UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2024
or

o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from       to       
 
Commission file number 1-31443
HAWAIIAN HOLDINGS INC.INC
(Exact Name of Registrant as Specified in Its Charter)
Delaware71-0879698
Delaware71-0879698
(State or Other Jurisdiction of(I.R.S. Employer
Incorporation or Organization)Identification No.)
3375 Koapaka Street,Suite G-350
Honolulu, HIHI96819
(Address of Principal Executive Offices)(Zip Code)

(808) 835-3700
(Registrant’s Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock ($0.01 par value)HANasdaq Stock Market, LLC
(Nasdaq Global Select Market)
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ý☒ Yes o☐ No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(§S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  ý☒ Yes o☐ No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” accelerated“accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filerx
☐
Accelerated filer o☒
Non-accelerated filer o☐
Smaller reporting company o☐
(Do not check if a smaller reporting company)
Emerging growth company o
☐


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o☐  Yes ý☒ No
 
As of October 13, 2017, 52,471,736April 19, 2024, 51,848,906 shares of the registrant’s common stock were outstanding.




Hawaiian Holdings, Inc.
Form 10-Q
Quarterly Period ended September 30, 2017March 31, 2024
 
Table of Contents
 
3
Financial Information
3
Item 1.
3
3
4
5
6
67
78
2830
3942
4042
4144
4144
4144
4166
4166
4166
66
4166
Exhibits67
42
Signatures
43

2


PART I. FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS.
Hawaiian Holdings, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (unaudited)(unaudited)
Operating Revenue:  
  
    
Passenger $634,475
 $591,496
 $1,765,275
 $1,592,095
Passenger
Passenger
Other
Other
Other 85,084
 80,341
 243,804
 225,512
Total 719,559
 671,837
 2,009,079
 1,817,607
Total
Total
Operating Expenses:
Operating Expenses:
Operating Expenses:  
  
    
Wages and benefits 161,059
 136,356
 466,772
 395,718
Wages and benefits
Wages and benefits
Aircraft fuel, including taxes and delivery
Aircraft fuel, including taxes and delivery
Aircraft fuel, including taxes and delivery 110,111
 94,818
 316,423
 248,516
Maintenance, materials and repairs 49,396
 51,812
 161,366
 166,901
Maintenance, materials and repairs
Maintenance, materials and repairs
Aircraft and passenger servicing 36,360
 33,971
 104,569
 93,245
Aircraft and passenger servicing
Aircraft and passenger servicing
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization
Aircraft rent
Aircraft rent
Aircraft rent 35,195
 32,891
 102,883
 92,345
Commissions and other selling 32,930
 29,480
 98,668
 93,936
Commissions and other selling
Commissions and other selling
Other rentals and landing fees 30,989
 28,926
 86,763
 78,338
Depreciation and amortization 28,447
 27,495
 83,787
 81,629
Other rentals and landing fees
Other rentals and landing fees
Purchased services 24,736
 25,614
 79,428
 72,889
Purchased services
Purchased services
Special items —
 —
 23,450
 —
Special items
Special items
Other
Other
Other 36,585
 31,565
 101,376
 94,279
Total 545,808
 492,928
 1,625,485
 1,417,796
Operating Income 173,751
 178,909
 383,594
 399,811
Total
Total
Operating Loss
Operating Loss
Operating Loss
Nonoperating Income (Expense):  
  
    
Other nonoperating special items (50,202) —
 (50,202) —
Nonoperating Income (Expense):
Nonoperating Income (Expense):
Interest expense and amortization of debt discounts and issuance costs (7,578) (8,539) (23,292) (28,453)
Gains (losses) on fuel derivatives 3,282
 (3,601) (10,228) 15,421
Other components of net periodic benefit cost (3,792) (5,054) (13,293) (15,218)
Interest expense and amortization of debt discounts and issuance costs
Interest expense and amortization of debt discounts and issuance costs
Interest income
Interest income
Interest income 1,861
 1,113
 4,480
 3,044
Capitalized interest 2,416
 719
 6,258
 1,407
Loss on extinguishment of debt —
 —
 —
 (9,993)
Capitalized interest
Capitalized interest
Losses on fuel derivatives
Losses on fuel derivatives
Losses on fuel derivatives
Other components of net periodic benefit cost
Other components of net periodic benefit cost
Other components of net periodic benefit cost
Gains on investments, net
Gains on investments, net
Gains on investments, net
Gains on foreign debt
Gains on foreign debt
Gains on foreign debt
Other, net
Other, net
Other, net (100) 612
 3,161
 9,884
Total (54,113) (14,750) (83,116) (23,908)
Income Before Income Taxes 119,638
 164,159
 300,478
 375,903
Income tax expense 45,072
 61,705
 108,567
 142,413
Net Income $74,566
 $102,454
 $191,911
 $233,490
Net Income Per Share  
  
    
Total
Total
Loss Before Income Taxes
Loss Before Income Taxes
Loss Before Income Taxes
Income tax benefit
Income tax benefit
Income tax benefit
Net Loss
Net Loss
Net Loss
Net Loss Per Share
Net Loss Per Share
Net Loss Per Share
Basic
Basic
Basic $1.40
 $1.92
 $3.59
 $4.37
Diluted $1.39
 $1.91
 $3.57
 $4.35
Diluted
Diluted
Weighted Average Number of Common Stock Shares Outstanding:
Weighted Average Number of Common Stock Shares Outstanding:
Weighted Average Number of Common Stock Shares Outstanding:
Basic
Basic
Basic
Diluted
Diluted
Diluted
'
See accompanying Notes to Consolidated Financial Statements.

3



Hawaiian Holdings, Inc.
Consolidated Statements of Comprehensive Income
(in thousands)

 Three Months Ended March 31,
 20242023
 (unaudited)
Net Loss$(137,565)$(98,257)
Other comprehensive income (loss), net:  
Net change related to employee benefit plans, net of tax expense of $114 and net of tax benefit of $2,316 for 2024 and 2023, respectively350 (7,078)
Net change in available-for-sale investments, net of tax expense of $250 and $1,645 for 2024 and 2023, respectively767 5,026 
Total other comprehensive income (loss)1,117 (2,052)
Total Comprehensive Loss$(136,448)$(100,309)

  Three Months Ended September 30,
  2017 2016
  (unaudited)
Net Income $74,566
 $102,454
Other comprehensive income (loss), net:  
  
Net change related to employee benefit plans, net of tax expense of $15,247 and $714 for 2017 and 2016, respectively 25,042
 1,293
Net change in derivative instruments, net of tax benefit of $198 and $1,141 for 2017 and 2016, respectively (326) (1,858)
Net change in available-for-sale investments, net of tax expense of $43 and net of tax benefit of $150 for 2017 and 2016, respectively 70
 (246)
Total other comprehensive income (loss) 24,786
 (811)
Total Comprehensive Income $99,352
 $101,643

  Nine Months Ended September 30,
  2017 2016
  (unaudited)
Net Income $191,911
 $233,490
Other comprehensive income (loss), net:    
Net change related to employee benefit plans, net of tax expense of $17,040 and $2,028 for 2017 and 2016, respectively 27,900
 3,448
Net change in derivative instruments, net of tax benefit of $3,756 and $10,457 for 2017 and 2016, respectively
 (6,162) (17,166)
Net change in available-for-sale investments, net of tax expense of $115 and $266 for 2017 and 2016, respectively 188
 437
Total other comprehensive income (loss) 21,926
 (13,281)
Total Comprehensive Income $213,837
 $220,209



See accompanying Notes to Consolidated Financial Statements.




4

Hawaiian Holdings, Inc.
Consolidated Balance Sheets
(in thousands, except shares)
  September 30, 2017 December 31, 2016
  (unaudited)  
ASSETS  
  
Current Assets:  
  
Cash and cash equivalents $348,049
 $325,991
Restricted cash 1,000
 5,000
Short-term investments 270,697
 284,075
Accounts receivable, net 118,622
 96,067
Spare parts and supplies, net 26,560
 20,363
Prepaid expenses and other 56,783
 66,740
Total 821,711
 798,236
Property and equipment, less accumulated depreciation and amortization of $533,964 and $454,231 as of September 30, 2017 and December 31, 2016, respectively
 1,753,946
 1,654,567
Other Assets:  
  
Long-term prepayments and other 124,926
 132,724
Intangible assets, less accumulated amortization of $21,301 and $20,337 as of September 30, 2017 and December 31, 2016, respectively 15,447
 16,411
Goodwill 106,663
 106,663
Total Assets $2,822,693
 $2,708,601
LIABILITIES AND SHAREHOLDERS’ EQUITY  
  
Current Liabilities:  
  
Accounts payable $118,810
 $116,507
Air traffic liability 573,373
 482,496
Other accrued liabilities 157,760
 172,214
Current maturities of long-term debt and capital lease obligations 58,585
 58,899
Total 908,528
 830,116
Long-Term Debt and Capital Lease Obligations 447,533
 497,908
Other Liabilities and Deferred Credits:  
  
Accumulated pension and other post-retirement benefit obligations 234,206
 355,968
Other liabilities and deferred credits 172,792
 173,613
Deferred tax liability, net 218,843
 170,543
Total 625,841
 700,124
Commitments and Contingencies 

 

Shareholders’ Equity:  
  
Special preferred stock, $0.01 par value per share, three shares issued and outstanding as of September 30, 2017 and December 31, 2016 —
 —
Common stock, $0.01 par value per share, 52,471,736 and 53,435,234 shares outstanding as of September 30, 2017 and December 31, 2016, respectively 525
 534
Capital in excess of par value 73,776
 127,266
Accumulated income 848,057
 656,146
Accumulated other comprehensive loss, net (81,567) (103,493)
Total 840,791
 680,453
Total Liabilities and Shareholders’ Equity $2,822,693
 $2,708,601

March 31, 2024
(unaudited)		December 31, 2023
ASSETS  
Current Assets:  
Cash and cash equivalents$230,865 $153,273 
Restricted cash17,250 17,250 
Short-term investments666,432 755,224 
Accounts receivable, net99,117 105,858 
Income taxes receivable642 669 
Spare parts and supplies, net65,444 60,115 
Prepaid expenses and other80,304 78,551 
Total1,160,054 1,170,940 
Property and equipment, less accumulated depreciation and amortization of $1,160,495 and $1,150,529 as of March 31, 2024 and December 31, 2023, respectively
2,104,442 2,013,616 
Other Assets:  
Assets held-for-sale1,091 1,135 
Operating lease right-of-use assets393,769 413,237 
Long-term prepayments and other118,057 121,097 
Intangible assets, net13,500 13,500 
Total Assets$3,790,913 $3,733,525 
LIABILITIES AND SHAREHOLDERS’ EQUITY  
Current Liabilities:  
Accounts payable$214,848 $199,223 
Air traffic liability and current frequent flyer deferred revenue757,855 633,345 
Other accrued liabilities165,430 175,591 
Current maturities of long-term debt, less discount75,132 43,857 
Current maturities of finance lease obligations8,791 10,053 
Current maturities of operating leases79,281 83,332 
Total1,301,337 1,145,401 
Long-Term Debt1,612,235 1,537,152 
Other Liabilities and Deferred Credits:  
Noncurrent finance lease obligations56,269 60,116 
Noncurrent operating leases283,836 303,119 
Accumulated pension and other post-retirement benefit obligations142,367 140,742 
Other liabilities and deferred credits78,499 77,154 
Noncurrent frequent flyer deferred revenue304,099 308,502 
Deferred tax liability, net52,492 65,914 
Total917,562 955,547 
Commitments and Contingencies
Shareholders’ Equity:  
Special preferred stock, $0.01 par value per share, three shares issued and outstanding as of March 31, 2024 and December 31, 2023— — 
Common stock, $0.01 par value per share, 51,848,616 and 51,824,362 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively518 518 
Capital in excess of par value294,599 293,797 
Accumulated loss(257,303)(119,738)
Accumulated other comprehensive loss, net(78,035)(79,152)
Total(40,221)95,425 
Total Liabilities and Shareholders’ Equity$3,790,913 $3,733,525 
See accompanying Notes to Consolidated Financial Statements.

