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Earnings call: Hawaiian Holdings discusses Q1 2024 performance and outlook

EditorAhmed Abdulazez Abdulkadir
Published 04/24/2024, 06:47 AM
© Reuters.
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Hawaiian Holdings , Inc. (NASDAQ:HA), the parent company of Hawaiian Airlines, reported its first quarter 2024 financial results, revealing an adjusted EBITDA loss of $116 million. Despite the loss, the company highlighted strong demand for travel to Hawaii, particularly from North America, and positive reception of its new products.

Hawaiian Airlines is focused on improving operational metrics and is optimistic about returning to profitability, bolstered by the launch of Starlink, work for Amazon (NASDAQ:AMZN), and the addition of two Boeing (NYSE:BA) 787s to its fleet. The company is also navigating a pending merger with Alaska Airlines and managing increased costs, including those associated with the A321 engine shortages.

Key Takeaways

  • Hawaiian Holdings reported an adjusted EBITDA loss of $116 million in Q1 2024.
  • Strong travel demand to Hawaii from North America and improvements in the Neighbor Island market.
  • The company is working to comply with the Department of Justice's second request regarding the pending merger with Alaska Airlines.
  • Unit costs, excluding fuel, are expected to rise by 6.5% in Q2 2024 compared to the same period in 2023.
  • Hawaiian Airlines has received its first two 787s, with plans to expand long-haul flights and expects a more significant premium contribution from the 787 fleet in 2025.
  • The company is considering refinancing options for its loyalty program bond maturing in 2026 and is focusing on a higher liquidity target, aiming for around $750 million.
  • Challenges include A321 engine shortages and disappointing revenue performance in the Japanese market due to currency depreciation.

Company Outlook

  • Hawaiian Airlines intends to extend flights beyond the West Coast with a new airplane.
  • The company is adapting to shifting booking patterns and remains confident in its revenue management system.
  • Advanced bookings for the summer look promising, especially for U.S. point-of-sale outbound demand.

Bearish Highlights

  • Current engine shortages for the A321 fleet are impacting costs and operations.
  • The Japanese market's revenue performance is weaker due to the yen's depreciation against the dollar.
  • The delivery schedule for the 787 fleet may face supply chain challenges.

Bullish Highlights

  • The company is seeing positive early results from the 787 premium cabin and plans fleet expansion in 2025.
  • Hawaiian Airlines is experiencing strong demand in international markets, particularly Australia, New Zealand, and South Korea.

Misses

  • A slight reduction in ASMs in Q1 2024 due to the timing of heavy maintenance events.
  • An anticipated increase in unit costs, excluding fuel and special items, by approximately 6.5% in Q2 2024.

Q&A Highlights

  • Hawaiian Airlines discussed the positive customer and employee reception of their products.
  • The company is analyzing balance sheet plans and considering refinancing options for its loyalty program.
  • There is flexibility with the A330 fleet to manage dynamic aircraft delivery schedules.

In conclusion, Hawaiian Holdings has demonstrated resilience in the face of challenges and is taking strategic steps towards future profitability. The company's focus on operational improvements and expansion of its fleet, along with strong market demand, provides a foundation for optimism in the coming years.

InvestingPro Insights

Hawaiian Holdings, Inc. (HA) has shown a remarkable 54.31% one-year price total return, indicating investor confidence and a significant recovery from previous market positions. This performance is especially noteworthy considering the company's challenges, such as the A321 engine shortages and the impact of currency depreciation in the Japanese market.

InvestingPro data reveals that Hawaiian Holdings is trading at a high Price / Book multiple of 7.01 as of the last twelve months ending Q4 2023, which suggests a premium valuation by the market relative to the company's book value. This could reflect the market's optimism about the company's strategic initiatives, such as the expansion of its 787 fleet and the potential synergies from the pending merger with Alaska Airlines.

