Hawaiian Airlines reports massive loss for third quarter

Many airlines the world over are reporting losses due to the global pandemic that has caused border closures and various other traffic restrictions. Hawaiian Airlines has been particularly badly affected, as President and CEO Peter Ingram explains: "The COVID-19 pandemic and State of Hawai'i quarantines continued to have a dramatic effect on our business in the third quarter, - Despite these monumental challenges, my colleagues throughout the business have done an incredible job adapting to the evolving environment.  We have taken action to reduce expenses, preserve cash, bolster our liquidity and care for our guests, positioning us to begin the recovery process in earnest with the introduction of the State of Hawai'i's pre-travel testing regime in the fourth quarter."

The State of Hawai'i was under mandatory 14-day self-quarantine for all incoming travellers throughout the third quarter of 2020, and for neighbour island travel starting from August 11, 2020 and as a consequence, the Company operated an extremely limited schedule during the third quarter.

During the quarter, the airline implemented both permanent and extended voluntary leave programs with each of its workgroups, and prepared for involuntary reductions effective October 1 , 2020.  In total, the company reduced its workforce by approximately 2,400 employees, or more than 32 percent of all employees, of which almost 2,100 were through voluntary means.

To increase liquidity, the Hawaiian Airlines closed on approximately $421 million of new financing during the quarter, including:

Raising approximately $114 million through the sale and leaseback of two Airbus A321neo aircraft

Raising approximately $262 million through the issuance of Enhanced Equipment Trust Certificates backed by two Airbus A330 aircraft and six Airbus A321neo aircraft

Drawing approximately $45 million of the $420 million available through the Economic Relief Program ("ERP") loans offered under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act")

As of September 30, 2020 , the Company has received $240.6 million in grants and $60.3 million in loans pursuant to the CARES Act Payroll Support Program ("PSP"), of which $38 million was received in the third quarter.

In October 2020 , the Company executed an amendment with the U.S. Treasury increasing the total amount of the ERP loan from $420 million to $622 million , of which $577 million is undrawn; the Company has until March 2021 to determine how much of the remaining ERP funds to borrow.

Guest Experience

During the third quarter, the Company announced the following guest experience improvements:

Eliminated change fees on all domestic and international flights in order to provide guests with travel flexibility across its network

Launched a program to offer guests pre-travel COVID-19 testing through mail-in test kits and proprietary drive-through testing labs in select U.S. mainland gateways

In addition, the Company continued its enhanced cleaning procedures and revised guest-facing procedures as part of its health and safety program, which is aligned with current recommendations from leading public health authorities.

The Company currently has limited capacity to 70 percent on its flights through December 15, 2020 .

Fourth Quarter 2020

The State of Hawai'i launched a pre-travel testing program for travelers entering the State on or after October 15 , 2020.  Travelers who choose to participate in the program can bypass the State's mandatory 14-day quarantine with proof of a negative COVID-19 test from one of the State's approved testing partners.

The Company expects its fourth quarter 2020 capacity to be approximately 70 percent below the capacity flown during the same period last year.  As a significant portion of the Company's costs are fixed, operating expenses are not expected to decline in proportion to the capacity decline.

In October 2020 , the Company reached an agreement with Boeing to push back the timing of 787-9 deliveries under its purchase agreement for 10 aircraft.  The Company now expects to take delivery of 787-9 aircraft from 2022 to 2026 with its first aircraft to be delivered in September 2022 .

Liquidity and Capital Resources

As of September 30, 2020, the Company had:

Unrestricted cash, cash equivalents and short-term investments of $979 million

Outstanding debt and finance lease obligations of $1,299 million

Air traffic liability of $515 million

Hawaiian Holdings, Inc.
Consolidated Statements of Operations (unaudited)
	Three Months Ended September 30,											Nine Months Ended September 30,
	2020				2019				% Change			2020				2019				% Change
	(in thousands, except per share data)
Operating Revenue:
Passenger	$	39,777			$	694,263			(94.3)	%		$	573,008			$	1,948,990			(70.6)	%
Other	36,205				60,888				(40.5)	%		122,122				175,101				(30.3)	%
Total	75,982				755,151				(89.9)	%		695,130				2,124,091				(67.3)	%
Operating Expenses:
Wages and benefits	19,494				182,862				(89.3)	%		238,077				537,997				(55.7)	%
Aircraft fuel, including taxes and delivery	14,544				138,586				(89.5)	%		135,025				405,290				(66.7)	%
Maintenance, materials and repairs	18,664				61,363				(69.6)	%		93,067				182,539				(49.0)	%
Aircraft and passenger servicing	5,140				41,762				(87.7)	%		46,459				120,303				(61.4)	%
Depreciation and amortization	36,734				41,596				(11.7)	%		115,516				119,274				(3.2)	%
Commissions and other selling	5,201				33,291				(84.4)	%		34,844				96,598				(63.9)	%
Aircraft rent	26,230				30,534				(14.1)	%		77,120				91,773				(16.0)	%
Other rentals and landing fees	14,156				33,345				(57.5)	%		57,599				95,777				(39.9)	%
Purchased services	22,878				33,120				(30.9)	%		77,006				98,306				(21.7)	%
Special items	17,489				—				100.0	%		178,407				—				100.0	%
Other	16,525				42,056				(60.7)	%		80,143				118,041				(32.1)	%
Total	197,055				638,515				(69.1)	%		1,133,263				1,865,898				(39.3)	%
Operating Income (Loss)	(121,073)				116,636				(203.8)	%		(438,133)				258,193				(269.7)	%
Nonoperating Income (Expense):
Other nonoperating special items	(7,011)				—							(7,011)				—
Interest expense and amortization of debt discounts and issuance costs	(11,596)				(6,438)							(26,612)				(21,268)
Interest income	1,942				3,148							7,728				9,205
Capitalized interest	831				1,171							2,583				3,713
Losses on fuel derivatives	(297)				(4,553)							(6,933)				(7,203)
Other, net	(6,380)				(1,445)							(2,915)				(5,553)
Total	(22,511)				(8,117)							(33,160)				(21,106)
Income (Loss) Before Income Taxes	(143,584)				108,519							(471,293)				237,087
Income tax expense (benefit)	(46,485)				28,443							(122,918)				62,820
Net Income (Loss)	$	(97,099)			$	80,076						$	(348,375)			$	174,267
Net Income (Loss) Per Share
Basic	$	(2.11)			$	1.70						$	(7.58)			$	3.65
Diluted	$	(2.11)			$	1.70						$	(7.58)			$	3.64
Weighted Average Number of Common Stock Shares Outstanding:
Basic	46,001				47,119							45,980				47,784
Diluted	46,001				47,236							45,980				47,847