5


Hawaiian Holdings, Inc.
Consolidated Statements of Shareholders' Equity
(in thousands)
Common
Stock(*)		Special
Preferred
Stock(**)		Capital In Excess of Par ValueAccumulated LossAccumulated Other Comprehensive Income (Loss)Total
(unaudited)
Balance at December 31, 2023$518 $— $293,797 $(119,738)$(79,152)$95,425 
Net Loss— — — (137,565)— (137,565)
Other comprehensive income, net— — — — 1,117 1,117 
Issuance of 24,254 shares of common stock, net of shares withheld for taxes
— — (200)— — (200)
Amazon warrant vesting— — 131 — — 131 
Share-based compensation expense— — 871 — — 871 
Balance at March 31, 2024$518 $— $294,599 $(257,303)$(78,035)$(40,221)

(*)    Common Stock—$0.01 par value; 118,000,000 authorized as of March 31, 2024 and December 31, 2023.
(**)    Special Preferred Stock—$0.01 par value; 2,000,000 shares authorized as of March 31, 2024 and December 31, 2023.



Common
Stock(*)		Special
Preferred
Stock(**)		Capital In Excess of Par ValueAccumulated IncomeAccumulated Other Comprehensive Income (Loss)Total
(unaudited)
Balance at December 31, 2022$514 $— $287,161 $140,756 $(95,166)$333,265 
Net Loss— — — (98,257)— (98,257)
Other comprehensive loss, net— — — — (2,052)(2,052)
Issuance of 131,858 shares of common stock, net of shares withheld for taxes1 — (1,067)— — (1,066)
Share-based compensation expense— — 1,430 — — 1,430 
Balance at March 31, 2023$515 $— $287,524 $42,499 $(97,218)$233,320 

(*)    Common Stock—$0.01 par value; 118,000,000 authorized as of March 31, 2023 and December 31, 2022.
(**)    Special Preferred Stock—$0.01 par value; 2,000,000 shares authorized as of March 31, 2023 and December 31, 2022.

See accompanying Notes to Consolidated Financial Statements.
6

Hawaiian Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
 
Three months ended March 31,Three months ended March 31,
20242023
(unaudited)(unaudited)
Net cash provided by Operating Activities
Cash flows from Investing Activities:Cash flows from Investing Activities: 
Additions to property and equipment, including pre-delivery payments
Proceeds from the disposition of aircraft and aircraft related equipment
Proceeds from the disposition of aircraft and aircraft related equipment
Proceeds from the disposition of aircraft and aircraft related equipment
Purchases of investments
Proceeds from sales and maturities of investments
Net cash used in investing activities
Net cash used in investing activities
Net cash used in investing activities
Cash flows from Financing Activities:Cash flows from Financing Activities: 
Long-term borrowings
Long-term borrowings
Long-term borrowings
Repayments of long-term debt and finance lease obligations
Debt issuance costs and discounts
Debt issuance costs and discounts
Debt issuance costs and discounts
 Nine Months Ended September 30,
 2017 2016
Payment for taxes withheld for stock compensation
 (unaudited)
Net cash provided by Operating Activities $295,477
 $434,922
Cash flows from Investing Activities:  
  
Additions to property and equipment, including pre-delivery payments (212,535) (104,250)
Proceeds from purchase assignment and leaseback transactions —
 31,851
Proceeds from disposition of property and equipment 33,511
 —
Purchases of investments (171,485) (217,964)
Sales of investments 183,930
 208,075
Net cash used in investing activities (166,579) (82,288)
Cash flows from Financing Activities:  
  
Repayments of long-term debt and capital lease obligations (52,463) (205,532)
Repurchases and redemptions of convertible notes —
 (1,426)
Repurchases of common stock (50,486) (13,763)
Other (7,891) (7,702)
Net cash used in financing activities (110,840) (228,423)
Payment for taxes withheld for stock compensation
Payment for taxes withheld for stock compensation
Net cash provided by (used in) financing activities
Net cash provided by (used in) financing activities
Net cash provided by (used in) financing activities
Net increase in cash and cash equivalents 18,058
 124,211
Cash, cash equivalents, and restricted cash - Beginning of Period 330,991
 286,502
Cash, cash equivalents, and restricted cash - End of Period $349,049
 $410,713
Non-Cash Transactions:
Non-Cash Transactions:
Non-Cash Transactions:
Right-of-use assets acquired under operating leases
Right-of-use assets acquired under operating leases
Right-of-use assets acquired under operating leases
 
See accompanying Notes to Consolidated Financial Statements.




7

Hawaiian Holdings, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 
1. General
Business and Basis of Presentation

Hawaiian Holdings, Inc. (the Company or Holdings) is a holding company(Holdings) and its direct wholly owned subsidiary, Hawaiian Airlines, Inc. (Hawaiian), are incorporated in the State of Delaware. The Company’sHoldings’ primary asset is its sole ownership of all issued and outstanding shares of common stock of Hawaiian. References to the "Company", "we", "us", and "our" in these Notes to Consolidated Financial Statements include both Holdings and Hawaiian Airlines, Inc. (Hawaiian). unless the context requires otherwise.

The accompanying unaudited financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (SEC). Accordingly, these interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying financial statements contain all adjustments, including normal recurring adjustments, necessary for the fair presentation of the Company’s results of operations and financial position for the periods presented. Due to seasonal fluctuations,variations in the demand for air travel, among other factors common to the airline industry, the results of operations for the periods presented are not necessarily indicative of the results of operations to be expected for the entire year. The accompanying unaudited Consolidated Financial Statements should be read in conjunction with the financial statements and the notes of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.2023.

Unless otherwise noted, all amounts disclosed are stated before consideration of income taxes.

2. Significant Accounting PoliciesMerger Agreement with Alaska Air Group
On December 2, 2023, the Company entered into an Agreement and Plan of Merger (the Merger Agreement) with Alaska Air Group, Inc., a Delaware corporation (Alaska), and Marlin Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Alaska (Merger Sub), pursuant to which, subject to satisfaction or waiver of conditions therein, Merger Sub will merge with and into the Company (the Merger), with the Company surviving as a wholly owned subsidiary of Alaska.
Recently Adopted Accounting Pronouncements

In March 2017,At the Financial Accounting Standards Board (FASB)effective time of the Merger (the Effective Time), each share of the Company's common stock, Series B Special Preferred Stock, Series C Special Preferred Stock, and Series D Special Preferred Stock issued Accounting Standards Update (ASU) 2017-07, Improvingand outstanding immediately prior to the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, requiring an employerEffective Time, subject to report the service cost componentcertain customary exceptions specified in the same line item or items as other compensation costs arising from services renderedMerger Agreement, will be converted into the right to receive $18.00 per share, payable to the holder in cash, without interest.
Completion of the Merger is subject to customary closing conditions, including approval by the pertinent employees duringCompany's stockholders, which was obtained on February 16, 2024; performance by the period. parties in all material respects of all their obligations under the Merger Agreement; the receipt of required regulatory approvals; and the absence of an order or law preventing, materially restraining, or materially impairing the consummation of the Merger.

On February 7, 2024, the Company and Alaska each received a request for additional information and documentary material (together, the Second Request) from the Department of Justice (the DOJ) in connection with the DOJ’s review of the Merger. On March 27, 2024, the Company and Alaska entered into a timing agreement with the DOJ pursuant to which we agreed, among other things, not to consummate the Merger before 90 days following the date on which both parties have certified substantial compliance with the Second Request unless we have received written notice from the DOJ prior to the end of such 90-day period that the DOJ has closed its investigation of the Merger.

The other componentsMerger Agreement includes customary termination rights in favor of net benefit cost areeach party. In certain circumstances, the Company may be required to be presentedpay Alaska a termination fee of $39.6 million in connection with the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. ASU 2017-07 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption only permitted in the first quarter of 2017. The Company early adopted this standard during the first quarter of 2017. The adoption of ASU 2017-07 resulted in a reclassification of $5.1 million and $15.2 million from wages and benefits to other components of net periodic benefit cost on the Company's consolidated statement of operations for the three and nine months ended September 30, 2016, respectively.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, Restricted Cash, requiring restricted cash and restricted cash equivalents to be included with cash and cash equivalents on the statement of cash flows when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company early adopted this standard during the first quarter of 2017. Restricted cash is now included as a component of cash, cash equivalents, and restricted cash on the Company's condensed consolidated statement of cash flows. The inclusion of restricted cash increased the beginning and ending balancestermination of the condensed consolidated statementMerger Agreement.
The Merger is expected to close within 12 to 18 months of cash flows by $5.0 million for the nine months ended September 30, 2016.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, requiring all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. ASU 2016-09 will also allow an employer to withhold more shares for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016. The Company adopted this standard during the first quarter of 2017. The primary impact of the adoption of the standard on the Company's consolidated financial statements was the recognition of excess tax benefits in the provision for income taxes rather than additional paid-in capital, which reduced income tax expense by $0.3 million and $5.8 million for the three and nine months ended September 30, 2017, respectively. The Company also reclassified $17.6 million of excess tax benefits for share-based payments in the cash flow statement from financing activities to operating activities for the nine months ended September 30, 2016.

Recently Issued Accounting Pronouncements

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging, which better aligns a company's risk management activities and financial reporting for hedging relationships and is intended to simplify hedge accounting requirements. ASU 2017-12 is effective for annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the components and options within ASU 2017-12.



In February 2016, the FASB issued ASU 2016-02, Leases, requiring a lessee to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018. ASU 2016-02 requires entities to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited. The Company is evaluating the impact the adoption of this standard will have on its consolidated financial statements and believes this ASU will have a significant impact on its consolidated balance sheet but does not expect that the ASU will have a material impact on the Company's results of operations or cash flows. The effect of adopting the new standard will be to record right-of-use assets and operating lease obligations for current operating leases on the Company's balance sheet. See Note 9 which discusses our lease obligations as of September 30, 2017.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, and created a new topic (ASC 606), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASC 606 will replace most existing revenue recognition guidance in GAAP when it becomes effective. ASC 606 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company will elect to adopt the full retrospective transition method as of January 1, 2018, resulting in the restatement of certain prior periods on the date of adoption.the Merger Agreement.

The Company is completing its overall analysis forDuring the provisions of ASC 606 specific to its consolidated financial statementsthree months ended March 31, 2024 and related disclosures. The Company is also designing and implementing controls and systems in anticipation of the adoption of the standard, effective January 1, 2018 which will have a material impact on its consolidated financial statements. The overall expected decrease in equity as of January 1, 2016 is expected to be up to $125 million net of tax, with an offsetting change primarily in Other liabilities and deferred credits. The corresponding annual income statement effect is expected to be a decrease of approximately 1% of total revenue.

While2023, the Company continues to assess all potential impactsincurred $8.5 million and $0.0 million, respectively, of this new standard, it currently believes the most significant impact relatescosts related to the accounting for the Company's frequent flyer travel award program. This changeMerger Agreement, which was recorded as well as other less significant changes, is briefly described below:

Frequent flyer - The standard will require the Company to account for miles earned by passengersa Special item in the HawaiianMiles program through flight activity as a componentConsolidated Statements of the passenger revenue ticket transaction at the estimated selling price of the miles (effectively eliminating the incremental cost accounting currently applied). Under ASC 606, ticket consideration received is allocated between the performance obligations, primarily travel and miles earned by passengers. The allocated value of the miles will be deferred until the free travel or other award is used by the passenger, at which time it will be included in passenger revenues. ASC 606 will result in a significant increase to the deferred revenue liability on the Company's balance sheet, as the estimated selling price of the miles significantly exceeds the value previously recorded for incremental cost.Operations.
8
Passenger revenue - Currently, passenger revenue is recognized either when the transportation is provided or when tickets expire unused. However, after the application of ASC 606, passenger revenue associated with unused tickets, which represent unexercised passenger rights, is expected to be recognized in proportion to the pattern of rights exercised by related passengers (e.g. scheduled departure dates). This will have the effect of accelerating the recognition of revenue and reducing the recorded balance in air traffic liability as compared to the current policy.
Other operating revenue - Other operating revenue includes checked baggage revenue, cargo revenue, ticket change and cancellation fees, charter revenue, ground handling fees, commissions and fees earned under certain joint marketing agreements with other companies, inflight revenue, and other incidental sales. Ticket change and cancellation fees are currently recognized at the time the fees are assessed. The Company expects to defer the recognition of ticket change fees as a component of air traffic liability until the related transportation is provided. Certain amounts currently classified in other revenue (e.g. bag and other ancillary fees) will be reclassified to passenger revenue.
Selling Costs - Certain selling costs to issue passenger tickets (e.g. credit card and booking fees) are currently recognized when incurred.  Consistent with the Company’s current accounting for commissions, under ASC 606 the Company will capitalize selling costs associated with credit card and booking fees and recognize the associated expense at the ticketed flight date.