Despite the positive market sentiment, the company operates with a significant debt burden, as indicated by one of the InvestingPro Tips. With a negative P/E ratio of -2.56 and adjusted operating income of -$344.65 million for the last twelve months as of Q4 2023, Hawaiian Holdings may face difficulties in making interest payments on its debt, which is a critical factor for investors to consider.

For readers looking to delve deeper into Hawaiian Holdings' financial health and future prospects, InvestingPro offers additional insights and tips. In fact, there are 15 more InvestingPro Tips available for HA, which can provide a comprehensive understanding of the company's financials and market performance. To access these valuable insights, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/HA.

Full transcript - Hawaiian Holdings (HA) Q1 2024:

Operator: Greetings and welcome to the Hawaiian Holdings, Inc. First Quarter 2024 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. [Operator instructions] As a reminder, this conference is being recorded. It my now my pleasure to introduce your host, Jay Schaefer, Vice President and Treasurer. Thank you. You may begin.

Jay Schaefer: Thank you, Camila. Hello everyone and welcome to Hawaiian Holdings' first quarter 2024 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. 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 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' 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 statements. These include the most recent annual report filed on Form 10-K. I will now turn the call over to Peter.

Peter Ingram: Mahalo Jay. Aloha everyone and thank you all for joining us today. As always, I want to thank our team for an incredible job in the first quarter. In a quarter that featured some operational and commercial challenges, we made great progress on major initiatives and saw important improvement in some key operational metrics. Early this year, a number of very important investments, ones like Starlink, our work for Amazon and the 787 that we've been talking about on these calls for some time began to come to fruition. I'll talk more about these in a moment. While I'm sure the pending merger with Alaska Airlines is a topic of great interest, we don't have anything material to share today beyond what we have already publicly disclosed. We received shareholder approval for the combination in February and are working diligently to respond to the Department of Justice's second request, which we received in early February. Our aim is to comply with that request as soon as possible and we are making steady progress to that goal. On March 27th, Hawaiian and Alaska disclosed a timing agreement with the DoJ in which we agreed not to consummate the merger until 90 days after the date on which both parties have certified substantial compliance with the second request. More information about this and other recent merger-related events can be found in our SEC filings. The early part of this year has featured some major milestones in the development of our fleet. As of this month, we have two 787s in service, and we flew our first 787 revenue flight between Honolulu and San Francisco on April 15th. Our second A330 freighter was also delivered and has commenced revenue operation. Greater flying is going well and we look forward to continued expansion of the fleet and network over the course of the year. We completed installing Starlink in-flight connectivity on all 18 of our Airbus A321neos and are working towards certification for the A330 so that we can complete installations on that fleet later this year. As promised, the Starlink product sets a completely new standard for in-flight connectivity and the response from our guests has been incredibly positive. On another positive note, we expect our full A321neo fleet to be available for service within the next couple of weeks, based on current engine availability, including the return of some engines from overhaul visits. Brent will talk about our commercial performance in more detail, but I'll hit a couple of highlights. Overall, the topping of our revenue guidance in the first quarter reflects generally strong demand for travel to Hawaii in the majority of our markets. While some core parts of our network, notably Maui and Japan have room to improve, the aggregate demand we're seeing across our portfolio of roots is encouraging. With the additions to our fleet, we are launching some new service in May and the initial customer response to our flights between Salt Lake City and Honolulu as well as between Sacramento and both Kona and Lihue has been very encouraging. We're also seeing good demand for additional seasonal frequencies that we've added to existing routes like Austin, Boston, Las Vegas, LAX, and American Samoa. We have talked previously about some of the challenges we faced with operations in 2023, mostly rooted in factors outside of our control. A key theme for us this year was ensuring that we get back to industry-leading on-time performance and baggage delivery, things we know we excel at when not facing external headwinds. We saw some tangible results from these efforts in Q1 as reliability improved month by month through the quarter, including hitting 87% on-time arrivals in March, which should rank us near the top of the industry for the month. We're also working on initiatives to handle disruptions better, improve our call center experience, and introduce new self-service options for guests. I'm excited about the progress we're making on this work. First, because it matters to our guests; and second, because running a smooth, reliable operation has a positive impact on costs. Shannon will speak more about our costs, but I want to underscore that we continue to focus on returning to profitability. The investments that we are making and the initiatives that we are pursuing lay a strong foundation for financial resilience. There is a lot going on in 2024 with exciting new projects in addition to the pending merger. My focus is on making sure that we don't lose sight of the fundamentals; safety, running a great operation, and sharing aloha with our guests, while we execute against a lot of initiatives. I'm grateful to my leadership team and to all of the employees of Hawaiian for keeping a daily unrelenting focus on those fundamentals, especially safety during such a busy time. With that, I'll turn the call over to Brent to go over our commercial performance and outlook in more detail.

