Hawaiian Holdings, Inc.

Greetings and welcome to Hawaiian Holdings Inc. fourth quarter and full year 2022 financial results call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during a 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 host, Marcy Morita, Managing Director, Investor Relations. Thank you. You may begin.

Thank you, Doug. Hello, everyone, and welcome to Hawaiian Holdings' fourth quarter and full year 2022 results conference call. Here with me in Honolulu are Peter Ingram, President and Chief Executive Officer, Brent Overby, Chief Revenue Officer, and Shannon Okinaka, 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 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. 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 webpage or website hawaiianairlines.com. During our call today, we refer at times to adjusted or non-GAAP numbers and metrics. A detailed reconciliation of GAAP 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 risk 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 in the Form 10-K, as well as subsequent reports filed in Forms 10-Q and 8-K. I will now turn the call over to Peter.

Mahalo, Marcie. Aloha, everyone, and thank you for joining us today. It's encouraging to be entering a year where COVID restrictions are no longer hovering over our network, but we know that we have a lot of work ahead of us as our financial performance remains quite a ways from being fully recovered. As we continue to build upon the progress we've made, we've also embarked on a number of significant initiatives that will strengthen our company and make Hawaiian a better airline for our guests, our community, and our shareholders. I want to start by thanking our team. We've been tested over the past few years by a global pandemic, intense competition, and during the waning weeks of 2022 by Mother Nature. Through it all, our team has shown their mettle and continued to deliver unrivaled hospitality. Our team cares deeply about our company, our guests, and each other. And more than anything else, This is what sets us up for success as we move forward. Leisure travel demand remains strong. We've experienced a full recovery in much of our network, most notably in the largest part of our network between the mainland U.S. and Hawaii. Low fares in the neighbor island market have stimulated traffic, and we continue to materially outperform our competitor on all these routes. Australia, New Zealand, and South Korea have all seen strong demand recoveries over the course of 2022. Having said that, despite the removal of COVID travel restrictions in October, Japanese travelers have not yet resumed international travel at a pace comparable to pre-pandemic levels, as Brent will discuss in more detail. With the timing of Japanese demand recovery still uncertain, we will need to be nimble. In recent weeks, we've made adjustments to slow the deployment of capacity to Japan. While we remain confident that with time, the long-standing affinity of Japanese travelers for Hawaii vacations will manifest, we also need to be pragmatic in putting capacity elsewhere if recovery remains slow. The natural question for investors is to wonder why it is taking Hawaiian longer to return to profitability than other U.S. airlines. On the cost side, our outlook relative to 2019 is comparable to others. We are facing cost inflation in a number of categories, including labor. I should emphasize that our cost outlook now includes the impact of new contracts for each of our unionized groups since 2020, including the economics of the TA we recently reached with ALPA. Where our 2022 results and our near-term outlook diverge from our peers is on revenue. Not because we are underperforming our competitors on specific routes, but because of the characteristics of the markets in which we compete. We don't control the timing of demand recovery from Japan. We only make decisions on one side of the neighbor island competitive battle. And even in North America, the North America to Hawaii market, which is operating profitably, the supply demand environment relative to 2019 is less favorable than in the domestic 48 and transatlantic markets. As a result, I can't project the timing of a return to profitability as precisely as I would like. What we can do and what we are doing is to focus on what we do control. We can focus on operational execution to unlock efficiencies which help offset an inflationary environment. We can invest in a continuum of initiatives to position our company for sustained success. And we can work to win competitive battles and maximize revenue generation in each of our markets. That is our focus. Everyone in Hawaii is keenly focused on winning in Hawaii. Last quarter, I talked at length about the competitive situation on our neighbor island routes. Based on the most recent information available through DOT reporting, we continue to succeed in earning a disproportionate passenger share with higher average fares than our competitors. And the gap is substantial. We continue to believe that our place in the community, our product and schedule, our knowledge of the guests, and our fabulous employees give us structural advantages here that will enable us to win. We are Hawaii's airline. The current battle continues nonetheless, which suppresses near-term financial performance. We are standing our ground and remain resolute that we will win in the end and emerge stronger on the other side. Also among our key imperatives this year is to firmly reestablish an efficient operating rhythm. 