Hawaiian Holdings, Inc.

Greetings and welcome to the Hawaiian Holdings, Inc. First Quarter 2023 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 host, Marci Morita. Managing Director of Investor Relations. Thank you, Marcy. You may begin.

Thank you, Camilla. Hello, everyone, and welcome to Hawaiian Holdings' first quarter 2023 results conference call. Here with me in Honolulu are Peter Ingram, President and Chief Executive Officer, Brent Overbeek, 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 costs in the balance sheet. At the end of the prepared remarks, we'll 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 page of our website, hawaiianairlines.com. During call today, we 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 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 found in Form 10-K. I will now turn the call over to Peter.

Mahalo, Marcy. Aloha, everyone, and thank you for joining us today. 2023 is off to an encouraging start. Many of the challenges we have discussed on previous calls remain, but leisure demand in the substantial majority of our markets remains strong, and we outperformed our revenue guidance in the first quarter. At the same time, we continue to execute against a wide variety of important initiatives this year that are going to position us extremely well for the years to come. Last week, we made the transition of our passenger service system to Amadeus' Altea platform. This is the largest technology project in the history of our company, and hundreds of people worked for more than a year to make it happen. The core PSS transition went smoothly. But we did experience issues in some of the Hawaiian airline systems that connect to it, particularly our website and kiosk check-in. Those systems have been stabilized since the end of last week, but in the three days immediately following the cutover, we faced crowded airport lobbies and were unable to take the normal volume of bookings on our website. We expect a small one-time impact on revenue in 2Q as a result, about which Brent will offer some thoughts. As you would expect, I wish the transition had gone flawlessly. But in spite of the challenges, I was inspired to see how our team and partners pulled together to take care of our guests and solve problems. What's most important to me is that first, that we're taking care of our guests with empathy and care. And second, where we go from here. Right now, we are focused on ensuring that the systems we have implemented are stable and working as planned, and that we are addressing any lingering transition issues. Beyond that is where the real benefits of this investment will be realized, as we begin to build new digital experiences and revenue-generating products on top of this fundamentally sounder technology foundation. In less than a week, we will complete another important project to insource substantial elements of our A330 maintenance from a third party, reducing our steady state expenses, giving our team greater control of our day-to-day operation, and allowing us to scale our costs more effectively as we grow the fleet with the Amazon A330 freighters. Beyond these two significant initiatives, there is much more ahead of this year. One of our key themes this year is delivering on our commitments, a nod to the fact that as we move forward from a disruptive couple of years, we continue to invest in our future. And several of these initiatives are coming to fruition this year. It's good to be off to a positive start. Brent will talk about our commercial performance in more detail, but I'll hit a couple of highlights. Demand in the largest part of our network from the U.S. mainland to Hawaii remains strong. First quarter performance met our expectations, and we are well set up for 2Q and the summer. Australia and New Zealand and South Korea can continue to see solid demand in the first quarter of the year. On the neighbor island network, we continue to face a pricing environment that delays a return to profitability on these routes. We are closely monitoring DOT reported yield and load factor information as it becomes available. And month after month, It shows that we are resoundingly outperforming Southwest on both fronts. Interisland pricing pressure abated somewhat sequentially in one queue. But remember, this is on the heels of five-plus months of our competitor offering last-seat availability of $39 fares, inclusive of taxes, on every flight. Demand recovery of outbound Japan travel remains slow. We've seen some green shoots in recent weeks, but our Japan routes remain far from a complete recovery. With the extension of slot flexibility for a few more months, we are going to fly less Japan capacity in the summer than we anticipated when building our 2023 plans. Some capacity will be shifted to the more rewarding U.S. mainland market this summer, but not as much as we would prefer as we are still plagued with limitations on our A321neo fleet capacity as a result of our engine supplier's inability to meet spare engine commitments amidst an overtaxed engine overhaul supply chain. At the moment, we have five aircraft grounded awaiting engines relative to an overall fleet of 18. We expect to return one of these aircraft to service later this week, with another one returning about a week after that if the current plan holds. We're working with Pratt & Whitney to find a way beyond this situation, but in the meantime, some of the A330s that aren't flying to Japan are backfilling service on routes that we would prefer to operate with A321s. And we've been less aggressive in scheduling summer capacity overall than we otherwise would have been. While I'm on the subject of operational challenges, let me provide an update on the impact of runway construction in Honolulu on our reliability. Since October, Honolulu Airport has operated without access to its primary arrivals runway. The project, which has experienced delays, is currently scheduled to be completed before the end of May. by which time we will have effectively seen seven months of impairment to the airport's peak hour capacity. Air traffic control protocols to manage the disruption have had a severe negative impact on our neighbor island operation. For the past several months, we have commonly seen our 717s held on the ground with extended waits for approval from air traffic control to depart. In the most recent period, this has been a daily phenomenon. These delays then cascade through the day for subsequent flights scheduled for the delayed aircraft. We have made adjustments to add buffer to our operation, putting slack time in the schedule to provide opportunities to recover a line of flying after ATC delays. This initially yielded some promising improvement to reliability, but in recent weeks, with the return of daylight savings time schedules, we have seen performance deteriorate again. Unfortunately, there is no quick fix here, and we expect the challenges to persist until the construction project concludes. I know this has an impact on our guests, who depend on reliable Interisland service for their jobs and personal lives, and we're absolutely committed to getting back to our historically industry-leading on-time performance. On a more positive note, we were pleased to see the ratification of our new pilot contract in February. The new terms went into effect on March 2nd. This contract recognizes the contributions of our pilots to our company and reflects the evolution of the industry's labor economics. The pilot contract follows the ratification of deals with our other collective bargaining units over the course of 2020 and 2021. As we sit here today, it will be 2025 before we have a contract becoming amendable for any work group. Given the more unsettled state of bargaining at some of our competitors, we feel very well positioned in this important area. We also remain focused on our environmental commitments. We've published a roadmap which details our plan to achieve net zero greenhouse gas emissions by 2050. including commitments to considerable progress in the 2030s. And to help put that plan into action, we've announced an agreement with biofuel company Jibo to purchase 50 million gallons of sustainable aviation fuel over five years. The availability of SAF is essential to reducing our carbon footprint, and we will continue to invest in meaningful partnerships to help develop this nascent industry. Earlier, I mentioned that 2023 is a year for Hawaiian to deliver on our commitments. The PSS transition and our A330 maintenance insourcing are significant milestones. Let me take a moment to talk about some of the other initiatives that have seen progress. We have a more clear picture now than at any time in the past few years on the timetable for introducing 787 to our fleet. With the first delivery scheduled for the fourth quarter of this year, and a planned entry into service date in 1Q24. The fleet will grow to four by the end of 2024. Planning and training have already kicked into gear, and we don't expect any impact from the recent brief interruption of Boeing 787 deliveries. We also continue to make progress toward commencing freighter flying for Amazon. Revenue flights will begin in the fourth quarter, and planning is on track. As a reminder, we will ramp up to 10 freighter aircraft in the operation over the course of 2024. As you can tell, 2023 is shaping up as a very busy year. We aren't yet where we want to be from the standpoint of financial recovery, but there is much to be excited about as we progress into the middle months of 2023. Our team is doing a great job, as they always do, taking care of our guests and making sure that we compete to win in the markets we serve. Let me turn it over to Brent to go over our commercial performance and outlook in more detail.