The adoption of the standard will require the implementation of new accounting processes and systems, which will change the Company's internal control over revenue recognition. Other items could be identified that will impact amounts ultimately recorded.



3. Accumulated Other Comprehensive Income (Loss)
 
Reclassifications out of accumulated other comprehensive income (loss) by component are as follows: 
Details about accumulated other comprehensive income (loss) componentsThree months ended March 31,Affected line items in the consolidated statements of operations where net income is presented
20242023
 (in thousands) 
Amortization of defined benefit plan items   
Actuarial loss$290 $450 Nonoperating income (expense), other, net
Prior service cost173 145 Nonoperating income (expense), other, net
Total before tax463 595  
Tax benefit(114)(147) 
Total, net of tax$349 $448  
Short-term investments   
Realized gain on sales of investments$(79)$(393)Gains (losses) on investments, net
Realized loss on sales of investments30 911 Gains (losses) on investments, net
Total before tax(49)518  
Income tax expense12 128  
Total, net of tax$(37)$646  
Total reclassifications for the period$312 $1,094  
Details about accumulated other comprehensive (income) loss components Three months ended September 30, Nine months ended September 30, Affected line items in the statement where net income is presented
 2017 2016 2017 2016 
  (in thousands)  
Derivatives designated as hedging instruments under ASC 815  
  
  
  
  
Foreign currency derivative losses (gains) $(449) $1,842
 $(2,141) $(1,679) Passenger revenue
Interest rate derivative losses, net —
 —
 —
 944
 Interest expense
Total before tax (449) 1,842
 (2,141) (735)  
Tax expense (benefit) 170
 (701) 811
 272
  
Total, net of tax $(279) $1,141
 $(1,330) $(463)  
Amortization of defined benefit plan items  
  
  
  
  
Actuarial loss $2,277
 $1,950
 $6,733
 $5,780
 Other components of net periodic benefit cost
Prior service cost 65
 57
 185
 171
 Other components of net periodic benefit cost
Partial settlement and curtailment loss 15,001
 —
 15,001
 —
 Other nonoperating special items
Loss on plan termination 35,201
 —
 35,201
 —
 Other nonoperating special items
Total before tax 52,544
 2,007
 57,120
 5,951
  
Tax benefit (19,883) (714) (21,648) (2,207)  
Total, net of tax $32,661
 $1,293
 $35,472
 $3,744
  
Short-term investments  
  
  
  
  
Realized gain on sales of investments, net $(6) $(129) $(26) $(189) Other nonoperating income
Total before tax (6) (129) (26) (189)  
Tax expense 2
 49
 10
 69
  
Total, net of tax $(4) $(80) $(16) $(120)  
Total reclassifications for the period $32,378
 $2,354
 $34,126
 $3,161
  




A rollforwardroll-forward of the amounts included in accumulated other comprehensive income (loss), net of taxes, for the three and nine months ended September 30, 2017March 31, 2024 and 20162023 is as follows:
Three months ended March 31, 2024Defined Benefit
Plan Items		Short-Term InvestmentsTotal
 (in thousands)
Beginning balance$(60,677)$(18,475)$(79,152)
Other comprehensive income before reclassifications, net of tax1 804 805 
Amounts reclassified from accumulated other comprehensive income (loss), net of tax349 (37)312 
Net current-period other comprehensive income350 767 1,117 
Ending balance$(60,327)$(17,708)$(78,035)
Three months ended September 30, 2017 Interest Rate Derivatives Foreign Currency Derivatives Defined Benefit
Plan Items		 Short-Term Investments Total
  (in thousands)
Beginning balance $—
 $1,235
 $(107,344) $(244) $(106,353)
Other comprehensive income (loss) before reclassifications, net of tax —
 (47) (7,619) 74
 (7,592)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax —
 (279) 32,661
 (4) 32,378
Net current-period other comprehensive income (loss) —
 (326) 25,042
 70
 24,786
Ending balance $—
 $909
 $(82,302) $(174) $(81,567)


Three months ended March 31, 2023Defined Benefit Plan ItemsShort-Term InvestmentsTotal
 (in thousands)
Beginning balance$(59,439)$(35,727)$(95,166)
Other comprehensive income (loss) before reclassifications, net of tax(7,526)4,380 (3,146)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax448 646 1,094 
Net current-period other comprehensive income (loss)(7,078)5,026 (2,052)
Ending balance$(66,517)$(30,701)$(97,218)

Three months ended September 30, 2016 Interest Rate Derivatives Foreign Currency Derivatives Defined Benefit Plan Items Short-Term Investments Total
  (in thousands)
Beginning balance $—
 $(10,348) $(101,710) $311
 $(111,747)
Other comprehensive loss before reclassifications, net of tax —
 (2,999) —
 (166) (3,165)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax —
 1,141
 1,293
 (80) 2,354
Net current-period other comprehensive income (loss) —
 (1,858) 1,293
 (246) (811)
Ending balance $—
 $(12,206) $(100,417) $65
 $(112,558)


Nine months ended September 30, 2017 Interest Rate Derivatives Foreign Currency Derivatives Defined Benefit Pension Items Short-Term Investments Total
  (in thousands)
Beginning balance $—
 $7,071
 $(110,202) $(362) $(103,493)
Other comprehensive income (loss) before reclassifications, net of tax —
 (4,832) (7,572) 204
 (12,200)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax —
 (1,330) 35,472
 (16) 34,126
Net current-period other comprehensive income (loss) —
 (6,162) 27,900
 188
 21,926
Ending balance $—
 $909
 $(82,302) $(174) $(81,567)

Nine months ended September 30, 2016 Interest Rate Derivatives Foreign Currency Derivatives Defined Benefit Pension Items Short-Term Investments Total
  (in thousands)
Beginning balance $81
 $4,879
 $(103,865) $(372) $(99,277)
Other comprehensive income (loss) before reclassifications, net of tax (668) (16,035) (296) 557
 (16,442)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax 587
 (1,050) 3,744
 (120) 3,161
Net current-period other comprehensive income (loss) (81) (17,085) 3,448
 437
 (13,281)
Ending balance $—
 $(12,206) $(100,417) $65
 $(112,558)



4. EarningsLoss Per Share
 
Basic earningsloss per share, which excludes dilution, is computed by dividing net incomeloss available to common shareholders by the weighted average number of common shares outstanding for the period.

Diluted earnings per share reflects
9

The potentially dilutive shares that were excluded from the potential dilution that could occur if securities or other contracts to issuecomputation of diluted weighted average common stock were exercised or converted into common stock. Forshares outstanding because their effect would have been antidilutive was 705,999 and 95,819 for the three and nine months ended September 30, 2017March 31, 2024 and 2016, anti-dilutive2023, respectively. Certain warrant shares held by Amazon have not been included in the computation as their performance condition has not yet been satisfied. As of March 31, 2024 and 2023, the unvested Amazon warrant shares excluded from antidilutive shares were 8,183,451 for both periods. Refer to Note 11 to the calculation of diluted earnings per share were nil.Notes to Consolidated Financial Statements for additional discussion.
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
  (in thousands, except for per share data)
Numerator:  
  
  
  
Net Income $74,566
 $102,454
 $191,911
 $233,490
Denominator:  
  
  
  
Weighted average common stock shares outstanding - Basic 53,185
 53,427
 53,456
 53,488
Assumed exercise of stock options and awards 324
 161
 343
 219
Assumed conversion of convertible note premium —
 —
 —
 8
Weighted average common stock shares outstanding - Diluted 53,509
 53,588
 53,799
 53,715
Net Income Per Share  
  
  
  
Basic $1.40
 $1.92
 $3.59
 $4.37
Diluted $1.39
 $1.91
 $3.57
 $4.35

Stock Repurchase Program and Dividends

In April 2017, the Company's Board of Directors approved the repurchase of up to $100 million of its outstanding common stock over a two-year period through May 2019 via the open market, established plans or privately negotiated transactions in accordance with all applicable securities laws, rules and regulations. The stock repurchase program is subject to further modification or termination at any time.


The Company spent $46.2 millionfollowing table shows the computation of basic and $50.5 million to repurchase and retire approximately 1.1 million shares and 1.2 million sharesdiluted loss per share:
 Three Months Ended March 31,
 20242023
 (in thousands, except for per share data)
Numerator:  
Net Loss$(137,565)$(98,257)
Denominator:  
Weighted average common stock shares outstanding - Basic51,838 51,507 
Dilutive effect of share-based awards and warrants— — 
Weighted average common stock shares outstanding - Diluted51,838 51,507 
Net Loss Per Share  
Basic$(2.65)$(1.91)
Diluted$(2.65)$(1.91)


5. Revenue Recognition
The majority of the Company's common stockpassenger revenue is derived from passenger ticket sales. Other revenue is primarily derived from the Company's cargo operations and loyalty program. The Company's primary operations are that of its wholly owned subsidiary, Hawaiian. Principally all operations of Hawaiian either originate and/or end in open market transactions duringthe state of Hawai'i. The management of such operations is based on a system-wide approach due to the interdependence of Hawaiian's route structure in its various markets. As Hawaiian offers only one significant line of business (i.e., air transportation), management has concluded that it has only one segment. The Company's operating revenues by geographic region (as defined by the U.S. Department of Transportation (DOT)) are summarized below:
Three Months Ended March 31,
20242023
Geographic Information(in thousands)
Domestic$492,410 $486,129 
Pacific153,157 126,474 
Total operating revenue$645,567 $612,603 

Hawaiian attributes operating revenue by geographic region based on the destination of each flight segment. Hawaiian's tangible assets consist primarily of flight equipment, which is mobile across geographic markets, and therefore has not been allocated to specific geographic regions.
Other operating revenue consists of cargo revenue, commissions, and fees earned under certain joint marketing agreements with other companies. These amounts are recognized when the service is provided.
10

Three Months Ended March 31,
20242023
Passenger Revenue by Type(in thousands)
Passenger revenue, excluding frequent flyer$539,622 $505,962 
Frequent flyer revenue, transportation component43,826 42,564 
Passenger Revenue$583,448 $548,526 
Other revenue (e.g., cargo and other miscellaneous)$33,547 $35,139 
Frequent flyer revenue, marketing and brand component28,572 28,938 
Other Revenue$62,119 $64,077 

As of March 31, 2024 and December 31, 2023, the Company's air traffic liability balance, as it relates to passenger tickets (excluding frequent flyer liability), was$539.1 million and $423.1 million, respectively, which generally represents revenue that is expected to be realized in future periods.

During the three and nine months ended September 30, 2017,March 31, 2024 and 2023, the amount of passenger ticket revenue recognized that was included in Air traffic liability as of the beginning of the respective period was $250.2 million and $294.5 million, respectively. As

Non-refundable tickets sold and credits issued generally expire 13 months from the date of September 30, 2017,issuance or scheduled flight, as applicable. The Company records an estimate of breakage revenue on the scheduled flight date for tickets that will expire unused. These estimates are based on the evaluation of actual historical results, available market information, and forecasted trends, including weather or other events impacting customer travel. During the three months ended March 31, 2024 and 2023, the Company had $49.5recognized advanced breakage of $17.4 million remainingand $12.6 million, respectively. The Company will continue to spend undermonitor customers' travel behavior and may adjust its stock repurchase program.estimates in the future.