Brent Overbeek: Thank you, Peter, and aloha everyone. As Peter mentioned, demand remains strong across most of our network in the first quarter. Total revenue was up 5.4% as we flew 2.7% more capacity versus the same period in 2023. We saw a good close-in demand and strong fares driven by continued strength in our premium cabinet. System RASM was up 2.6% year-over-year for the first quarter, which, as Peter mentioned, was above our guidance. Digging into our first quarter performance by geography. North America continues to perform well, and the overall healthy demand was augmented by two factors; first, accommodating other airlines passengers impacted by the MAX 9 grounding; and second, by the timing of Easter, which on a year-over-year basis, pushed more traffic into the first quarter. Turning to Japan, after seeing demand ramp up through the third quarter of 2023, we have seen the Japan point-of-sale demand recovery flat, driven by the challenges of a weekend compounded by high lodging rates in Hawaii. Somewhat offsetting that weakness, we have been pleased with U.S. point-of-sale demand, which has backfilled some of the gap in Japan originating demand. We expect that U.S. point-of-sale strength to remain robust while the exchange rate environment persists. The rest of our international markets are seeing similarly strong U.S. point-of-sale demand. However, international RASM is down year-over-year as lower yields offset improved load factors compared to a very strong first quarter of 2023. Neighbor Island saw a strong close-in demand and improving yields, which are driving unit revenue improvement. We are seeing the strongest unit revenue improvement since the second quarter of 2022 when the state of Hawaii reopened travel without COVID-19 restrictions. We continue to perform exceptionally well against the competition with a 28-point load factor differential and a PRASM that was roughly twice that of our competitor in the fourth quarter of 2023. Looking at our ancillary revenue performance. Revenue generated from our Extra Comfort and preferred seat products remained strong and was up 16% year-over-year driven by strong demand and price optimization. We continue to make good progress on our NDC distribution initiative and are now processing roughly 60% of eligible U.S. indirect transactions through NDC. Overall, the feedback from our distribution partners who have implemented this more modern distribution technology is positive and we are pleased with the pace at which we are able to bring on new partners and expand NDC adoption. Looking forward, we anticipate our NDC penetration will continue to grow as we begin to offer NDC content through the Sabre (NASDAQ:SABR) GDS in the back half of this year. Looking forward to the second quarter. In North America, we are seeing a little bit of year-over-year revenue pressure in the front part of the quarter, mostly attributable to the Easter shift. And our expectations for the summer peak remained strong. As Peter mentioned, our new markets, including Salt Lake City and Sacramento, to Kona and Lihue are building well into the summer. Specifically for Maui, we are seeing continued improvement in advanced bookings, narrowing the demand gap relative to Honolulu. And building off positive year-over-year PRASM improvement in the first quarter, we expect continued improvement in Neighbor Island performance. We have a lot to look forward to in the second quarter with the recent introduction of the 787 into revenue service, the return to service of our entire A321 fleet, further rollout of Starlink and strong performance on our new routes. All of that combined with our authentic Hawaiian hospitality, and we continue to give travelers to Hawaii lots of compelling reasons to choose us over the competition. For the second quarter, we expect RASM to be about flat year-over-year on capacity growth of about 5%. Looking out over the full year, ASMs are now expected to be up about 6% as the full impact of our previously announced Japan schedule reductions are incorporated into the forecast. With that, I'll turn the call over to Shannon.

