Hawaiian Airlines, the state’s dominant air carrier and one of its largest private employers, is rebounding amid increasing visitors from the mainland, executives said Tuesday during an earnings call with Wall Street analysts.

But there’s still a big piece missing — Japanese travelers.

The good news: even without much travel from Japan, Hawaiian executives said the company’s losses are shrinking and the carrier could have positive cash flow by summer.

It’s a remarkable turnaround from the spring of 2020, when travel to Hawaii was largely shut down by orders requiring all arriving passengers to quarantine for two weeks because of the coronavirus pandemic. In April 2020, Hawaiian’s president and chief executive, Peter Ingram, said the company was losing $4 million to $4.5 million a day.

As the world opens up to travel, Hawaiian Airlines is planning to resume flights to New Zealand during the summer and expand its South Korean flight schedule. Ludwig Laab/Civil Beat/2021

Even with a federal aid package valued at up to $654 million in grants and loans, with its fleet grounded, the company allowed voluntary furloughs and leaves for about half of its employees, which before the pandemic totaled about 7,500.

During Tuesday’s presentation, Ingram presented a brighter picture, saying it’s now hard to remember just how bad things were.

“There’s so much to be encouraged about right now,” Ingram said.

The already strong U.S. market got another boost in late March when Hawaii lifted restrictions that required arriving passengers to take a Covid-19 test or show proof of vaccination to avoid a five-day quarantine.

And even before that travel from the mainland was booming. In fact, Ingram said, compared with the same period in 2019, Hawaiian operated at 118% of its domestic capacity in the first three months of this year.

That’s allowed Hawaiian’s workforce to swell back to more than 6,700 workers, according to spokesman Alex DaSilva. And Hawaiian is continuing to hire, especially airport and maintenance workers, Ingram said. Meanwhile, Australia, South Korea and New Zealand have begun opening as Covid infections ebb.

Hawaiian plans to resume three-times-weekly nonstop service between Auckland and Honolulu starting in July and a seasonal increase in flights between Seoul and Honolulu for the summer.

That’s not to say everything is perfect. Hawaiian reported a net loss of $122.8 million for the quarter, with negative cash flow, or adjusted EBITDA, of $105.5 million. But the company expects that to change soon. Its outlook for the quarter ending June 20 calls for cash flow to increase to a point that the company could end up with positive adjusted EBITDA as high as $10 million.

In other words, by summer, Hawaiian Airlines could be back in the black.

And that’s even as Japan’s rebound remains unclear. Questions about Japan are so central to Hawaiian’s fortunes that almost all of the half dozen or so equity analysts participating in the conference call had questions about Japan, which is Hawaii’s third-largest travel market after the western and eastern halves of the U.S.

While domestic capacity is up, international travelers are way down, filling just 25% of the capacity of international routes.

Hawaiian Airlines CEO President Peter Ingram COVID Coronavirus House commitee hearing. March 2020.
Hawaiian Airlines president and chief executive Peter Ingram said restrictions on passenger arrivals in Japan is muting the airline’s recovery. Cory Lum/Civil Beat/2020

Quarantine requirements for returning Japanese residents previously had prevented people from coming to Hawaii for vacation.

Japan has lifted the quarantine rules for returning travelers. The problem now, Ingram said, is a testing requirement for returning residents. Japanese officials can administer only so many tests on arriving passengers, and as a result have limited the total number of passengers who can arrive in Japan per day from all over the world.

Before the pandemic, Ingram said, Japan had 140,000 arrivals per day. Now Japan allows only 10,000, with each airline serving Japan getting an allocation. Ingram described the limit on arrivals as “an artificial hard constraint.”

Forecasts for visits to Hawaii during Japan’s “Golden Week” holiday period, which runs April 29-May 5 this year, show the impact of the limits. During other years, Hawaii might have 4,500 to 6,000 Japanese arrivals per day during that period, said Eric Takahata, managing director of Hawaii Tourism Japan, which markets Hawaii to Japan for the Hawaii Tourism Authority.

This year, Takahata said, the four carriers linking Japan to Hawaii — Hawaiian, JAL, ANA and ZIPAIR — are expecting 6,500 to 7,000 total travelers for the week.

“Its a start,” he said in an interview, but added, “I know it’s not close to pre-pandemic.”

At the same time, Takahata in an interview and Hawaiian Airlines executives during the conference call expressed optimism when asked about other factors worrying travel industry analysts.

Flood Gates From Japan Will ‘Open Up Full Force’

For example, Michael Linenberg, a managing director and airline analyst for Deutsche Bank, noted that Japanese travelers tend to plan trips six to nine months in advance and work with travel agents. Given this dynamic, he asked if Hawaiian and Hawaii in general could expect a quick “snap back” in travelers from Japan when the arrivals cap lifts.

Takahata said tour operators are already at work selling Hawaii, and he predicts little delay after Japan lifts its restrictions.

“When the cap is lifted, you can bet the flood gates are going to open up full force from Japan,” he said.

Meanwhile, Conor Cunningham, an executive director and senior travel analyst with MKM Partners, asked whether a weakened Japanese yen could hurt Hawaii by reducing the buying power of Japanese visitors.

Takahata said the Japanese public is so eager for travel that the weak yen shouldn’t be a problem.

“The industry is telling us that currently the pent up demand is so pent up that that 20% decline in the currency is not that much of a concern,” he said.

Hawaiian executives echoed that view. Brent Overbeek, Hawaiian’s senior vice president and chief revenue officer, said Hawaiian is confident Japanese visitors will be back.

“We know we’re going to be really attractive to Japan when it opens up,” Overbeek said.

The question is when that will be.

“We’ve been hesitant to try to speculate on that,” Ingram said. But he added, “We’re confident that it will come back.”

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