Frequent Flyer Accounting
In October 2017,
The Company's frequent flyer liability is recorded in Air traffic liability (short-term) and Noncurrent frequent flyer deferred revenue on its unaudited Consolidated Balance Sheets. The table below presents the Company announced that its BoardCompany's frequent flyer liability balance:
March 31, 2024December 31, 2023
(in thousands)
Air traffic liability (current portion of frequent flyer revenue)$211,321 $201,418 
Noncurrent frequent flyer deferred revenue304,099 308,502 
Total frequent flyer liability$515,420 $509,920 

The table below presents a roll forward of Directors declared a quarterly cash dividend of $0.12 per share payable on November 30, 2017, to stockholders of record as of November 17, 2017.Frequent flyer deferred revenue for the three months ended March 31, 2024 and 2023:

 20242023
 (in thousands)
Total frequent flyer liability - beginning balance$509,920 $484,580 
Miles awarded50,860 54,502 
Travel miles redeemed (Passenger Revenue)(43,826)(42,564)
Non-travel miles redeemed (Other Revenue)(1,534)(1,226)
Total frequent flyer liability - ending balance$515,420 $495,292 

5.
6.  Short-Term Investments
Debt securities that are not classified as cash equivalents are classified as available-for-sale investments and are stated at fair value.  Realized gains and losses on sales of investments are reflected in nonoperating income (expense) in the Company's unaudited consolidated statements of operations.  Unrealized gains and losses on available-for-sale securities are reflected as a component of accumulated other comprehensive income.


The following is a summary of short-term investments held as of September 30, 2017March 31, 2024 and December 31, 2016:2023:
11

  Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
September 30, 2017 (in thousands)
Corporate debt $167,407
 $67
 $(170) $167,304
U.S. government and agency debt 50,515
 1
 (131) 50,385
Municipal bonds 19,839
 27
 (30) 19,836
Other fixed income securities 33,172
 1
 (1) 33,172
Total short-term investments $270,933
 $96
 $(332) $270,697
March 31, 2024Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
(in thousands)
Debt securities
Corporate debt securities$160,488 $217 $(11,617)$149,088 
U.S. government and agency securities309,856 37 (4,819)305,074 
Other fixed income securities33,843 33 (5,261)28,615 
Asset-backed securities29,659 100 (1,207)28,552 
Collateralized loan obligations36,270 25 (800)35,495 
Bank notes8,672 — (182)8,490 
Total debt securities578,788 412 (23,886)555,314 
Derivatives492 1,163 (148)1,507 
Equity securities119,015 — (10,504)108,511 
Other investments measured at net asset value1,000 100 — 1,100 
Total short-term investments$699,295 $1,675 $(34,538)$666,432 

 December 31, 2023
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
(in thousands)
Debt securities
Corporate debt securities$217,777 $440 $(10,717)$207,500 
U.S. government and agency securities305,169 168 (4,908)300,429 
Other fixed income securities35,319 42 (6,847)28,514 
Asset-backed securities24,298 69 (1,281)23,086 
Collateralized loan obligations39,628 83 (1,335)38,376 
Bank notes9,118 — (204)8,914 
Total debt securities631,309 802 (25,292)606,819 
Derivatives233 1,026 (745)514 
Equity securities161,677 — (14,866)146,811 
Other investments measured at net asset value1,000 80 — 1,080 
Total short-term investments$794,219 $1,908 $(40,903)$755,224 


The following tables present fair values and gross unrealized losses by security type and length of time that individual debt securities have been in a continuous unrealized loss position:

Less than 12 Months12 Months or GreaterTotal
Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
March 31, 2024(in thousands)
Debt securities
Corporate debt securities$17,505 $(938)$120,679 $(10,679)$138,184 $(11,617)
U.S. government and agency securities273,683 (3,482)8,489 (1,337)282,172 (4,819)
Other fixed income securities1,281 (23)23,982 (5,238)25,263 (5,261)
Asset-backed securities3,903 (43)14,234 (1,164)18,137 (1,207)
Collateralized loan obligations6,993 (129)20,890 (671)27,883 (800)
Bank notes7,350 (97)1,139 (85)8,489 (182)
$310,715 $(4,712)$189,413 $(19,174)$500,128 $(23,886)
12

  Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
December 31, 2016 (in thousands)
Corporate debt $171,139
 $84
 $(357) $170,866
U.S. government and agency debt 53,916
 8
 (134) 53,790
Municipal bonds 22,893
 1
 (144) 22,750
Other fixed income securities 36,670
 —
 (1) 36,669
Total short-term investments $284,618
 $93
 $(636) $284,075
Less than 12 Months12 Months or GreaterTotal
Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
December 31, 2023(in thousands)
Debt securities
Corporate debt securities$9,784 $(233)$154,607 $(10,484)$164,391 $(10,717)
U.S. government and agency securities82,930 (608)193,400 (4,300)276,330 (4,908)
Other fixed income securities1,867 (26)21,933 (6,821)23,800 (6,847)
Asset-backed securities2,225 (17)14,881 (1,264)17,106 (1,281)
Collateralized loan obligations5,032 (63)29,445 (1,272)34,477 (1,335)
Bank notes8,396 (164)519 (40)8,915 (204)
$110,234 $(1,111)$414,785 $(24,181)$525,019 $(25,292)

As of March 31, 2024 and December 31, 2023, the Company's unrealized losses from debt securities were generated from 393 positions out of 495 positions and 394 positions out of 502 positions, respectively.
The Company reviews debt securities quarterly for credit losses and impairment. If the cost of an investment exceeds its fair value, the Company will evaluate, among other factors, general market conditions, credit quality of debt instrument issuers, and the extent to which the fair value is less than cost. This determination requires significant judgment. In making this judgment, the Company employs a systematic methodology that considers available quantitative and qualitative evidence in evaluating potential impairment of its investments. In addition, the Company considers specific adverse conditions related to the financial health of, and business outlook for, the investee. If the Company has plans to sell the security or it is more likely than not that the Company will be required to sell the security before recovery, then a decline in fair value below cost is recorded as an impairment charge in Other, net, within non-operating expense on the unaudited consolidated statements of operations, and a new cost basis in the investment is established. If market, industry, and/or investee conditions deteriorate, the Company may incur future impairments.

Debt securities in a continuous unrealized loss position for twelve months or greater as of March 31, 2024 and December 31, 2023 were primarily attributable to changes in interest rates, relative to when the investment securities were purchased. The Company does not intend to sell any of these investments and it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis, which may be at maturity. Accordingly, the Company has determined that the unrealized losses on its debt securities as of March 31, 2024 were temporary in nature. The Company has evaluated these debt securities and did not recognize any significant credit losses as of March 31, 2024 and December 31, 2023.

For the three months ended March 31, 2024 and 2023, the unrealized gains on equity securities, recorded in Gains on Investment, net, in Nonoperating income (expense) were $5.1 millionand $0.9 million, respectively.

Contractual maturities of short-term investmentsdebt securities as of September 30, 2017March 31, 2024 are shown below. 
  Under 1 Year 1 to 5 Years Total
  (in thousands)
Corporate debt $72,879
 $94,425
 $167,304
U.S. government and agency debt 34,320
 16,065
 50,385
Municipal bonds 6,942
 12,894
 19,836
Other fixed income securities 24,535
 8,637
 33,172
Total short-term investments $138,676
 $132,021
 $270,697
below:
 Under 1 Year1 to 5 YearsOver 5 YearsTotal
(in thousands)
Debt Securities
Corporate debt$132 $66,935 $82,021 $149,088 
U.S. government and agency debt7,109 284,695 13,270 305,074 
Other fixed income securities425 14,410 13,780 28,615 
Asset-backed securities305 9,627 18,620 28,552 
Collateralized loan obligations— — 35,495 35,495 
Bank notes— 4,489 4,001 8,490 
Total debt securities$7,971 $380,156 $167,187 $555,314 
The Company classifies its investments as current assets as these securities are available for use in its current operations.operation.

13
6.

7.  Fair Value Measurements
 
ASCAccounting Standards Codification (ASC) Topic 820, Fair Value Measurement (ASC 820), defines fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
 
Level 1 — Observable inputs such as quoted prices in active markets for identical assets or liabilities;
 
Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term for the assets or liabilities; and
 
Level 3 — Unobservable inputs for which there is little or no market data and that are significant to the fair value of the assets or liabilities.




The tables below present the Company’s financial assets and liabilities measured at fair value on a recurring basis:
  Fair Value Measurements as of September 30, 2017
  Total Level 1 Level 2 Level 3
  (in thousands)
Cash equivalents $198,018
 $171,936
 $26,082
 $—
Restricted cash 1,000
 1,000
 —
 —
Short-term investments 270,697
 —
 270,697
 —
Fuel derivative contracts:    
  
  
Crude oil call options 8,184
 —
 8,184
 —
Jet fuel swaps 566
 —
 566
 —
Foreign currency derivatives 4,721
 —
 4,721
 —
Total assets measured at fair value $483,186
 $172,936
 $310,250
 $—
Fuel derivative contracts:  
  
  
  
Jet fuel swaps $21
 $—
 $21
 $—
Foreign currency derivatives 2,612
 —
 2,612
 —
Total liabilities measured at fair value $2,633
 $—
 $2,633
 $—
 Fair Value Measurements as of March 31, 2024
 TotalLevel 1Level 2Level 3
 (in thousands)
Cash equivalents$139,427 $138,084 $1,343 $— 
Restricted cash17,250 17,250 — — 
Short-term investments
Debt securities
Corporate debt securities149,088 — 144,526 4,562 
U.S. government and agency securities305,074 — 305,074 — 
Other fixed income securities28,615 — 28,615 — 
Asset-backed securities28,552 — 20,768 7,784 
Collateralized loan obligations35,495 — 35,029 466 
Bank notes8,490 — 1,692 6,798 
Total debt securities555,314 — 535,704 19,610 
Derivatives1,507 — 1,507 — 
Equity securities108,511 107,623 888 — 
Other investments measured at net asset value1,100 — — — 
Total short-term investments666,432 107,623 538,099 19,610 
Other Assets
Fuel derivative contracts3,189 — 3,189 — 
Assets held-for-sale1,091 — — 1,091 
Total assets measured at fair value$827,389 $262,957 $542,631 $20,701 
 
14

  Fair Value Measurements as of December 31, 2016
  Total Level 1 Level 2 Level 3
  (in thousands)
Cash equivalents $123,120
 $104,113
 $19,007
 $—
Restricted cash 5,000
 5,000
 —
 —
Short-term investments 284,075
 —
 284,075
 —
Fuel derivative contracts:    
  
  
Crude oil call options 8,489
 —
 8,489
 —
Heating oil swaps 6,601
 —
 6,601
 —
Foreign currency derivatives 12,906
 —
 12,906
 —
Total assets measured at fair value $440,191
 $109,113
 $331,078
 $—
Foreign currency derivatives 1,469
 —
 1,469
 —
Total liabilities measured at fair value $1,469
 $—
 $1,469
 $—
 Fair Value Measurements as of December 31, 2023
 TotalLevel 1Level 2Level 3
 (in thousands)
Cash equivalents$99,965 $99,279 $686 $— 
Restricted cash17,250 17,250 — — 
Short-term investments
Debt securities
Corporate debt securities207,500 — 202,873 4,627 
U.S. government and agency securities300,429 — 300,429 — 
Other fixed income securities28,514 — 28,514 — 
Asset-backed securities23,086 — 15,172 7,914 
Collateralized loan obligations38,376 — 38,123 253 
Bank notes8,914 — 2,046 6,868 
Total debt securities606,819 — 587,157 19,662 
Derivatives514 — 514 — 
Equity securities146,811 146,031 780 — 
Other investments measured at net asset value1,080 — — — 
Total short-term investments755,224 146,031 588,451 19,662 
Other Assets
Fuel derivative contracts2,069 — 2,069 — 
Assets held-for-sale1,135 — — 1,135 
Total assets measured at fair value$875,643 $262,560 $591,206 $20,797 


Cash equivalents. equivalents and restricted cash. The Company's levelLevel 1 cash equivalents consist of money market securities and mutual funds, which are valued based on quoted prices in an active market. The carrying amounts approximate fair value because of the levelshort-term maturity of these assets. Level 2 cash equivalents consist primarily of U.S. agency bonds, mutual funds, and commercial paper. The instruments classified as level 2 are valued using quoted prices for similar assets in active markets.

Restricted cash.  The Company’s restricted cash consists of cash held as collateral by institutions that process our credit card transactions for advanced ticket sales, which is valued similarly to the money marketdebt securities held as cash equivalents.
Short-term investments. Short-term investments include U.S. and foreign government notes and bonds, U.S. agency bonds, variable-rate corporate bonds, asset backed securities, foreign and domestic corporate bonds, municipal bonds, and commercial paper.  These instruments are valued using quoted prices for similar assets in active markets or other observable inputs.