Shannon Okinaka: Thanks, Brent. Aloha everyone and thank you for joining us today. We ended first quarter of the year with an adjusted EBITDA loss of $116 million, equating to an adjusted loss of $2.77 per share, which includes the impact of $0.32 per share due to a change in our effective tax rate that I'll discuss in a moment. Our CASMex results for the first quarter were better than our expectations, even considering the slight reduction in ASMs, primarily due to the shift in timing of heavy maintenance events, which will be incurred later this year. As we mentioned on our last call, our year-over-year CASM change reflects the preparation for and ramp-up of our capacity throughout the year. Thus, the year-over-year change in CASM starts off larger in the first quarter and improves throughout the year. Pilot training and other fleet induction costs are being incurred now, but will be offset by the capacity and revenue generated as we begin operating the new additions to our fleet. Significantly affecting our first quarter results and likely the remainder of 2024 is the reduction in our effective tax rate from 21% to 10%. Since 2020, we've generated significant federal and state net operating losses, which will be used to reduce future cash tax obligations. Our analysis of the net operating losses under GAAP required us to increase the valuation allowance, lowering the effective tax rate and decreasing our book tax benefit for the quarter. For the second quarter, we expect our unit costs, excluding fuel and special items, to be about 6.5% higher than the same period in 2023. About 3 points are due to the timing of heavy maintenance events and about 1 point related to Amazon operations and another point related to increased labor costs. For the full year, we expect our unit costs, excluding fuel and special items, to be up about 2.5%. The change from our prior guidance of up 1.5% is primarily due to the lowering of our capacity forecast. Turning to the balance sheet, Peter mentioned that we took delivery of our first two 787s, both of which we have financed, one in the first quarter and one in April. We continue to receive competitive offers from financing companies for our future 787 deliveries as well, and we will make a decision whether and how best to finance them closer to their deliveries. We're also evaluating the best path forward for our 2026 loyalty program bond maturity. While the closing of the merger with Alaska Airlines may render this moot, we're building a solid plan for our balance sheet. While we are not satisfied with our current financial performance, we believe that we are taking the right actions and are starting to see some of the major investments we put in motion several years ago start to materialize. I want to reiterate our gratitude to all of the employees of Hawaiian who have persevered as we work our way back to sustainable profitability. And with that, we can open up the call for questions.

Operator: Thank you. We will now begin conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is from Conor Cunningham with Melius Research. Please proceed with your question.

Conor Cunningham: Everyone, thank you. Just I wanted to see if you would impact the RASM forecast a little bit. Just trying to understand how the competitive landscape is changing in the interisland market and off the West Coast? And then I know you mentioned that the issues with Japan. Just curious on how the international entity is kind of playing out right now? Thank you.

Peter Ingram: Thanks Conor. I think as we look at kind of sequentially coming out of 1Q into 2Q, you have a little more international capacity coming online, which, as we talked about, with Japan, in particular, puts a little bit more of a challenging environment, some more difficult comps in 2Q. From a North America perspective, if you look at kind of the whole period and adjust for the Easter shift, I think we feel -- and for the benefit we had in 1Q at MAX, we feel a pretty kind of similar trend rate as we come out of 1Q and into 2Q and the good progress that we saw in Neighbor Island in 1Q, we continue to see that into the second quarter and maybe even improving a little bit as we get to the back half of the quarter.

Conor Cunningham: Okay. Helpful. And then last call, you talked a little bit about slowing hiring, but I think you just mentioned that you're still hiring and training a fair bit of folks. I'm just curious on where the hiring needs kind of stand today. Do you need to hire more to fulfill the capacity plan? Or do you have enough people on campus at this point to get through 2024 and so on? Thank you.

