Hawaiian Holdings, Inc.

Greetings and welcome to Hawaiian Holdings Incorporated's second quarter 2023 financial results call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the call, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. At this time, I would now like to hand the call over to Marcy Morita, Managing Director of Investor Relations. Thank you. You may begin.

Thank you, Daryl. Hello, everyone, and welcome to Hawaiian Holdings' second quarter 2023 results conference call. Here with me at 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 and 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 our 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 statements. These include the most recent annual report filed in 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.

Mahalo, Marcie. Aloha, everyone, and thank you for joining us today. I want to start with a sincere mahalo for our frontline team who have been working in a challenging operating environment for the past several months. The good news is that things are getting better, and our team has once again demonstrated that when things get tough, they rise to the occasion. For that, I am incredibly grateful. Leisure demand remains robust throughout our network, reflected in strong second quarter revenue performance and encouraging advanced bookings for the back half of the year. We continue to make important progress on the strategic initiatives that will make us an even better airline. And we are encouraged by improvement in some of the outside influences that have affected our operating environment. With some of the factors we don't control falling into place, we're getting back to a world in which our team members can do what they do best, deliver exceptional hospitality to our guests. As you have seen in our press release today, RASM came in above the range that we guided to during our last earnings call, a testament to the robust demand environment. I'll touch on a few highlights of our commercial performance that Brent will address in more detail. Revenue performance from the U.S. mainland to Hawaii, the largest part of our network, remains strong, continuing the trend we have seen for several quarters. There is no evidence of a slowdown or other signs of a looming recession in our demand indicators. Similarly, we have seen the continuation of recent trends on our international routes outside of Japan. with Australia, New Zealand, and South Korea all seeing solid demand in the second quarter. And on our neighbor island network, we continue to decisively outperform Southwest on load factor, unit revenue, and customer preference in an environment that remains challenging in terms of fares and supply. Where we have seen a divergence from recent trends in a favorable direction, is on our routes between Japan and Hawaii. Since early May, Japan outbound demand has accelerated meaningfully for the first time since the onset of the pandemic. Combined with historically high demand from U.S. point of sale, the result has been load factors and RASM that are comparable to historical levels. Now, I will offer one caveat to this recovery. The performance we are seeing is currently on a capacity base that has been about 70% of what we operated in 2019. And JAL and ANA, the other two major operators between Japan and Hawaii, have been operating a similar proportion of their pre-pandemic capacity levels. So we will have to see a continued growth in demand as capacity comes back. both as a result of demand and the likely conclusion of slot relief measures. But having talked about this since 2021 on these calls, it's great to see Japanese visitors starting to return to Hawaii in numbers. And it's important not just for us, but for many businesses here in Hawaii that have historically relied on what has long been the state's largest source of international visitors. We've also seen a positive shift in our operations. For eight months, from last October through almost the end of May, we've dealt with the consequences of a major runway construction project in Honolulu. As I previously shared, the construction project resulted in a reduced arrival rate at the airport during peak periods and frequent ground holds for some of our neighbor island flights, which severely affected our operations and on-time performance. The good news is that on May 27th, the most impactful phase of the construction project was completed, and the runway is open for daily operation. As expected, we delivered a significantly improved on-time performance in June and are trending even more favorably in July. We're not resting here, though. There is still some work to be done to get all the way back to the historical level of industry-leading reliability. So this is no time to take our eyes off the ball. What is most important, though, is that our team is now positioned to be successful again, which they really couldn't be for eight long months. I thank them again for their perseverance as we work through these challenges. We've also seen some improvement in the availability of our A321 aircraft, which have been constrained in recent months by our engine suppliers' inability to meet spare engine commitments, as we detailed on previous calls. The worst period saw us with five of our 18 aircraft on the ground awaiting engines. More recently, we've experienced two and sometimes three grounded aircraft. Our plan prior to this morning had been for no more than two aircraft out of service for the next few months, improving to one in the fourth quarter. Today's news from Pratt's parent company's earnings call announcing additional removals for this engine type renders this plan subject to change. Since this development is late breaking, we haven't yet fully calibrated the impact. Our team has already started to work with Pratt & Whitney to understand the specific impacts on our installed fleet. And in the days ahead, we will assess whether we must take any scheduled action to mitigate aircraft shortages. Even as the situation improved recently, we always knew that it remained dynamic. And while we received financial compensation for unavailable aircraft, What we are really looking forward to is full availability of our fleet, an appropriate level of spare engines at our facilities, and a much more predictable operation. We're also making progress on many major initiatives we're tackling this year. We've achieved major milestones on two such initiatives in the second quarter, transitioning our reservation system to Amadeus's Altea platform, and insourcing important aspects of our A330 maintenance from a third party. Altea will provide a stronger technology foundation on which to build new revenue generating products and digital experiences for our guests. By insourcing management of our A330 maintenance, we're taking full ownership of our A330 fleet reliability. which will provide a lower steady-state cost structure and better control and flexibility to accommodate changes in our business, especially as we bring the freighter fleet into service. Earlier this month, the first A330-300 freighter that will operate for Amazon arrived in Honolulu. Over the next few months, we'll use the aircraft for employee familiarization work. This is the first of 10 freighter aircraft we will be inducting over the course of the next year and a half, providing us a new and diversified stream of revenue that will begin to ramp more materially in 2024. In May, we unveiled our Boeing 787-9 Dreamliner interior and a new business class product, the Lehoku Suites. These 34 seats feature fully flat beds, privacy doors, and shared double suites. This aircraft truly will set the standard for premium travel to Hawaii. Our team has done a great job of building in unique Hawaiian touches that provide a special experience from the front to the back of the airplane. We have recently learned of an incremental two-month delay on the delivery of our first aircraft, but this does not at all diminish our enthusiasm about what the aircraft will mean for us in the long term. On a previous call, we've shared with you our exciting news about plans to provide Wi-Fi connectivity on our long-haul fleet using SpaceX's Starlink. The Starlink team continues to work through the certification and modification kits for the A321 and A330, the first for each type. At this point, we don't expect the first installation to occur until at least 4Q, and it will be 2024 before we have a steady stream of aircraft mods underway. Getting this product installed on our fleet, which will be free for every guest from day one, will set a new standard for bandwidth and speed, something we have even more confidence about now, given documented performance of the technology on other fleets that are in service. As you can tell, we're very busy right now. Our message to the team over the last year has been to buckle down and focus on what we can control. Encouragingly, we're now seeing some of the externalities we don't control, like runway construction and Japan demand, move in our favor. All of these things position us for stronger performance ahead. And what positions us most of all is our team throughout the organization. They continue to do a great job extending a standard of hospitality and care that sets us apart. Lastly, I want to mention some changes that we've made recently to our commercial leadership team. We have consolidated responsibility over commercial to two long-standing leaders, Brent Overbeek, our Chief Revenue Officer, and Avi Maness, our Chief Marketing Officer. Both have been promoted to Executive Vice President as part of this change. I have great confidence that their complementary skill sets and vision are going to drive our commercial performance over the coming years. Let me now turn it over to Brent to go over our commercial performance and outlook in more detail.