Fuel derivative contracts. The Company’s fuel derivative contracts consist of crude oil call options and jet fuel swaps, which are not traded on a public exchange.with original maturity dates less than 90 days. The fair value of these instruments are determinedis based on inputs available or derived from public markets including contractual terms,a market approach using prices yield curves,generated by market transactions involving similar assets. Restricted cash includes funds held in a controlled account to be used for debt service payments associated with the Company's loyalty and measuresintellectual brand offering. As of volatility among others.March 31, 2024, approximately $17.3 millionwas held in the controlled account designated for debt servicing and was classified as restricted cash on the Company's Consolidated Balance Sheets.

Foreign currency derivatives. Short-term investments. The Company’s foreign currency derivativesCompany's Level 1 short-term investments consist of Japanese Yen and Australian Dollar forward contracts andequity mutual funds, which are valued primarily based upon data availableon a market approach using prices generated by market transactions involving identical assets. Level 2 short-term investments consist of corporate debt securities, U.S. government and agency securities, other fixed income securities, asset-backed securities, collateralized loan obligations, bank notes, equity securities, and derivative instruments as further discussed in Note 8, which are valued based on a market approach using industry standard valuation techniques that incorporate inputs such as quoted prices for similar assets, interest rates, benchmark curves, credit ratings, and other observable inputs or derived from public markets.market data. Certain asset-backed securities, collateralized loan obligations, and private bank notes that are not readily marketable are classified as Level 3 in the fair value hierarchy and valued using certain unobservable inputs including future cash flows and discount rates.


The table below presentsreconciliation of the Company’s debt (excluding obligations under capital leases)Company's short-term investments measured at fair value: value on a recurring basis using unobservable inputs (Level 3) for the three months ended March 31, 2024 is as follows:



15

Fair Value of Debt
September 30, 2017 December 31, 2016
Carrying Fair Value Carrying Fair Value
Amount Total Level 1 Level 2 Level 3 Amount Total Level 1 Level 2 Level 3
(in thousands)
$438,843
 $449,761
 $—
 $—
 $449,761
 $481,874
 $484,734
 $—
 $—
 $484,734
Short-term Investment Activity for the three months ended March 31, 2024
Asset-Backed SecuritiesBank NotesCollateralized Loan ObligationsCorporate Debt SecuritiesTotal
(in thousands)
Beginning balance as of December 31, 2023$7,914 $6,868 $253 $4,627 $19,662 
Purchases— — 213 — 213 
Sale of investments— — — (10)(10)
Redemptions and paydowns(39)(72)— — (111)
Amortization and accretion, net29 — — (68)(39)
Realized and unrealized gains (losses), net(120)2 — 13 (105)
Ending balance as of March 31, 2024$7,784 $6,798 $466 $4,562 $19,610 

Short-term Investment Activity for the three months ended March 31, 2023
Asset-Backed SecuritiesBank NotesCollateralized Loan ObligationsCorporate Debt SecuritiesTotal
(in thousands)
Beginning balance as of December 31, 2022$9,033 $9,426 $2,558 $8,173 $29,190 
Purchases— 944 — — 944 
Sale of investments— (2,189)— — (2,189)
Redemptions and paydowns(41)(185)— (12)(238)
Amortization and accretion, net16 1 — (24)(7)
Realized and unrealized gains (losses), net(145)61 (130)80 (134)
Ending balance as of March 31, 2023$8,863 $8,058 $2,428 $8,217 $27,566 

Other investments at net asset value (NAV). In accordance with relevant accounting standards, certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value estimatesamounts presented in the table above are intended to permit reconciliation of the Company’s debt were based on the discounted amount of future cash flows using the Company’s current incremental rate of borrowing for similar instruments.
The carrying amounts of cash, other receivables, and accounts payable approximate fair value duehierarchy to the short-term natureamounts presented in the statement of these financial instruments.position. The investments measured using NAV are investments in a partnership for which a secondary market does not exist. Investments in the partnership are carried at estimated NAV as determined by and reported by the general partners of the partnerships and represent the proportionate share of the estimated fair value of the underlying assets of the limited partnerships. The Company can redeem its shares upon approval by the respective partnerships' managing member.

7.  Financial Derivative Instruments
Fuel derivative contracts. The Company uses derivatives to manage risks associated with certain assets and liabilities arising from the potential adverse impact of fluctuations in global fuel prices and foreign currencies.
Fuel Risk Management

prices. The Company’s operations are inherently dependent upon the price and availability of aircraft fuel. To manage economic risks associated with fluctuations in aircraft fuel prices, the Company periodically enters into derivative financial instruments. During the three and nine months ended September 30, 2017, the Company primarily used crude oil call options and jet fuel swaps to hedge its aircraft fuel expense.  These derivative instruments were not designated as hedges under ASC Topic 815, Derivatives and Hedging (ASC 815), for hedge accounting treatment. As a result, anyAny changes in fair value of these derivative instruments are adjusted through other nonoperatingNonoperating income (expense) in the period of change. The Company’s fuel derivative contracts consist of crude oil call options, which are not traded on a public exchange. The fair value of these instruments is determined based on inputs available or derived from public markets including contractual terms, market prices, yield curves, and measures of volatility among others.


Assets held for sale. The Company's assets held for sale consist of aircraft, engine, rotable and expendable aircraft parts. The assets are measured at the lower of the carrying amount or fair value less cost to sell and a loss is recognized for any initial adjustment of the assets' carrying amount to fair value less cost to sell. The fair value measurements for the Company's held-for-sale assets were based on Level 3 inputs, which include information obtained from third-party valuation sources and other market sources, including recent offers from potential buyers. Refer to Note 13 to the Notes to Consolidated Financial Statements for additional discussion.

The table below presents the Company’s debt measured at fair value: 
16

Fair Value of Debt
March 31, 2024December 31, 2023
CarryingFair ValueCarryingFair Value
AmountTotalLevel 1Level 2Level 3AmountTotalLevel 1Level 2Level 3
(in thousands)
$1,687,367 $1,526,555 $— $— $1,526,555 $1,581,009 $1,406,721 $— $— $1,406,721 
The fair value estimates of the Company’s debt were based on the discounted amount of future cash flows using the Company’s current incremental rate of borrowing based on quotes of similar debt for other similarly rated companies.
The carrying amounts of cash, other receivables, and accounts payable approximate fair value due to the short-term nature of these financial instruments.

8. Financial Derivative Instruments
The Company uses derivatives to manage risks associated with certain assets and liabilities arising from the potential adverse impact of fluctuations in global fuel prices.
Fuel Risk Management
The Company's operations are inherently dependent upon the price and availability of aircraft fuel. To manage economic risks associated with fluctuations in aircraft fuel prices, the Company periodically enters into derivative financial instruments. The Company uses a combination of derivative contracts to hedge its aircraft fuel expense.
The following table reflects the amount of realized and unrealized gains and losses recorded as nonoperatingNonoperating income (expense) in the Company's unaudited Consolidated Statements of Operations.

 Three months ended September 30, Nine months ended September 30,
Three months ended March 31,
Three months ended March 31,
Three months ended March 31,
Fuel derivative contracts 2017 2016 2017 2016
 (in thousands)
Fuel derivative contracts
Fuel derivative contracts
(in thousands)
(in thousands)
(in thousands)
Losses realized at settlement $(2,787) $(2,525) $(2,100) $(30,349)
Reversal of prior period unrealized amounts 6,251
 (7,115) (7,946) 39,731
Unrealized gains (losses) that will settle in future periods (182) 6,039
 (182) 6,039
Gains (losses) on fuel derivatives recorded as Nonoperating income (expense) $3,282
 $(3,601) $(10,228) $15,421
Reversal of prior period unrealized amounts
Reversal of prior period unrealized amounts
Unrealized losses that will settle in future periods
Unrealized losses that will settle in future periods
Unrealized losses that will settle in future periods
Losses on fuel derivatives recorded as Nonoperating Expense
Losses on fuel derivatives recorded as Nonoperating Expense
Losses on fuel derivatives recorded as Nonoperating Expense

Foreign Currency Exchange Rate RiskInvestment Portfolio Management
The Company is subjectCompany's investment managers use a combination of derivative instruments (swaps, futures, options and forward contracts) to foreignmanage risk associated with its investment portfolio, including the volatility in interest rates and currency exchange rate risk due to revenuesrates on foreign denominated debt securities. As of March 31, 2024 and expenses that are denominated in foreign currencies, withDecember 31, 2023, the primary exposures beingCompany's derivative positions reflected a net asset position of $1.5 million and $0.5 million, respectively, within the Japanese Yenportfolio. During the three months ended March 31, 2024 and Australian Dollar. To manage exchange rate risk,2023, the Company executes its international revenuerecognized a net realized and expense transactions in the same foreign currency to the extent practicable.  
The Company enters into foreign currency forward contracts to further manage the effectsunrealized gain of fluctuating exchange rates. The effective portion of the gain or$0.6 million and a net realized and unrealized loss of designated cash flow hedges is reported as a component of accumulated other comprehensive income (AOCI) and reclassified into earnings in the same period in which the related sales are recognized as passenger revenue. The effective portion of the foreign currency forward contracts represents the change in fair value of the hedge that offsets the change in the fair value of the hedged item. To the extent the change in the fair value of the hedge does not perfectly offset the change in the fair value of the hedged item, the ineffective portion of the hedge is immediately recognized as nonoperating$0.1 million, respectively, through Nonoperating income (expense). Foreign currency forward contracts that are not designated as cash flow hedges are recorded at fair value, and any changes in fair value are recognized as other nonoperating income (expense) in the period of change.
The Company believes that its foreign currency forward contracts that are designated as cash flow hedges will continue to be effective in offsetting changes in cash flow attributable to the hedged risk. The Company expects to reclassify a net gain of approximately $0.6 million into earnings over the next 12 months from AOCI based on the values at September 30, 2017.


The following tables presenttable presents the gross fair value of asset and liability derivatives, that are designated as hedging instruments under ASC 815 and derivatives thatall of which are not designated as hedging instruments under ASC 815, as well as the net derivative positions and location of the asset and liability balances within the Company's unaudited Consolidated Balance Sheets.

17

Derivative positionpositions as of September 30, 2017March 31, 2024
Balance Sheet
Location		Notional AmountFinal
Maturity
Date		Gross Fair
Value of
Assets		Gross Fair
Value of
(Liabilities)		Net Derivative Position
 (in thousands)(in thousands)
Derivatives not designated as hedges
Fuel derivative contractsPrepaid expenses and other93,114 gallonsMarch 2025$3,189 $— $3,189 
Foreign currency derivativesShort-term investments37,707 EuroMarch 2025$1,109 $— $1,109 
Interest rate contractsShort-term investments47,217 US DollarsMay 2028$550 $(152)$398 
  Balance Sheet
Location		 Notional Amount Final
Maturity
Date		 Gross fair
value of
assets		 Gross fair
value of
(liabilities)		 Net
derivative
position
    (in thousands)   (in thousands)
Derivatives designated as hedges        
  
  
Foreign currency derivatives Prepaid expenses and other 15,704,725 Japanese Yen
46,792 Australian Dollars		 September 2018 3,594
 (2,340) 1,254
  Long-term prepayments and other 4,812,000 Japanese Yen
8,247 Australian Dollars		 September 2019 952
 (242) 710
Derivatives not designated as hedges        
  
  
Foreign currency derivatives Prepaid expenses and other 924,350 Japanese Yen
3,776 Australian Dollars		 December 2017 175
 (30) 145
Fuel derivative contracts Prepaid expenses and other 94,332 gallons September 2018 8,750
 (21) 8,729
Derivative positionpositions as of December 31, 2016
  Balance Sheet
Location		 Notional Amount Final
Maturity
Date		 Gross fair
value of
assets		 Gross fair
value of
(liabilities)		 Net
derivative
position
    (in thousands)   (in thousands)
Derivatives designated as hedges        
  
  
Foreign currency derivatives Prepaid expenses and other 16,121,500 Japanese Yen
41,917 Australian Dollars		 December 2017 9,803
 (1,349) 8,454
  Long-term prepayments and other 4,371,900 Japanese Yen
8,434 Australian Dollars		 December 2018 2,632
 (59) 2,573
Derivatives not designated as hedges        
  