Brent Overbeek: Yes. Thanks for that, Conor. I'll take that one. We are continuing to hire, but it is at a slower pace than we've seen over the last 18 months to two years. We have -- we've got more aircraft coming in over the course of the year, another 787 delivery, a few more freighters should be online before the end of the year. We've done some of the hiring for that, but we will be doing pilot hiring again at a reduced pace from where we were over 2022 and 2023 as we set up in to next year, frankly. We are always hiring for our airports operation. That's an area where we see a fair bit of natural turnover, but our staffing is in good shape today, thankfully, and we're not dealing with some of the deficits we were in other areas. We've been doing some hiring on maintenance, but that's another area where we've made good progress. So, I would characterize it as a more normalized environment of ramping up staffing for a little bit of growth going forward as well as dealing with more normalized attrition and not the sort of hyperkinetic hiring environment that we had coming out of COVID.

Conor Cunningham: Appreciate the thoughts. Thank you.

Brent Overbeek: Thanks Conor.

Operator: Our next question comes from the line of Mike Linenberg with Deutsche Bank. Please proceed with your question.

Mike Linenberg: Hey, good morning everyone. I guess two questions here for Shannon. When we think about unit costs and how you portray it, how are you treating the freighter operation. We're at two now? Where are we by year-end? And obviously, pilot costs and dispatch costs and aircraft costs associated with those airplanes, but no ASMs. Are you going to carve that out or is that going to be in the Q?

Shannon Okinaka: Yes. Thanks Mike. Yes, I think part of your question, I think, was about how many we'll have by the end of the year. And I think right now, the current plan is to have seven of the freighters flying by the end of the year. So, right now, we just put it all together into CASM. It's still pretty small from a system perspective relative to the system to break out. I think as it gets a little larger, we'll probably verbally break it out, just to give you a sense of how much of the CASM is due to the Amazon costs. For this year, just in general, the Amazon operation and financial results are still pretty much immaterial to the company. So, we don't plan to do segment reporting this year based on the outlook. So, I think the best we'd be able to do is just split out some of the direct costs. I think right now, the costs are pretty hard to filter out because a lot of it is pilot training, and that's just intermingled with our regular passenger business. But when the direct costs become a little larger, we can break that out for you.

Mike Linenberg: Okay, great.

Peter Ingram: And Mike, I'll just add a little bit to what Shannon said on the Amazon fleet. The number of aircraft and the pace of deliveries has been moving around a little bit driven by the pace at which Amazon has been able to get airplanes delivered from the vendor that is working on reconfiguring the aircraft from passenger configuration to freighter configuration. We had, at one point, expected fewer than the seven by the end of this year than Shannon said. A couple of those have now moved up. So, we think we're getting more stability on that. I would caution that they may not all be flying by the end of the year because during the peak period, our partner doesn't necessarily want to introduce new lines of flying into the operation. So, we'll -- that number could move around a little bit. But we do have a fair amount of ramp coming over the course of this year, and that business will become more significant as we go quarter-to-quarter through this year.

Mike Linenberg: Okay, great. And then just a follow-up. Peter, either you and/or Brent, the 787, can you talk about the difference of that premium product versus your A330, your ability to monetize that? It does seem like it is -- while the A330 product is a good one, it does feel like that this is a nice step up, and there's a nice opportunity to generate a lot more premium revenue with the new airplane. Thanks for taking my question.