 

Table 2.
Hawaiian Holdings, Inc.
Selected Statistical Data (unaudited)
	Three months ended September 30,											Nine months ended September 30,
	2020				2019				% Change			2020				2019				% Change
	(in thousands, except as otherwise indicated)
Scheduled Operations (a) :
Revenue passengers flown	331				3,066				(89.2)	%		2,873				8,843				(67.5)	%
Revenue passenger miles (RPM)	181,878				4,673,734				(96.1)	%		3,988,435				13,288,823				(70.0)	%
Available seat miles (ASM)	711,151				5,321,812				(86.6)	%		6,095,612				15,325,559				(60.2)	%
Passenger revenue per RPM (Yield)	21.87		¢		14.85		¢		47.3	%		14.37		¢		14.67		¢		(2.0)	%
Passenger load factor (RPM/ASM)	25.6		%		87.8		%		(62.2)	pts.		65.4		%		86.7		%		(21.3)	pts.
Passenger revenue per ASM (PRASM)	5.59		¢		13.05		¢		(57.2)	%		9.40		¢		12.72		¢		(26.1)	%
Total Operations (a) :
Revenue passengers flown	332				3,072				(89.2)	%		2,877				8,853				(67.5)	%
Revenue passenger miles (RPM)	185,788				4,679,632				(96.0)	%		3,995,644				13,300,090				(70.0)	%
Available seat miles (ASM)	718,405				5,331,914				(86.5)	%		6,107,424				15,341,510				(60.2)	%
Operating revenue per ASM (RASM)	10.58		¢		14.16		¢		(25.3)	%		11.38		¢		13.85		¢		(17.8)	%
Operating cost per ASM (CASM)	27.43		¢		11.98		¢		129.0	%		18.56		¢		12.16		¢		52.6	%
CASM excluding aircraft fuel and non-recurring items (b)	40.94		¢		9.38		¢		336.5	%		17.36		¢		9.53		¢		82.2	%
Aircraft fuel expense per ASM (c)	2.02		¢		2.60		¢		(22.3)	%		2.22		¢		2.64		¢		(15.9)	%
Revenue block hours operated	12,388				56,088				(77.9)	%		71,743				162,556				(55.9)	%
Gallons of jet fuel consumed	13,394				69,749				(80.8)	%		84,975				201,547				(57.8)	%
Average cost per gallon of jet fuel (actual) (c)	$	1.09			$	1.99			(45.2)	%		$	1.59			$	2.01			(20.9)	%
Economic fuel cost per gallon (c)(d)	$	1.24			$	2.04			(39.2)	%		$	1.68			$	2.06			(18.4)	%

(a)	Includes the operations of the Company's contract carrier under a capacity purchase agreement.
(b)	See Table 4 for a reconciliation of GAAP operating expenses to operating expenses excluding aircraft fuel and non-recurring items.
(c)	Includes applicable taxes and fees.
(d)	See Table 3 for a reconciliation of GAAP fuel costs to economic fuel costs.

 

Three months ended September 30,											Nine months ended September 30,
	2020				2019				% Change			2020				2019				% Change
	(in thousands, except per-gallon amounts)
Aircraft fuel expense, including taxes and delivery	$	14,544			$	138,586			(89.5)	%		$	135,025			$	405,290			(66.7)	%
Realized losses on settlement of fuel derivative contracts	2,062				3,399				(39.3)	%		7,899				9,294				(15.0)	%
Economic fuel expense	$	16,606			$	141,985			(88.3)	%		$	142,924			$	414,584			(65.5)	%
Fuel gallons consumed	13,394				69,749				(80.8)	%		84,975				201,547				(57.8)	%
Economic fuel costs per gallon	$	1.24			$	2.04			(39.2)	%		$	1.68			$	2.06			(18.4)

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