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HH

HAWAIIAN HOLDINGS INC (HA)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 was weak operationally with revenue down 8.5% YoY on higher capacity and continued headwinds from Maui, cargo normalization, and tough leisure comps; adjusted EPS loss widened to $2.37 and adjusted EBITDA fell to -$98.1M .
  • Unit costs ex-fuel rose, while RASM declined double-digits YoY; Q1 2024 guide calls for flat to slightly positive RASM and a high-single to low-double-digit increase in CASM ex-fuel, setting a cautious near-term setup .
  • Management highlighted steady Maui recovery, improving Japan demand, 787 induction, and free Starlink IFC as 2024 drivers; Alaska deal at $18/share in cash remains the key stock catalyst pending approvals (12–18 month expected close from Dec. 2023 announcement) .
  • S&P Global consensus was unavailable via our data connection; we could not formally benchmark Q4 results to Street estimates. A non-S&P media summary cited adjusted EPS of -$2.37 vs -$2.35 expected (slight miss) .

What Went Well and What Went Wrong

What Went Well

  • International recovery: International passenger load factor rose 20.7 points YoY in Q4 on stronger U.S. and Japan-origin demand; premium products remained strong .
  • Product/tech milestones: FAA approved Starlink on A321neo; Hawaiian expects to be the first major airline to offer the fastest, most capable IFC free to all guests, with installs underway .
  • Liquidity intact: Year-end unrestricted cash and investments were $908.5M with $1.1B total liquidity including a $235M undrawn revolver, supporting transition initiatives (787, Amazon freighter) .

What Went Wrong

  • Revenue pressure and mix: Q4 total operating revenue fell 8.5% YoY despite 3.3% higher ASMs; cargo/“Other” revenue declined 15.9% YoY as pandemic-era cargo strength normalized .
  • Margin compression: Reported pre-tax margin fell to -19.0% (adjusted -22.9%); adjusted EBITDA was -$98.1M amid lower RASM and higher ex-fuel unit costs .
  • Unit costs ex-fuel up: CASM ex-fuel increased 8.1% YoY in Q4; management flagged Q1 2024 ex-fuel unit costs up ~8–11% with labor/benefits, heavier maintenance, airport rates, and Amazon ramp each adding points of pressure .

Financial Results

Quarterly trend (oldest → newest)

MetricQ2 2023Q3 2023Q4 2023
Operating Revenue ($USD Millions)$706.9 $727.7 $669.1
GAAP Diluted EPS ($)-$0.24 -$0.94 -$1.96
Adjusted EPS ($)-$0.47 -$1.06 -$2.37
Pre-tax Margin (Reported)-2.0% -8.3% -19.0%
Pre-tax Margin (Adjusted)-4.2% -9.5% -22.9%
EBITDA ($USD Millions, reported)$41.6 -$3.2 -$71.8
Adjusted EBITDA ($USD Millions)$26.3 -$11.7 -$98.1
RASM (¢)14.10¢ 14.08¢ 13.11¢
CASM ex-fuel (¢)11.08¢ 11.27¢ 11.77¢

Q4 2023 vs Q4 2022

MetricQ4 2022Q4 2023
Passenger Revenue ($USD Millions)$650.8 $601.6
Other Revenue ($USD Millions)$80.2 $67.5
Total Operating Revenue ($USD Millions)$731.0 $669.1
Total Operating Expenses ($USD Millions)$763.8 $780.8
Operating Loss ($USD Millions)-$32.8 -$111.8
Net Loss ($USD Millions)-$50.2 -$101.2
Diluted EPS ($)-$0.98 -$1.96
Passenger Load Factor (%)80.7% 82.7%
PRASM (¢)13.20¢ 11.79¢
RASM (¢)14.80¢ 13.11¢
CASM (¢)15.46¢ 15.30¢
CASM ex-fuel (¢)10.89¢ 11.77¢

KPIs and Operating Stats

KPIQ3 2023Q4 2023
Revenue Passengers (000s)2,828 2,656
RPMs (000s)4,451,484 4,220,584
ASMs (000s)5,168,883 5,103,666
Load Factor (%)86.1% (sched.) 82.7%
Fuel Gallons (000s)68,521 68,756
Avg Fuel Price/Gal (actual)$2.92 $2.94
Economic Fuel/Gal$2.98 $2.98

Non-GAAP context and adjustments (Q4): ERC of $32.5M recorded in wages/benefits; $10.6M merger-related “Special items”; unrealized gains/losses on derivatives, foreign debt and equity securities adjusted out in non-GAAP; these items materially affect adjusted EPS, EBITDA and pre-tax margin .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
ASMsQ1 2024N/AUp 2.5% to 5.5% New
RASMQ1 2024N/ADown 1.0% to up 2.0% New
CASM ex-fuelQ1 2024N/AUp 8.0% to 11.0% New
Avg Fuel Price/Gal (incl. taxes)Q1 2024N/A$2.66 New
Economic Fuel Price/GalQ1 2024N/A$2.71 New
Effective Tax RateQ1 2024N/A~21% New
ASMsFY 2024N/AUp 6.0% to 9.0% New
CASM ex-fuelFY 2024N/AFlat to up 3.0% New
Avg Fuel Price/Gal (incl. taxes)FY 2024N/A$2.55 New
Economic Fuel Price/GalFY 2024N/A$2.59 New
Capital ExpendituresFY 2024N/A$500M to $550M New