Peter Ingram: Yes. Thanks Mike. I'll start on that and see if Brent has anything additional to add. We're incredibly proud of the product our team has put together on that aircraft. It's our Leihoku suites are probably by far and away, a leading business class product for any airline in North America, but certainly easily the best product flying between the U.S. mainland and Hawaii on any of the aircraft that come out this direction. So, we do think as people start flying it and the word of mouth starts to travel, we're going to get a really positive response to that. The other important thing to note is that there's a lot more of those seats on those airplanes as well with 34 in the front cabin compared to 18 on our A330s. So, the success of premium revenue over the last few years has inspired us to allocate more of the real estate on the cabin to that. And that's going to be very helpful, especially in some of our premium-rich markets, especially as we sort of move away from the initial deployments on the West Coast and start flying it even longer haul in some of the real premium deep markets, we're incredibly encouraged about what the prospects are.

Brent Overbeek: Yes, I would say that word of mouth that Peter mentioned is already out there. We're seeing really strong demand in both Phoenix and Los Angeles, which are on initial deployments. I was reviewing just last week with the team despite nearly doubling the capacity on those trips, demand is -- and load factors are in line, if not a little bit up. As we look into the summer and average fares remain really strong. So, people are clearly searching out the product in addition to the great physical product that the team has designed all the benefits of the 787 in terms of lower humidity -- or more humidity and lower cap pressure, I think people really interested in flying the product. And as Peter mentioned, we're really looking forward to being able to extend the missions beyond just some West Coast operations and when we take airplane number three, we'll be able to do that. So, overall, a great start, really encouraged with where we're going and both the customer and employee reception of it of the products has been fantastic so far.

Mike Linenberg: Great. Thanks guys.

Peter Ingram: Thanks Mike.

Operator: Our next question comes from the line of Helane Baker with TD Cowen. Please proceed with your question.

Helane Becker: Thanks very much operator. Hi team. I just have a couple of questions. When you talk about strong cuisine demand, can you like define that a little better, maybe refine that?

Peter Ingram: Yes, I think, Helane, what we've seen post-pandemic and really kind of it's a continuation is people's decision-making about Hawaii vacations continues to move closer in. Traditionally, our booking curve was highly correlated with stage length. So our East Coast services and international services had a longer booking curve than our West Coast services. I think we're seeing broadly across the board, both domestic, international that some of that is just continuing to move closer to departure. And while we would have a really good idea, 30, 45 days out on some of our leisure markets, we still do, but we're seeing kind of more people make those decisions and more people to choose to fly Hawaiian kind of within that last month, month and a half prior to departure.

Helane Becker: Okay, that's helpful. But has that caused you to make different pricing decisions?

Peter Ingram: No, I don't think so. I think it's probably more of a -- how is the revenue management system accommodating that than discrete pricing decisions. And so it's something that as we've implemented more willingness to pay solutions with our revenue management solution provider. It's something the team keeps a keen eye on, but I wouldn't say there's a tangible one-to-one view of how that's changed pricing behavior.

Helane Becker: Okay, that's really helpful. Thank you. And then just for my follow-up question, maybe for Shannon, do you have any goals on what you want your liquidity to be and where you feel it's not enough or where it would -- I don't think it would ever be too much. But you mentioned that the loyalty program has to be refinanced in 1Q 2026, I think. But how should we think about your goals for liquidity, however you want to measure that?

Shannon Okinaka: Yes. Thanks Helane. And Jay and I would agree with you, there's probably never too much liquidity. Well, a couple of things. So, our -- yes, our loyalty program bond becomes due in January of 2026. And so we're starting to take a look at our -- at that as well as just our full balance sheet with all of the 787 deliveries coming up. So, pre-pandemic, I think we've talked a lot about our cash target of $500 million. And while we haven't done-- redone the full analysis of that, we know that our cash target at this point is higher than $500 million just based on what happened during the pandemic. We throw around a number like 750, but there's not a full analysis behind that. And so right now, we're focused on probably the next two years looking at CapEx and our debt maturities. We don't have anything to announce today, but this is partially why you hear us talking about financing of the 787s, and it's all kind of in preparation for what we're going to do with the loyalty program line, which really is probably something we're looking at doing near term, not necessarily waiting until 2025 or 2026. So, I think maybe by this summer, we'd have more to talk about. We're right in the middle of looking at our balance sheet plans and really strategizing on what we do there.

