes and delivery | $188,778 | $197,625 | (4.5)% | | Realized losses on settlement of fuel derivative contracts | 2,398 | 1,513 | 58.5% | | Economic fuel expense | $191,176 | $199,138 | (4.0)%| | Fuel gallons consumed | 67,651 | 64,853 | 4.3% | | Economic fuel price per gallon | $2.83 | $3.07 | (7.8)% | Estimated Economic Fuel Expense (Q2 2024 & Full Year 2024) | Item | Estimated three months ending June 30, 2024 | Estimated full year ending December 31, 2024 | | :----------------------------------------- | :------------------------------------------ | :------------------------------------------- | | Aircraft fuel expense, including taxes and delivery | $192,675 - $198,314 | $772,335 - $794,830 | | Realized losses on settlement of fuel derivative contracts | $1,456 | $6,431 | | Economic fuel expense | $194,131 - $199,770 | $778,766 - $801,261 | | Fuel gallons consumed | 68,032 - 70,024 | 275,377 - 283,398 | | Economic fuel price per gallon | $2.85 | $2.83 | Non-GAAP Financial Reconciliation Hawaiian Holdings provides non-GAAP financial measures, including adjusted net loss, adjusted diluted EPS, adjusted pre-tax margin, adjusted EBITDA, and CASM excluding fuel and non-recurring items, to offer a clearer view of operational performance - The Company evaluates its financial performance using GAAP and non-GAAP measures, including adjusted net loss, adjusted diluted EPS, adjusted pre-tax margin, adjusted EBITDA, and adjusted operating cost per ASM (CASM excluding fuel and non-recurring items)[31] - Adjustments include CBA related expense, contract termination amortization, special items (merger-related expenses), gain on sale of commercial real estate, interest income on federal tax refund, changes in fair value of fuel derivative contracts, unrealized gain on foreign debt, and unrealized gain on equity securities[31][32][33][34] - These adjustments help investors better analyze the Company's operational performance and compare results across periods and with other airlines by removing the impact of company-specific or one-time occurrences[35][37] Adjusted Net Loss and Diluted EPS The adjusted net loss for Q1 2024 was ($143.5 million), resulting in an adjusted diluted EPS of ($2.77) Adjusted Net Loss and Diluted EPS (Three Months Ended March 31) | Item | 2024 Total (in thousands) | 2024 Diluted Per Share | 2023 Total (in thousands) | 2023 Diluted Per Share | | :----------------------------------------- | :------------------------ | :--------------------- | :------------------------ | :--------------------- | | Net Loss, as reported | ($137,565) | ($2.65) | ($98,257) | ($1.91) | | Adjusted for: | | | | | | Special items | 8,482 | 0.16 | — | — | | Changes in fair value of fuel derivative contracts | (1,816) | (0.04) | 3,552 | 0.07 | | Unrealized gain on foreign debt | (8,555) | (0.17) | (2,488) | (0.05) | | Unrealized gain on equity securities | (5,115) | (0.10) | (944) | (0.02) | | Tax effect of adjustments | 1,037 | 0.03 | 1,568 | 0.03 | | Adjusted net loss | ($143,532) | ($2.77) | ($111,807) | ($2.17) | Adjusted EBITDA Adjusted EBITDA for Q1 2024 was ($116.0 million), compared to ($103.3 million) in Q1 2023 Adjusted EBITDA (Three Months Ended March 31) | Item | 2024 (in thousands) | 2023 (in thousands) | | :----------------------------------------- | :------------------ | :------------------ | | Net Loss | ($137,565) | ($98,257) | | Income tax benefit | (15,285) | (27,574) | | Depreciation and amortization | 32,967 | 32,667 | | Interest expense and amortization of debt discounts and issuance costs | 24,069 | 22,880 | | Interest income | (10,021) | (16,465) | | Capitalized interest | (3,134) | (1,458) | | EBITDA, as reported | ($108,969) | ($88,207) | | Adjusted for: | | | | Special items | 8,482 | — | | Changes in fair value of fuel derivative instruments | (1,816) | 3,552 | | Unrealized gain on foreign debt | (8,555) | (2,488) | | Unrealized gain on equity securities | (5,115) | (944) | | Adjusted EBITDA | ($115,973) | ($103,325) | Operating Costs per Available Seat Mile (CASM) GAAP CASM for Q1 2024 was 15.72¢, while CASM excluding fuel and non-recurring items was 11.82¢, an increase from 11.04¢ in Q1 2023 Operating Costs per Available Seat Mile (CASM) Reconciliation (Three Months Ended March 31) | Item | 2024 (in thousands, except CASM data) | 2023 (in thousands, except CASM data) | | :----------------------------------------- | :------------------------------------ | :------------------------------------ | | GAAP Operating Expenses | $794,213 | $730,030 | | Operating Expenses excluding non-recurring items | $785,731 | $740,596 | | Operating Expenses excluding fuel and non-recurring items | $596,953 | $542,971 | | Available Seat Miles | 5,050,841 | 4,917,517 | | CASM - GAAP | 15.72¢ | 14.85¢ | | Aircraft fuel, including taxes and delivery | (3.74) | (4.02) | | Special items | (0.16) | — | | CASM excluding fuel and non-recurring items | 11.82¢ | 11.04¢ | Estimated CASM (Q2 2024 & Full Year 2024) | Item | Estimated three months ending June 30, 2024 | Estimated full year ending December 31, 2024 | | :----------------------------------------- | :------------------------------------------ | :------------------------------------------- | | GAAP operating expenses | $803,834 - $844,733 | $3,273,023 - $3,438,253 | | Adjusted operating expenses | $603,914 - $639,174 | $2,408,459 - $2,551,194 | | Available seat miles | 5,189,938 - 5,340,371 | 21,113,699 - 21,719,834 | | CASM - GAAP | 15.49¢ - 15.82¢ | 15.50¢ - 15.83¢ | | Aircraft fuel, including taxes and delivery | (3.71) - (3.71) | (3.66) - (3.66) | | Non-recurring items | (0.14) - (0.14) | (0.44) - (0.42) | | CASM excluding fuel and nonrecurring items | 11.64¢ - 11.97¢ | 11.40¢ - 11.75¢ | Pre-tax Margin The adjusted pre-tax margin for Q1 2024 was (24.8)%, compared to (23.0)% in Q1 2023 Adjusted Pre-Tax Margin (Three Months Ended March 31) | Item | 2024 | 2023 | | :----------------------------------------- | :---------- | :---------- | | Pre-Tax Margin, as reported | (23.7)% | (20.5)% | | Adjusted for: | | | | Special items | 1.3 | — | | Changes in fair value of fuel derivative contracts | (0.3) | 0.6 | | Unrealized gain on foreign debt | (1.3) | (0.4) | | Unrealized (gain) loss on equity securities | (0.8) | (0.1) | | Adjusted Pre-Tax Margin | (24.8)% | (23.0)% |