Notes: Q1 and FY 2024 guidance include expected impacts from the freighter operation; fuel price assumptions based on Jan 12, 2024 forward curve .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2023)Previous Mentions (Q3 2023)Current Period (Q4 2023)Trend
Maui impactNot applicable in Q2Wildfires sharply reduced Maui traffic; demand recovering but below historical; schedule impacted “Steady improvement in travel to Maui” as recovery continues Improving recovery
Japan/international demand“Significant increase” in Japan bookings; Intl load factor +16.2 pts YoY in Q2 Japan routes remained strong; Intl revenue +90.9% YoY on +43.6% capacity Brand remains strong in Japan; more Japan-origin traffic; Intl load factor +20.7 pts YoY Continued recovery
A321neo GTF issuesOutlook footnote: Q3/FY guide did not reflect RTX accelerated inspections disclosed 7/25/23 Accelerated removals/inspections hurt capacity growth Headwinds from A321 engine issues “receding after the first quarter” of 2024 Headwinds peaking, easing after Q1
Amazon A330-300F freighterPrepared ops to support freighter; maintenance insourcing completed Commenced A330-300F contract freighter service 10/2/23 Plan to ramp to ~6 aircraft in 2024; ramp slower due to conversion-line availability (customer demand intact) Gradual ramp
Boeing 787 programInterior unveiled; entry into service in 2024 targeted Ticket sales began; EIS targeted April 15, 2024 First 787 delivery “in the next few days” from call timing Execution milestone
Starlink IFC——FAA approval on A321neo; free for all guests; installs underway Product differentiation
RASM/CASMRASM -8.0% YoY; CASM ex-fuel +1.9% YoY RASM -5.7% YoY; CASM ex-fuel +9.2% YoY RASM -11.4% YoY; CASM ex-fuel +8.1% YoY RASM pressure; cost inflation
Alaska merger——$18 cash/share, ~$1.9B EV incl. ~$0.9B net debt; expected close 12–18 months from 12/3/23; subject to approvals Regulatory process underway

Management Commentary

  • “Demand is solid across our networks, our brand remains strong in Japan as the market recovers, and we have seen steady improvement in travel to Maui. We expect the combination with Alaska will create an even more competitive combined airline, positioning the Hawaiian Airlines brand to flourish in the years ahead.” — Peter Ingram, President & CEO .
  • “We finished the fourth quarter with an adjusted EBITDA loss of $98 million and adjusted loss of $2.37 per share... We expect our first quarter unit costs, excluding fuel and special items to be about 9% higher than the same period in 2023.” — Shannon Okinaka, CFO .
  • “We are operating one aircraft [for Amazon]... plan is to ramp up to about six airplanes in operation over the course of this year... a little bit slower... due to the pace at which those airplanes are available from the conversion line.” — Peter Ingram (Q&A) .
  • “We have a lot to look forward to in 2024 with the headwinds from A321 engine issues receding after the first quarter, the introduction of the 787 into passenger service, and steady improvement in the Maui recovery...” — Management on 2024 setup .

Q&A Highlights

  • Freighter ramp and economics: Management emphasized a measured ramp to ~6 Amazon A330-300Fs in 2024, paced by conversion availability, not demand; early operational performance strong on the single deployed aircraft .
  • A321neo GTF/pilot efficiency: Discussion focused on improving crew and aircraft utilization as GTF-related inefficiencies abate into 2025; headwinds expected to ease after Q1 2024 .
  • Revenue cadence: Management noted tougher PRASM compares for international into 2Q, implying sequential pressure vs 1Q on that vector (context from Q&A) .
  • Technology/Cloud: Management framed tech modernization as incremental rather than a single big-bang cloud transition to balance cost and savings over time .
  • Alaska merger disclosures: Team limited commentary during proxy period; referred investors to the definitive proxy (Jan 9) for details .

Estimates Context

  • S&P Global consensus: Unavailable for HA via our data connection at this time; therefore, we cannot provide an S&P-anchored beat/miss assessment for Q4 2023.
  • Media reference (non-S&P): Insider coverage indicated adjusted EPS of -$2.37 vs -$2.35 expected, implying a slight miss; treat as indicative only, not a substitute for S&P consensus .

Key Takeaways for Investors

  • Near-term setup remains challenged: RASM pressure and higher ex-fuel unit costs persist into Q1 2024; expect muted margin trajectory near term absent faster Maui/Japan normalization or stronger U.S. leisure demand .
  • 2024 inflection drivers: 787 induction, Starlink IFC (free), Maui rebound, and Amazon freighter ramp provide multi-pronged revenue and product catalysts as A321neo GTF headwinds subside post-Q1 .
  • Liquidity sufficient for transition: $1.1B liquidity and undrawn revolver underpin execution through a capex-heavy year ($500–$550M) and operating headwinds .
  • Alaska transaction is the stock’s dominant catalyst: $18/share cash consideration, with regulatory risk and timing (12–18 months from Dec. 2023) driving spread/trading dynamics .
  • Watch mix and international comps: Management flagged tougher intl PRASM comparisons into 2Q; monitor Japan-origin strength vs U.S. POS demand trends .
  • Cost trajectory: Q1 CASM ex-fuel up 8–11% before moderating in FY (flat to +3% guide); focus on labor, maintenance, airports, and Amazon ramp cadence for unit cost relief as the year progresses .
  • Non-GAAP noise in Q4: ERC ($32.5M) and merger-related costs ($10.6M) complicate YoY and QoQ comparisons; use adjusted metrics and reconciliations for trend analysis .

Sources:

  • Q4 2023 8-K earnings press release, guidance, and financial tables .
  • Q3 2023 8-K earnings press release and statistical tables .
  • Q2 2023 8-K earnings press release and statistical tables .
  • Earnings call commentary and Q&A excerpts: Yahoo Finance/Insider Monkey/Motley Fool transcript pages as cited above .