Hawaiian Holdings, Inc.

Greetings. Welcome to the Hawaiian Holdings, Inc. Third Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Alana James. You may begin.

Thank you, Kyle. Hello, everyone, and welcome to Hawaiian Holdings' third quarter 2021 results conference call. Here with me in Honolulu are Peter Ingram, our President and Chief Executive Officer, Brent Overbeek, our Senior Vice President of Revenue Management and Network Planning, and Shannon Okunaka, our Chief Financial Officer. We also have several other members of our management team in attendance for the Q&A. Peter will provide an overview of our business, including the continued impact of COVID-19, and an update on our priorities for 2021. Brent will provide an update on our commercial performance and trends, and Shannon will provide an update on our cost performance and liquidity. At the end of the prepared remarks, we will open up the call for questions. By now, everyone should have access to the press release that went out at about 4 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. 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 questions. 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. This includes the most recent annual report filed on Form 10-K, as well as subsequent reports filed on Forms 10-Q and 8-K. I will now turn the call over to Peter.

PETER T. Mahalo, Alana. Aloha, everyone, and thank you for joining us today. This will be Alana's last call leading our investor relations function as she is moving on to a leadership position in our ESG efforts as our managing director for sustainability initiatives. Mahalo, Alana, for stewarding the investor relations team through the last two unusual years. Ashley Kishimoto, who many of you on the call will remember, is returning to investor relations and will be hosting our calls going forward. As you have already seen in the financial release we issued earlier this hour, the surge in COVID cases associated with the spread of the Delta variant has dampened our near-term financial performance. As much as we would all prefer to see a straight line recovery, the environment continues to deliver twists and turns for us to navigate. While it's disappointing to see the full recovery of our business delayed by a few months, We are absolutely confident that the effects of these conditions are short term, and we are already seeing signs of a solid rebound in our domestic business at the same time as the necessary conditions for recovery of our international operations are falling into place. With that in mind, we are managing the business for the long term, preparing for an international rebound in the months ahead, focusing on the delivery of outstanding guest experience, and moving forward with efforts to better position our balance sheet for the future. One constant over the course of the pandemic has been the outstanding contributions of our team throughout the business. Constantly evolving conditions have forced us to adapt and overcome, and they have responded with an awe-inspiring display of strength and resilience day in and day out. by continuing to lead the industry in operational performance by an impressive margin and always keeping the evolving needs of our guests top of mind. I am honored to be a part of this remarkable team. The third quarter began with great promise. Unprecedented demand for Hawaii vacations from the mainland allowed us to operate our largest July schedule ever from this geography. By July, we were operating 115% of pre-pandemic level capacity, and load factors, which had steadily improved in the first half of the year, reached historical levels. By the tail end of July and into early August, we saw the beginning of the impact of the Delta variant wave of COVID cases as booking slowed. These conditions continued until mid-August, when Hawaii's governor made public comments asking visitors not to come to Hawaii in light of a pandemic high level of new cases and hospitalizations in our home state. These statements not only further blunted the pace of bookings, but they led to the cancellation of a significant number of reservations, particularly for near-term travel in late August, September, and to a lesser extent, October. The impact of all of this was a significantly lower final load factor in August and September and a deterioration of the strong booking position for the fourth quarter that we had established prior to the Delta surge. By the end of September, conditions were solidifying, although not yet quite back to where we were in July. The seven-day averages of COVID cases and hospitalizations in Hawaii were clearly in decline. Bookings had stabilized and begun to recover. and cancellation rates had reverted to more normal levels. Hawaii now has among the lowest rates of COVID per capita in the U.S., returning to the position we have had through most of the pandemic. Our hospitals have returned to a more normal mode of operations, and we are seeing resurgent interest in Hawaii travel. On October 19, Governor Ige acknowledged this progress and encouraged visitors to resume travel to Hawaii effective November 1st. We have some work to do to recover the bookings we didn't take over the course of this period, and that will affect traffic levels for the fourth quarter. But it's encouraging to see demand back on the mend. Given that trends have quickly started to move