  
Foreign currency derivatives Prepaid expenses and other 879,050 Japanese Yen
5,802 Australian Dollars		 March 2017 471
 (61) 410
Fuel derivative contracts Prepaid expenses and other 17,850 gallons December 2017 15,090
 —
 15,090
The following table reflects the impact of cash flow hedges designated for hedge accounting treatment and their location within the Company's unaudited Consolidated Statements of Comprehensive Income. 
  (Gain) loss recognized in AOCI on derivatives (effective portion) (Gain) loss reclassified from AOCI
into income (effective portion)		 (Gain) loss recognized in
nonoperating (income) expense
(ineffective portion)
  Three months ended September 30, Three months ended September 30, Three months ended September 30,
  2017 2016 2017 2016 2017 2016
  (in thousands)
Foreign currency derivatives $75
 $4,841
 $(449) $1,842
 $—
 $—
Interest rate derivatives —
 —
 —
 —
 —
 —



  (Gain) loss recognized in AOCI on derivatives (effective portion) (Gain) loss reclassified from AOCI
into income (effective portion)		 (Gain) loss recognized in
nonoperating (income) expense
(ineffective portion)
  Nine months ended September 30, Nine months ended September 30, Nine months ended September 30,
  2017 2016 2017 2016 2017 2016
  (in thousands)
Foreign currency derivatives $7,780
 $24,996
 $(2,141) $(1,679) $—
 $—
Interest rate derivatives —
 923
 —
 944
 —
 —

2023
Balance Sheet
Location		Notional AmountFinal
Maturity
Date		Gross Fair
Value of
Assets		Gross Fair
Value of
(Liabilities)		Net Derivative Position
 (in thousands)(in thousands)
Derivatives not designated as hedges
Fuel derivative contractsPrepaid expenses and other90,258 gallonsDecember 2024$2,069 $— $2,069 
Foreign currency derivativesShort-term investments38,385 EuroMarch 2025$543 $(569)$(26)
Interest rate contractsShort-term investments16,110 US DollarsMay 2028$797 $(257)$540 
Risk and Collateral
FinancialThe financial derivative instruments expose the Company to possible credit loss in the event the counterparties to the agreements fail to meet their obligations. To manage such credit risks, the Company (1) selects its counterparties based on past experience and credit ratings, (2) limits its exposure to any single counterparty, and (3) regularlyperiodically monitors the market position and credit rating of each counterparty. Credit risk is deemed to have a minimal impact on the fair value of the derivative instruments as cash collateral would be provided to or by the counterparties based on the current market exposure of the derivative.

The Company's agreements with its counterparties also require the posting of cash collateral in the event the aggregate value of the Company's positions exceeds certain exposure thresholds. The aggregate fair value of the Company's derivative instruments that contain credit-risk related contingent features was in a net asset position of $4.7 million and $2.6 million as of March 31, 2024 and December 31, 2023, respectively.
ASC 815 requires a reporting entity to elect a policy of whether to offset rights to reclaim cash collateral or obligations to return cash collateral against derivative assets and liabilities executed with the same counterparty under a master netting agreement, or present such amounts on a gross basis. The Company’sCompany's accounting policy is to present its derivative assets and liabilities on a net basis, including any collateral posted with the counterparty. The Company had no collateral posted withwith its counterparties as of September 30, 2017March 31, 2024 and December 31, 2016.

2023, respectively.
The Company is also subject to market risk in the event these financial instruments become less valuable in the market. However, changes in the fair value of the derivative instruments will generally offset the change in the fair value of the hedged item, limiting the Company’sCompany's overall exposure.

18

8.9.  Debt
 
Long-term debt, net of unamortized discounts and issuance costs, is outlined as follows:

March 31, 2024December 31, 2023
(in thousands)
Class A EETC-13, fixed interest rate of 3.9%, semiannual principal and interest payments, remaining balance due at maturity in January 2026$153,067 $162,953 
Japanese Yen denominated financing, fixed interest rate of 1.05%, quarterly principal and interest payments, remaining balance due at maturity in May 203017,092 19,050 
Japanese Yen denominated financing, fixed interest rate of 1.01%, semiannual principal and interest payments, remaining balance due at maturity in June 203015,278 16,394 
Japanese Yen denominated financing, fixed interest rate of 0.65%, quarterly principal and interest payments, remaining balance due at maturity in March 202538,610 45,107 
Japanese Yen denominated financing, fixed interest rate of 0.76%, semiannual principal and interest payments, remaining balance due at maturity in September 203140,462 46,225 
CARES Act Payroll Support Program, fixed interest rate of 1.0% for the first through fifth years and variable interest of SOFR plus a margin of 2.0% for the sixth year through maturity, semiannual interest payments, principal balance due at maturity in April 2030 through September 203060,278 60,278 
Payroll Support Program Extension, fixed interest rate of 1.0% for the first through fifth years and variable interest of SOFR plus a margin of 2.0% for the sixth year through maturity, semiannual interest payments, principal balance due at maturity in March 2031 through April 203127,797 27,797 
Payroll Support Program 3, fixed interest rate of 1.0% for the first through fifth years and variable interest of SOFR plus a margin of 2.0% for the sixth year through maturity, semiannual interest payments, principal balance due at maturity in April 2031 through June 203123,908 23,908 
Financing Lease, variable interest rate of SOFR plus a margin of 3.85%, quarterly principal and interest payments, remaining balance due at maturity in January 2034131,400 — 
Loyalty Program Financing, fixed interest of 5.75%, quarterly interest payments, principal balance due at maturity in January 20261,200,000 1,200,000 
Unamortized debt discount and issuance costs(20,525)(20,703)
Total Debt$1,687,367 $1,581,009 
Less: Current maturities of long-term debt(75,132)(43,857)
Long-Term Debt, less discount$1,612,235 $1,537,152 

Revolving Credit Facility

In August 2022, the Company entered into an Amended and Restated Credit and Guarantee Agreement (the Revolving Credit Facility). The Revolving Credit Facility has an aggregate principal amount not to exceed $235.0 million and matures in December 2025. The Company may, from time to time, grant liens on certain eligible account receivables, aircraft, spare engines, ground support equipment and route authorities, as well as cash and certain cash equivalents, in order to secure its outstanding obligations under the Revolving Credit Facility. Indebtedness under the Revolving Credit Facility will bear interest, at a per annum rate based on, at the Company's option: (1) a variable rate equal to the Secured overnight financing rate (as defined in the Revolving Credit Facility) plus a margin of 3.0%; or (2) Alternate base rate (as defined in the Revolving Credit Facility) plus a margin of 2.0%. The Company is also subject to compliance and liquidity covenants under the Revolving Credit Facility. As of September 30, 2017,March 31, 2024, the Company had no outstanding borrowing under the Revolving Credit Facility.

Financing Lease

In February 2024, the Company entered into a Finance Lease Agreement for $131.4 million, collateralized by our first delivered Boeing 787-9 aircraft. The transaction did not meet the criteria of a sale under the applicable accounting framework and therefore the Company recorded the transaction as a financing liability. The financing has a term of ten years, maturing in January 2034. The financing has a variable interest rate based on SOFR plus a margin of 3.85%, with quarterly principal and interest payments.
19


Schedule of Debt Maturities

As of March 31, 2024, the expected maturities of long-term debt, excluding debt issuance costs, for the remainder of 20172024 and the next four years, and thereafter, were as follows (in thousands): 
Remaining months in 2024$33,489 
202564,422 
20261,348,357 
202721,708 
202822,657 
Thereafter217,259 
 $1,707,892 
Remaining months in 2017$5,771
201848,244
201972,927
202021,413
202149,060
Thereafter241,428
 $438,843


Covenants
9.  Leases


The Company's debt agreements contain various affirmative, negative and financial covenants. The Company leases aircraft, engines, and other assets under long-term lease arrangements. Other leased assets include real property, airport and terminal facilities, maintenance facilities, and general offices. Certain leases include escalation clauses and renewal options. When lease renewals are considered to be reasonably assured,was in compliance with the rental payments that will be due during the renewal periods are includedcovenants in the determinationthese debt agreements as of rent expense over the life of the lease.March 31, 2024.



As of September 30, 2017, the scheduled future minimum rental payments under operating leases with non-cancellable basic terms of more than one year were as follows:
 Aircraft Other
 (in thousands)
Remaining in 2017$31,984
 $1,643
2018127,235
 7,311
2019118,070
 6,939
202097,717
 6,690
202164,730
 6,768
Thereafter222,227
 107,760
 $661,963
 $137,111
10. Employee Benefit Plans
 
The components of net periodic benefit cost for the Company’s defined benefit and other post-retirement plans included the following: 
 Three months ended September 30, Nine months ended September 30,
Components of Net Period Benefit Cost 2017 2016 2017 2016
Components of Net Period Benefit Cost
Components of Net Period Benefit Cost
 (in thousands)(in thousands)
Service cost $3,296
 $3,438
 $10,922
 $10,864
Other cost:        
Other cost:
Other cost:
Interest cost
Interest cost
Interest cost 5,983
 7,518
 20,502
 22,682
Expected return on plan assets (4,533) (4,472) (14,125) (13,416)
Expected return on plan assets
Expected return on plan assets
Recognized net actuarial loss
Recognized net actuarial loss
Recognized net actuarial loss 2,342
 2,008
 6,916
 5,952
Total other components of the net periodic benefit cost 3,792
 5,054
 13,293
 15,218
Partial settlement and curtailment loss 15,001
 —
 15,001
 —
Loss on plan termination 35,201
 —
 35,201
 —
Total other components of the net periodic benefit cost
Total other components of the net periodic benefit cost
Net periodic benefit cost $57,290
 $8,492
 $74,417
 $26,082
Net periodic benefit cost
Net periodic benefit cost
 
Service costs are recorded within Wages and benefits on the unaudited Consolidated Statements of Operations. Total other components of the net periodic benefit cost are recorded within the nonoperating income (expense), other, net line item on the unaudited Consolidated Statements of Operations. During the three and nine months ended September 30, 2017,March 31, 2024 and 2023, the Company contributed $14.2 millionwas not required to, and $28.6 million, respectivelydid not make cash contributions to its defined benefit and other post-retirement plans. These amounts are exclusive of the one-time contributionsThe Company is not required to the Hawaiian Airlines, Inc. Salaried & IAM Merged Pension Plan (the Merged Plan) and pilots' other post-retirement benefit plan, as discussed below. During the three and nine months ended September 30, 2016, the Company contributed $15.6 million and $26.9 million, respectivelymake a cash contribution to its defined benefit and other post-retirement plans.

In 2016, the Hawaiian Airlines, Inc. Pension Plan for Salaried Employees (the Salaried Plan) was consolidated into the Hawaiian Airlines, Inc. Pension Plan for Employees Represented by the International Association of Machinists (IAM), which established the Merged Plan. At that time, the net liabilities of the Salaried Plan were transferred to the Merged Plan. In August 2017, the Company completed the termination of the plan by transferring the assets and liabilities to a third-party insurance company. The Company contributed a total of $18.5 million in cash to fully fund the plan and recognized a one-time financial loss of $35.2 million as an other nonoperating special item on the Company's Consolidated Statement of Operations. The Company no longer has any expected contributions to the Merged Plan due to the final settlement.

In March 2017, the Company announced the ratification of a 63-month contract amendment with its pilots as represented by the Air Line Pilots Association (ALPA). In connection with the ratification of the agreement, the parties agreed to eliminate the post-65 post-retirement medical benefit for all active pilots, and replace the benefit with a heath retirement account (HRA) managed by ALPA, which represented a curtailment and partial settlement of the pilots' other post-retirement benefit plan. In August 2017, the Company made a one-time cash payment of approximately $101.9 million to fund the HRA and settle the post-65 post-retirement medical plan obligation. The cash contributed was distributed to the trust funding the individual health retirement notional accounts of the participants. In connection with the settlement of the liability, the discount rate was updated to 3.87%. The Company recognized a one-time settlement loss of $15.0 million. The obligation recorded for the unsettled portion of this plan was $83.4 million as of September 30, 2017. The Company has expected contributions of $0.9 million to the pilots' other post-retirement benefit plan for the remainder of 2017.2024.





