Thursday, 29 October 2020

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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