2022 was marked by an unprecedented level of hiring and training throughout our organization as we rebuilt our network after the pandemic. Almost 20% of my over 7,000 teammates have joined our company since the beginning of 2022. Being in rebuilding mode meant that we sometimes accepted ways of working that were not optimally efficient at scale. For 2023, the focus is on operating more reliably, consistently, and efficiently, something that is good for both our guests and our cost structure, countering inflationary pressure in a number of areas. Over the past few months, we have not performed to our standards operationally. The root causes are not a function of our decisions, but it is our responsibility to overcome external forces and deliver the level of service and reliability our guests expect. Since October, on-time performance at our Honolulu hub has been undermined by construction on a primary arrivals runway and the air traffic control programs that constrain arrivals into the airport. These changes have disproportionately affected short hauled neighbor island flights. As a consequence, our reliability has fallen below our high standards, and we've been forced to make adjustments to our schedule to stabilize operations. This construction will continue into the second quarter and will continue to challenge our operations for the next few months. We've adjusted our schedule to add block time and have created schedule recovery buffers on our lines of flight. As a result of these changes and an intense focus on daily reliability by our operations team, we've seen considerable improvement in performance over the past two months. But even with these changes, it will be a day-to-day battle during the construction period to manage through the capacity constraints at our primary hub. and we will be more susceptible than usual to weather or mechanical disruptions. A huge mahalo goes out to our teams in the trenches who are working every day to deliver on our customer promise. We are also not immune to global supply chain challenges. Since late last year, we have encountered constraints on the availability of A321 engines, for which Pratt & Whitney's MRO supply chain has been unable to keep pace. Most recently, this has resulted in two of our 18 A321s being grounded for an extended period, awaiting available serviceable engines. Here again, we have made adjustments to protect the integrity of our schedules, but not without operational challenges and associated revenue and cost headwinds. As we deal with these near-term challenges, we remain keenly focused on completing an extensive list of initiatives that will position Hawaiian for long-term success. Our team is deep in preparation for the launch of freighter operations for Amazon later this year. Over the next few months, we will also complete the insourcing of certain elements of the maintenance programs for our A330 fleet for which we have relied on a third party for over a decade. This will improve our cost structure over time and immediately give us more control over fleet reliability and performance. While separate from the Amazon initiative, taking on this insourcing at the same time as we're adding at least 10 freighters to our A330 fleet makes it even more timely. We're putting mobile technology in the hands of more of our employees to make us more operationally nimble and to allow us to serve our guests better with real-time information. And in April, we will go live with our new passenger service system. Not only does this unshackle us from a core system that has limited our pace of innovation, it also has served as a catalyst to accelerate transformation of our technology. streamlining the connections between the PSS and other systems, enabling better use of data, and providing an opportunity to modernize code for our e-commerce platform. This year, we will begin cycling our long-haul fleet through the installation of Starlink in-flight connectivity, which will position us as a global leader in offering free, fast, and frictionless internet to all our guests. We're also pleased to have reached terms on a four-year pilot working agreement with ALPA this month. Since this agreement is currently out for a ratification vote, we won't be commenting on the specific terms of the contract, but we have reflected the expected economic impact of the agreement and the guidance we are sharing today. Should our pilots ratify the agreement, we will have reached new contract terms with all of our organized labor groups since 2020. And none of our contracts will become amendable prior to 2025. So we have a lot to do in a year with significant challenges in some of our core markets. While we might wish for these initiatives to be a bit more spread out, you don't always get to choose when the opportunity presents. And I believe the priorities I just mentioned will be transformational for our company. 2023 promises to be an exciting year, and I'm fortunate to have an unbelievably talented team to tackle the challenges and opportunities. Let me turn it over now to Brent to go over our commercial performance in more detail. Thank you, Peter. Aloha, everyone.