11. Amazon Agreement

On October 20, 2022, Hawaiian and Amazon.com Services LLC (Customer), a wholly owned subsidiary of Amazon.com, Inc. (Amazon), entered into an Air Transportation Services Agreement (the ATSA) under which the Company will provide certain air cargo transportation services to Customer for an initial term of eight years. Thereafter, the Customer may elect to extend the ATSA for two years and, at the end of such period, the parties may mutually agree to extend the term for three additional years.

The ATSA provides for the Company to initially operate ten A330-300F aircraft for air cargo transportation services, with the Customer having the right to enter into work orders for additional aircraft. The Company will supply flight crews, perform maintenance and certain administrative functions, and procure aircraft insurance. The Customer will pay the Company a fixed monthly fee per aircraft, a per flight hour fee, and a per flight cycle fee for each flight cycle operated. The Customer will also reimburse the Company for certain operating expenses, including fuel, certain maintenance, and insurance premiums. As part of the ATSA, the Company received $11.5 million toward start-up costs which has been recorded in Other liabilities in the Consolidated Balance Sheet. The deferred up-front payment will be amortized into revenue on a pro-rata basis over the term of the contract as revenue is earned. Operations under the ATSA commenced on October 2, 2023.
20


The Company and Amazon also entered into a Transaction Agreement, under which the Company agreed to issue to Amazon.com NV Investment Holdings LLC, a wholly owned subsidiary of Amazon, a warrant (the Warrant) to acquire up to 9,442,443 shares (the Warrant Shares), of the Company's common stock, par value $0.01 per share.

The exercise price with respect to the first 6,294,962 Warrant Shares that vest will be $14.71 per share (the First Tranche). The exercise price with respect to the remaining 3,147,481 Warrant Shares (the Second Tranche) will be determined based on the 30-day volume-weighted average price of the Company’s common stock as of the earlier of (i) October 20, 2025, or (ii) the date that the entire First Tranche is vested. At execution of the ATSA, 1,258,992 Warrant Shares, valued at $11.6 million, vested, and were recorded in Other assets in the Consolidated Balance Sheet. The remaining Warrant Shares will vest based on qualifying payments to be made by Amazon or its affiliates either under the ATSA or generally to the Company with respect to air cargo or air charter services (the Performance Condition), excluding commercial passenger service, up to $1.8 billion of qualifying payments in the aggregate.

The Warrant was valued in two tranches, both utilizing a Monte Carlo Simulation Model. The First Tranche, which met the grant date criteria under ASC 718 at execution of the ATSA, has a set exercise price and a grant date fair value of approximately $57.9 million, or $9.19 per Warrant Share. The Warrant is classified as an equity award, subject only to the Performance Condition referenced above which impacts the timing of the vesting of the Warrant Shares. The Second Tranche, which will not have an established exercise price until a future date, as noted above, was valued at approximately $27.6 million, or $8.77 per Warrant Share as of March 31, 2024. As a grant date has not yet been established, the Company will estimate the fair value of these Warrant Shares on a quarterly basis; however, the Company also considered that until the Warrant Shares vest, there is no financial statement impact related to the Second Tranche for unvested shares under ASC 718. At their grant date, the Company will value these Warrant Shares, which will be classified as equity awards, subject to the Performance Condition.

As discussed above, 1,258,992 Warrant Shares (included in the First Tranche), with a value of $11.6 million, vested at execution of the ATSA, and were recorded as Other assets on the Consolidated Balance Sheet. The $11.6 million will be recognized as contra-revenue pro rata with estimated revenue earned over the term of the ATSA. For the remaining Warrant Shares, the value of the Warrant Shares, at grant date, will be recognized as a reduction of the transaction price of the Company’s flight services performance obligation over the term of the ATSA as revenue is earned with an offsetting entry to Capital in excess of par.

12. Commitments and Contingent Liabilities
 
Commitments


As of September 30, 2017,March 31, 2024, the Company had the following capitalaircraft-related commitments consisting of firm aircraft and engine orders and purchase rights:rights for additional aircraft and engines:
Aircraft TypeFirm OrdersPurchase RightsExpected Delivery Dates
A321neo aircraft— 9 N/A
Boeing 787-9 aircraft11 8 Between 2024 and 2027
General Electric GEnx spare engines:   
Boeing 787-9 spare engines3 1 Between 2024 and 2027

In July 2018, the Company entered into a purchase agreement for the purchase of 10 Boeing 787-9 "Dreamliner" aircraft, including purchase rights for an additional 10 aircraft with scheduled delivery from 2021 to 2025. In October 2018, the Company entered into a definitive agreement for the selection of GEnx engines to power its Boeing 787-9 fleet. The agreement provides for the purchase of 20 GEnx engines, the right to purchase an additional 20 GEnx engines, and the purchase of up to four spare engines.

In December 2022, the Company entered into a supplemental agreement to its Boeing 787-9 purchase agreement, pursuant to which (a) the Company agreed with Boeing to defer the delivery of the Boeing 787-9 aircraft and (b) agreed to exercise purchase options for an additional two Boeing 787-9 aircraft. In July 2023, the Company was notified by Boeing that its 2023 and 2024 Boeing 787-9 aircraft deliveries would be delayed by a couple of months. In February 2024, the Company took delivery of its first Boeing 787-9 aircraft under a finance lease. Refer to Note 9 of the Notes to Consolidated Finance Statements for additional discussion. This aircraft was placed into revenue service in April 2024.

21

Aircraft Type Firm Orders Purchase Rights Expected Delivery Dates
A321neo aircraft 16
 9
 Between 2017 and 2020
A330-800neo aircraft 6
 6
 Between 2019 and 2021
Pratt & Whitney spare engines:  
  
  
A321neo spare engines 3
 2
 Between 2017 and 2019
Rolls-Royce spare engines:  
  
  
A330-800neo spare engines 2
 2
 Between 2019 and 2026
The Company took delivery of its second Boeing 787-9 aircraft in April 2024, which is anticipated to enter into revenue service in May 2024. To finance the aircraft, the Company entered into (a) a $115.0 million senior note maturing in April 2034 with a variable interest rate based on SOFR plus 350 basis points, and (b) a $15.0 million junior note maturing in April 2029 with a fixed interest rate of 8.8693%. Principal and interest payments on the notes are due quarterly.

In order to complete the purchase of these aircraft and fund related costs, the Company may need to secure acceptable financing. Financing may be necessary to satisfy the Company's capital commitments for firm order aircraft and other related capital expenditures. The Company can provide no assurance that any financing not already in place for aircraft and spare engine deliveries will be available to us on acceptable terms when necessary or at all.
The Company has commitments with third-party service providers for reservations, information technology, and accounting services through 2033. Committed capital and operatingother expenditures include escalation and variable amounts based on estimates.estimated forecasts. The gross committed expenditures and committed payments for those deliveries as of September 30, 2017March 31, 2024 and for the next five fiscal years and thereafter are detailed below: 
Aircraft and Aircraft RelatedOtherTotal Committed
Expenditures
 (in thousands)
Remaining in 2024$225,949 $20,204 $246,153 
2025419,557 18,328 437,885 
2026665,473 12,085 677,558 
2027252,872 8,270 261,142 
2028— 3,311 3,311 
Thereafter— 58,285 58,285 
 $1,563,851 $120,483 $1,684,334 
  Capital Operating Total Committed
Expenditures
  (in thousands)
Remaining in 2017 $114,916
 $23,089
 $138,005
2018 454,848
 73,242
 528,090
2019 500,811
 60,228
 561,039
2020 242,152
 58,708
 300,860
2021 170,406
 56,551
 226,957
Thereafter 131,834
 400,430
 532,264
  $1,614,967
 $672,248
 $2,287,215

Litigation and Contingencies
 
The Company is subject to legal proceedings arising in the normal course of its operations. ManagementThe Company does not anticipate that the disposition of any currently pending proceeding will have a material effect on the Company’s operations, business or financial condition.


General Guarantees and Indemnifications
 
In the normal course of business, the Company enters into numerous aircraft financing and real estate leasing arrangements that have various guarantees included in such contracts. It is common in such lease transactions for the lessee to agree to indemnify the lessor and other related third-partiesthird parties for tort liabilities that arise out of, or relate to, the lessee’s use of the leased aircraft or occupancy of the leased premises. In some cases, this indemnity extends to related liabilities arising from the negligence of the indemnified parties, but usually excludes any liabilities caused by such parties' gross negligence or willful misconduct. Additionally, the lessee typically indemnifies such parties for any environmental liability that arises out of or relates to the lessee's use of the real estate leased premises. The Company believes that it is insured (subject to deductibles) for most of the tort liabilities and related indemnities described above with respect to the aircraft and real estate that it leases. The Company cannot reasonably estimate the potential amount of future payments, if any, under the foregoing indemnities and agreements.
 
Credit Card HoldbackHoldbacks
 
Under the Company’s bank-issued credit card processing agreements, certain proceeds from advance ticket sales may be held back to serve as collateral to cover any possible chargebacks or other disputed charges that may occur. These holdbacks, which are included in restricted cash in the Company’s unaudited Consolidated Balance Sheets, totaled $1.0 million at September 30, 2017As of March 31, 2024 and $5.0 million at December 31, 2016.2023, there were no holdbacks held with the Company's credit card processors.
 


In the event of a material adverse change in the Company's business, the holdbackcredit card processor could increase holdbacks to an amount up to 100% of the applicableamount of outstanding credit card tickets that are unflown (e.g., air traffic liability, excluding frequent flyer deferred revenue), which would also cause an increaseresult in the levela restriction of restricted cash. If the Company iswere unable to obtain a waiver of, or otherwise mitigate the increase in the restriction of cash, it could have a material adverse impact on the Company's operations, business or financial condition.

12. Special Items
22
  Three months ended September 30, Nine months ended September 30,
  2017 2016 2017 2016
  (in thousands)
Operating:        
Loss on sale of aircraft —
 —
 4,771
 —
Collective bargaining charge —
 —
 18,679
 —
Special items $—
 $—
 $23,450
 $—
Nonoperating:        
Partial settlement and curtailment loss 15,001
 —
 15,001
 —
Loss on plan termination 35,201
 —
 35,201
 —
Other nonoperating special items $50,202
 $—
 $50,202
 $—


13. Assets Held-For-Sale

In 2021, the Company reclassified approximately $29.5 million in long-lived assets as held for sale as follows:

•The Company announced the termination of its 'Ohana by Hawaiian operations, which utilized its ATR-42 and ATR-72 fleet, and was operated under a capacity purchase agreement (CPA) with a third-party carrier. Following the termination of the operations, management committed to a plan of sale and wrote-down the related assets by approximately $6.4 million to fair value, less cost to sell, and classified approximately $23.4 million as assets held for sale on the Consolidated Balance Sheets.

•The Company sold certain commercial real-estate assets held by one of the Company's subsidiaries. Management fair valued the assets, less the cost to sell, which did not result in a write-down to the asset group, and reclassified approximately $6.3 million as assets held for sale on the Consolidated Balance Sheets.

As discussed in Note 10, in August 2017,of March 31, 2024 and December 31, 2023, assets held for sale were $1.1 million for both periods. A roll-forward of the Company terminated the Merged Plan and settled a portion of its pilots' other post-retirement medical plan liability. In connection with the reduction of these liabilities the Company recorded one-time Other nonoperating special charges of $35.2 million related to the Merged Plan termination and $15.0 million related to the other post-retirement medical plan partial settlement.

In April 2017, the Company executed a sale leaseback transaction with an independent third party for three Boeing 767-300 aircraft. The lease termsAssets held-for-sale activity for the three aircraft commenced in April 2017 and continues through November 2018, December 2018, and January 2019, respectively. During the nine months ended September 30, 2017,March 31, 2024 and 2023 is as follows:

Assets Held-For-Sale Activity for the three months ended March 31, 2024
ATR AircraftCommercial Real EstateTotal
(in thousands)
Beginning balance as of December 31, 2023$1,135 $— $1,135 
Additions— — — 
Proceeds from sale(105)— (105)
Realized gains61 — 61 
Realized losses— — — 
Ending balance as of March 31, 2024$1,091 $— $1,091 

Assets Held-For-Sale Activity for the three months ended March 31, 2023
ATR AircraftCommercial Real EstateTotal
(in thousands)
Beginning balance as of December 31, 2022$7,728 $6,291 $14,019 
Additions— — — 
Proceeds from sale(2,769)(16,470)(19,239)
Realized gains65 10,179 10,244 
Realized losses— — — 
Ending balance as of March 31, 2023$5,024 $— $5,024 

In February 2023, the Company recordedentered into a losssale agreement for the sale of its commercial real estate and recognized a gain on sale of aircraft$10.2 million, which was recorded in Other operating expense in the consolidated statements of $4.8 million.operations. The sale closed in March 2023.