back in a positive direction, we think that this Delta variant interlude will be remembered as a short-term setback on the road to fulsome recovery. As we've discussed on prior calls, the part of our business for which recovery has been most elusive is international, where restrictions on cross-border travel continue to stifle demand. What is encouraging now is that the necessary preconditions for recovery are falling into place. Most importantly, vaccination rates in Japan, South Korea, Australia, and New Zealand, which lagged the US in the early part of 2021, have dramatically accelerated. In Japan, which is the most important international country in our network, 70% of the population is now fully vaccinated and 77% has received at least their first dose. These numbers compare to 57% and 66% for the US and 71% and 79% in Hawaii. Similarly, we expect in the weeks ahead that vaccination rates and our other important international markets will meet and most likely exceed U.S. levels. This environment sets the stage for a relaxation of restrictive cross-border travel policies that have been in place throughout the pandemic. Notably, New South Wales in Australia has announced the elimination of quarantine requirements for vaccinated travelers beginning in November. allowing us to recommence service to Sydney in mid-December for the first time since March of 2020. This is a harbinger of expected policy relaxations in the Asia-Pacific region in the months ahead and particularly notable given that Australia previously had some of the strictest COVID travel restrictions of major nations. We expect quarantine requirements to be shortened or eliminated replaced by vaccination and or testing requirements. When this happens, pent-up demand for leisure travel should be unleashed in our international markets, paralleling the experience we have already seen for domestic travel. People want to travel, especially for leisure. The confinement associated with this pandemic is unprecedented in our lifetime, And when domestic travel restrictions have been relaxed in the U.S. and elsewhere, leisure demand has responded quickly. I am confident the international experience will be similar. We continue to ready ourselves for this eventuality, making sure that we are prepared with staffing, training, and fleet to take advantage of demand while delivering the operational performance that our guests expect of Hawaiian Airlines. We are planning for the addition of more international flying to our schedule beginning in late December and ramping up through the first quarter of next year. Given that the policy environment is still evolving, we expect that the recovery of international demand will have a limited impact on our fourth quarter financial results, but we expect a more material recovery in 2022. Elsewhere in our business, we experienced a number of notable events in the past quarter. Hawaiian was proud to respond to the activation of the Civil Reserve Air Fleet for just the third time in the history of the craft program. Our team helped relocate refugees from the Afghanistan evacuation to a new life in the United States, an experience that was extremely moving for all those involved. We also continue to use aircraft and crews that are temporarily surplus from our scheduled operations to support charter flights for the US military and other customers. In addition, we marked a notable milestone with the opening of the new MALCA concourse at our Honolulu hub. The MALCA gates represent the first major expansion at our home airport in 28 years, with the ability to simultaneously serve 11 narrow-body or six wide-body aircraft. In conjunction with ongoing projects to improve our lobby experience in Honolulu, we are taking meaningful steps to enhance our award-winning guest service. We're also taking concrete steps to reduce our debt levels, most notably by conducting a tender offer for the A and B tranches of our 2020 EETC issuances. As our investors are aware, our focus through 2020 and into the early part of 2021 was bolstering our liquidity to manage through the COVID crisis. While COVID is still with us, we have a clearer line of sight today to long-term recovery. and the tender offer is an important first step towards restoring our balance sheet to a superior long-term position. All of this fits in the theme of focusing on the long term, even as we look to manage near-term performance in a turbulent environment. As we navigate the day-to-day twists and turns of our current environment, it is easy to forget that just a little over a year ago, it was impossible to travel to Hawaii without enduring a 14-day quarantine. Now we have seen our mainland business recover and are confident that it will recover again from the recent dip. Conditions are falling into place for a recovery of our international franchise. By the middle of next year, we expect to restore system capacity to pre-pandemic levels and beyond, justified by the full restoration of demand for travel to Hawaii. And through it all, I'm immensely proud to share this journey with a fantastic team of aviation professionals who are laser focused on serving the needs of our guests. As we close out this year of recovery over the next couple of months, we are looking ahead to even better days in 2022. With that, let me turn the call over to Brent to discuss our commercial performance in more detail.