Helane Becker: Okay. Thanks Shannon. That’s huge helpful.

Operator: Our next question comes from the line of Dan McKenzie with Seaport Global. Please proceed with your question.

Dan McKenzie: Hi, thanks guys. Going back to the script, the full A321 fleet in the next couple of weeks, including engines from overhaul visits. That's kind of a surprise. Does that mean the GTF issues are in the rearview mirror for you guys? And I think it was just a couple of aircraft. But can you help us size the earnings impact from those being out?

Peter Ingram: Yes. Hi Dan. So, I would hesitate to use the term in the rearview mirror because clearly, there still is a global shortage of engines. I think what you're seeing reflected in our fleet is a number of our aircraft had gone into the overhaul shop over the course of the last couple of years. And in fact, we bore the brunt of lack of A321 spare engine availability earlier in 2023, even before the powder metal problems forced a lot of inspections in the summer of last year. And so having taken some of that pain in 2023, we're now seeing engines returning from the overhaul shop, and that has left us at Hawaiian in a relatively more enviable position than some other carriers that are -- have dealt with the aftermath of engines that have had to go in for inspections a little bit later. I will caution it's a fluid situation. Some of the removals we can -- we anticipate and we do anticipate and we have planned engine replacements for those. We know we've got some more engines coming back from the overhaul shop over the course of this year. But there is always the risk of an unexpected engine renewal, something that's not in our plans that we have to account for as well. So, we'll continue to monitor that going forward. In terms of the impact on our business, I mean, candidly, it has been challenging to deal with. We've had A330s deployed in -- on routes that we would prefer to fly an A321 based on the level of underlying demand and that has produced a higher level of cost on those routes that is not offset by the commensurate revenue you would expect because the market is just not deep enough to absorb that. We have underutilized some of our crew as we've had available crew to be able to fly 18 A321s. And if time hasn't been flying 14 or 15 or 16 depending on what was available. So, I think all of that accrues to a benefit for us going forward if we can keep the full fleet operational.

Dan McKenzie: I see, okay. I guess we just going with that is just the path back to normalized margins and the returns that you're targeting this next cycle. And I guess, if you just look at the key sources of revenue, so ramping up to 10 aircraft with Amazon 2025. I think ancillary upsell from NDC, you've got network adjustments with Starlink. Are those enough to offset the weaknesses from Inter Island, Japan and Maui, I guess? And if not, can you think -- help us think about what has to happen to get back to profitability? Just going back to the script and the confidence that you guys are taking the right steps to get there?

Peter Ingram: Yes, I mean I'm confident we are taking the right steps. I think getting past the investment phase on some of the big initiatives we've had, like the 787 as we're now getting into flying the aircraft and generating revenue from it like the freighter operation where we are beginning to get the aircraft in that drive the revenue, drive the flying that will make us more productive with the pilots that we have trained, and the investments that we have made preparing for that. All of those things are going to help us. We do certainly need some help from the operating environment. But even there, we've got some things that are moving in a positive direction. Brent talked this quarter and last quarter about some of the improvements in the Neighbor Island revenue environment. We've consistently been winning competitively, but now we're winning competitively in an improving revenue environment. I wouldn't say it's where we expect it to be for the long-term, but it certainly has moved in the right direction. I would say the one environmental factor that is probably even a bigger wildcard right now is Japan, where we're disappointed where how the revenue performance has flattened out a little bit in that market. And I really think we're well beyond the point where the Japanese travelers weren't willing to venture out internationally. I think it is more a case of pure economics right now, where the yen at something between ¥154 and ¥155 to the dollar today is just really depreciated against the dollar, and it makes it more expensive for visitors originating in Japan to travel to the United States. But I'm confident we're moving in the right direction. I really think a lot of those things are starting to pay off. I don't have a specific forecast. I'm not going to try and look into the crystal ball and tell you what the timing is of returning to profitability. But I'm really confident that we are moving a lot of things in the right direction and some of the investments and initiatives we have made over the last couple of years are starting to take hold.

Dan McKenzie: Okay, good. Thanks for the time you guys.

Peter Ingram: Thanks Dan.

Operator: Thank you. And our next question comes from the line of Chris Stathoulopoulos with Susquehanna International. Please proceed with your question.

Chris Stathoulopoulos: Thanks for taking my question. So, Peter, I appreciate all the color around your thoughts on getting back to sustained profitability. But if we could dig into the revenue environment here, put a finer point or tie what is four or five sort of outlook. So, on the U.S. piece, I think you said point-of-sale strong. If you could speak to perhaps how much of summer is booked at this point and how that fares versus typical seasonality? And then color on your other international POS markets, New Zealand, Australia, South Korea. And then on the premium contribution from the 787, should we think of that as more of a 2025 benefit or kind of a late 2024 benefit? Thank you.

Peter Ingram: Yes, let me let Brent touch on those.

Brent Overbeek: All right. I'll try and get to all those, Chris. Thanks. In terms of advanced book for the summer, I think we're comfortable with where we're at relative to kind of pre-pandemic levels. We're in a pretty good shape. We're a little bit lower on more capacity in North America overall as we look into the summer. But given some of the later build I mentioned earlier, I'm pretty happy with where we sit and where average fares sit there. International point-of-sale and international markets, 2023 was a pretty strong, particularly first half of the year in many of those markets, particularly Australia, New Zealand, South Korea, we are off some of those highs and so we do have a little bit of a headwind there. But again, we're pretty comfortable with how strong U.S. point-of-sale outbound demand is. Unfortunately, for us, it's historically was a relatively small portion of our network but has grown to be fairly significant now. And in most -- in many cases now is approaching half of the aircraft relative to where we previously had been. And 787, on premium cabin there, I think I would characterize that as good early results. Right now, we've got two airplanes in the schedule as we take more of those and are able to use the airplane to fly longer missions, where we get the benefits greater benefits from both a cost perspective on fuel burn and revenue-generating capabilities. It's probably a little bit more of a 2025 story. We'll take what we can get in 2024, but certainly as the fleet builds up and we have greater deployment in long haul in 2025, the benefits will grow a bit more there.

Chris Stathoulopoulos: Okay. And as a follow-up, could you just remind us of the cadence of the 787 deliveries, there were some news earlier this week around potentially slower production rates and deliveries for that aircraft from Boeing? Thank you.

Brent Overbeek: Yes. So, we've got the two aircraft delivered now with one line of flying and then next month, we go to two lines of flying with those aircraft. We expect to get a third airplane before the end of this year. And my expectation right now is that we'll have five by the end of next year, but it is -- there is some risk there. I would say that we do know that some of the 787 deliveries could slide a little bit based on the reports that you've probably seen over the last couple of days of some supply chain challenges. So, I think we're going to really have to take a closer look at what our expectation is for 2025 over the course of the next several weeks as we firm that up with Boeing. I think we've got some flexibility, which is a good thing with A330s that are coming to the end of their lease terms over the next few years. So, as we ramp up to 12 787s between the two we have now and into 2027, we've got about -- not quite half of our A330 fleet that comes up for lease decisions at some point in that period. And I think that gives us flexibility to manage what has been a sort of dynamic aircraft delivery environment.

Chris Stathoulopoulos: Okay. Thank you.

Operator: Thank you. There are no further questions at this time. I would like to turn the floor back over to Mr. Peter Ingram for any closing comments.

Peter Ingram: Thank you, Camila. Mahalo everyone for joining us today. Amidst the dynamic environment, our team continues to deliver meaningful accomplishments that position us well for the future, while continuing to take care of our guests with the unparalleled hospitality for which we are known. We appreciate your interest and look forward to updating you on our progress in the months ahead. Aloha.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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