In February 2017,October 2023, the Company reached a tentative agreement with ALPA, coveringcompleted the Company's pilots. In March 2017,sale of its remaining ATR 72-200 aircraft. The Company anticipates completing the Company received notice from ALPA thatsale of remaining aircraft parts classified as held-for-sale in 2024, and will continue to monitor the agreement was ratified by ALPA's members.  The agreement became effective April 1, 2017 and has a term of 63 months.  The agreement includes, among other various benefits, a pay adjustment and ratification bonus computed based on previous service. During the nine months ended September 30, 2017, the Company expensed $18.7 million related to (1) a one-time payment to reduce the Company's future 401K employer contributionasset group for certain pilot groups, which is not recoverable once paid and (2) a one-time true up of the pilot vacation accrual at the revised rates set forth in the agreement.potential impairment.

13. Supplemental Cash Flow Information
Non-cash investing and financing activities for the nine months ended September 30, 2017 and 2016 were as follows:
23
 Nine months ended September 30,
 2017 2016
 (in thousands)
Investing and Financing Activities Not Affecting Cash:   
Property and equipment acquired through a capital lease$—
 $6,092


14. Condensed Consolidating Financial Information


The following condensed consolidating financial information is presented in accordance with Rule 3-10 of Regulation S-X paragraph 210.3-10 because, in connection with the issuance by two pass-through trusts formed by Hawaiian (which is also referred to in this Note 14 as Subsidiary Issuer / Guarantor) of pass-through certificates, the CompanyHoldings (which is also referred to in this Note 14 as Parent Issuer / Guarantor) is fully and unconditionally guaranteeing the payment obligations of Hawaiian, which is a 100% owned subsidiary of the Company,Holdings, under equipment notes issued by Hawaiian to purchase new aircraft.




The Company's condensed consolidating financial statements are presented in the following tables:


Condensed Consolidating Statements of Operations and Comprehensive Loss
Three months ended March 31, 2024
 Parent Issuer /
Guarantor		Subsidiary
Issuer /
Guarantor		Non-Guarantor
Subsidiaries		EliminationsConsolidated
 (in thousands)
Operating Revenue$— $645,591 $13,783 $(13,807)$645,567 
Operating Expenses:     
Wages and benefits— 261,935 — — 261,935 
Aircraft fuel, including taxes and delivery— 188,778 — — 188,778 
Maintenance, materials and repairs— 70,971 — — 70,971 
Aircraft and passenger servicing— 45,424 — — 45,424 
Commissions and other selling10 28,490 32 (89)28,443 
Aircraft rent— 29,706 — — 29,706 
Other rentals and landing fees— 43,127 — — 43,127 
Depreciation and amortization— 32,967 — — 32,967 
Purchased services120 38,327 94 (66)38,475 
Special items— 8,482 — — 8,482 
Other2,349 56,571 637 (13,652)45,905 
Total2,479 804,778 763 (13,807)794,213 
Operating Income (Loss)(2,479)(159,187)13,020 — (148,646)
Nonoperating Income (Expense):     
Undistributed net loss of subsidiaries(135,192)(4,472)— 139,664 — 
Interest expense and amortization of debt discounts and issuance costs— (6,314)(18,501)746 (24,069)
Interest income109 9,447 1,211 (746)10,021 
Capitalized interest— 3,134 — — 3,134 
Losses on fuel derivatives— (582)— — (582)
Other components of net periodic pension cost— (927)— — (927)
Gains on investments, net— 470 — — 470 
Gains on foreign debt— 8,519 — — 8,519 
Other, net— (770)— — (770)
Total(135,083)8,505 (17,290)139,664 (4,204)
Loss Before Income Taxes(137,562)(150,682)(4,270)139,664 (152,850)
Income tax benefit— (15,285)— — (15,285)
Net Loss$(137,562)$(135,397)$(4,270)$139,664 $(137,565)
Comprehensive Loss$(136,448)$(134,280)$(4,270)$138,550 $(136,448)

24

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
Three months ended September 30, 2017March 31, 2023
 Parent Issuer /
Guarantor		Subsidiary
Issuer /
Guarantor		Non-Guarantor
Subsidiaries		EliminationsConsolidated
 (in thousands)
Operating Revenue$— $611,800 $14,275 $(13,472)$612,603 
Operating Expenses:     
Wages and benefits— 241,933 — — 241,933 
Aircraft fuel, including taxes and delivery— 197,625 — — 197,625 
Maintenance, materials and repairs— 50,318 (31)— 50,287 
Aircraft and passenger servicing— 42,532 — — 42,532 
Commissions and other selling8 28,153 222 (145)28,238 
Aircraft rent— 28,171 — — 28,171 
Depreciation and amortization— 32,667 — — 32,667 
Other rentals and landing fees— 38,739 — (19)38,720 
Purchased services119 34,451 568 (66)35,072 
Other1,829 55,564 (9,368)(13,240)34,785 
Total1,956 750,153 (8,609)(13,470)730,030 
Operating Income (Loss)(1,956)(138,353)22,884 (2)(117,427)
Nonoperating Income (Expense):     
Undistributed net loss of subsidiaries(96,696)(4,830)— 101,526 — 
Interest expense and amortization of debt discounts and issuance costs— (5,147)(18,473)740 (22,880)
Interest income398 15,542 1,265 (740)16,465 
Capitalized interest— 1,458 — — 1,458 
Losses on fuel derivatives— (5,065)— — (5,065)
Other components of net periodic pension cost— (1,494)— — (1,494)
Gains on investments, net— 697 — — 697 
Gains on foreign debt— 2,260 — — 2,260 
Other, net— 155 — — 155 
Total(96,298)3,576 (17,208)101,526 (8,404)
Income (Loss) Before Income Taxes(98,254)(134,777)5,676 101,524 (125,831)
Income tax benefit— (27,574)— — (27,574)
Net Income (Loss)$(98,254)$(107,203)$5,676 $101,524 $(98,257)
Comprehensive Income (Loss)$(100,309)$(109,255)$5,676 $103,579 $(100,309)



25
  Parent Issuer /
Guarantor		 Subsidiary
Issuer /
Guarantor		 Non-Guarantor
Subsidiaries		 Eliminations Consolidated
  (in thousands)
Operating Revenue $—
 $717,812
 $1,853
 $(106) $719,559
Operating Expenses:  
  
  
  
  
Wages and benefits —
 161,059
 —
 —
 161,059
Aircraft fuel, including taxes and delivery —
 110,111
 —
 —
 110,111
Maintenance materials and repairs —
 48,987
 409
 —
 49,396
Aircraft and passenger servicing —
 36,360
 —
 —
 36,360
Commissions and other selling 18
 32,924
 19
 (31) 32,930
Aircraft rent —
 35,090
 105
 —
 35,195
Other rentals and landing fees —
 30,989
 —
 —
 30,989
Depreciation and amortization —
 27,491
 956
 —
 28,447
Purchased services 117
 24,428
 206
 (15) 24,736
Other 1,498
 34,678
 469
 (60) 36,585
Total 1,633
 542,117
 2,164
 (106) 545,808
Operating Income (Loss) (1,633) 175,695
 (311) —
 173,751
Nonoperating Income (Expense):  
  
  
  
  
Undistributed net income of subsidiaries 75,469
 —
 —
 (75,469) —
Other nonoperating special items —
 (50,202) —
 —
 (50,202)
Interest expense and amortization of debt discounts and issuance costs —
 (7,578) —
 —
 (7,578)
Other components of net periodic pension cost —
 (3,792) —
 —
 (3,792)
Interest income 76
 1,785
 —
 —
 1,861
Capitalized interest —
 2,416
 —
 —
 2,416
Gains on fuel derivatives —
 3,282
 —
 —
 3,282
Other, net —
 (100) —
 —
 (100)
Total 75,545
 (54,189) —
 (75,469) (54,113)
Income (Loss) Before Income Taxes 73,912
 121,506
 (311) (75,469) 119,638
Income tax expense (benefit) (654) 45,726
 —
 —
 45,072
Net Income (Loss) $74,566
 $75,780
 $(311) $(75,469) $74,566
Comprehensive Income (Loss) $99,352
 $100,566
 $(311) $(100,255) $99,352



Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
Three months ended September 30, 2016

  Parent Issuer /
Guarantor		 Subsidiary
Issuer /
Guarantor		 Non-Guarantor
Subsidiaries		 Eliminations Consolidated
  (in thousands)
Operating Revenue $—
 $670,115
 $1,800
 $(78) $671,837
Operating Expenses:  
  
  
  
  
Aircraft fuel, including taxes and delivery —
 94,818
 —
 —
 94,818
Wages and benefits —
 136,356
 —
 —
 136,356
Aircraft rent —
 32,891
 —
 —
 32,891
Maintenance materials and repairs —
 51,354
 458
 —
 51,812
Aircraft and passenger servicing —
 33,971
 —
 —
 33,971
Commissions and other selling —
 29,494
 15
 (29) 29,480
Depreciation and amortization —
 26,496
 999
 —
 27,495
Other rentals and landing fees —
 28,926
 —
 —
 28,926
Purchased services 34
 25,404
 191
 (15) 25,614
Other 1,348
 29,807
 444
 (34) 31,565
Total 1,382
 489,517
 2,107
 (78) 492,928
Operating Income (Loss) (1,382) 180,598
 (307) —
 178,909
Nonoperating Income (Expense):  
  
  
  
  
Undistributed net income of subsidiaries 103,211
 —
 —
 (103,211) —
Interest expense and amortization of debt discounts and issuance costs —
 (8,539) —
 —
 (8,539)
Other components of net periodic pension cost —
 (5,054) —
 —
 (5,054)
Interest income 71
 1,042
 —
 —
 1,113
Capitalized interest —
 719
 —
 —
 719
Losses on fuel derivatives —
 (3,601) —
 —
 (3,601)
Loss on extinguishment of debt —
 —
 —
 —
 —
Other, net —
 612
 —
 —
 612
Total 103,282
 (14,821) —
 (103,211) (14,750)
Income (Loss) Before Income Taxes 101,900
 165,777
 (307) (103,211) 164,159
Income tax expense (benefit) (554) 62,259
 —
 —
 61,705
Net Income (Loss) $102,454
 $103,518
 $(307) $(103,211) $102,454
Comprehensive Income (Loss) $101,643
 $102,707
 $(307) $(102,400) $101,643



Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
Nine months ended September 30, 2017
  Parent Issuer /
Guarantor		 Subsidiary
Issuer /
Guarantor		 Non-Guarantor
Subsidiaries		 Eliminations Consolidated
  (in thousands)
Operating Revenue $—
 $2,003,961
 $5,436
 $(318) $2,009,079
Operating Expenses:  
  
  
  
  
Aircraft fuel, including taxes and delivery —
 316,423
 —
 —
 316,423
Wages and benefits —
 466,772
 —
 —
 466,772
Aircraft rent —
 102,408
 475
 —
 102,883
Maintenance materials and repairs —
 158,417
 2,949
 —
 161,366
Aircraft and passenger servicing —
 104,569
 —
 —
 104,569
Commissions and other selling 42
 98,677
 57
 (108) 98,668
Depreciation and amortization —
 80,927
 2,860
 —
 83,787
Other rentals and landing fees —
 86,763
 —
 —
 86,763
Purchased services 400
 78,428
 645
 (45) 79,428
Special items —
 23,450
 —
 —
 23,450
Other 3,958
 96,132
 1,451
 (165) 101,376
Total 4,400
 1,612,966
 8,437
 (318) 1,625,485
Operating Income (Loss) (4,400) 390,995
 (3,001) —
 383,594
Nonoperating Income (Expense):  
  
  
  
  
Undistributed net income of subsidiaries 193,581
 —
 —
 (193,581) —
Other nonoperating special items —
 (50,202) —
 —
 (50,202)
Interest expense and amortization of debt discounts and issuance costs —
 (23,292) —
 —
 (23,292)
Other components of net periodic pension cost —
 (13,293) —
 —
 (13,293)
Interest income 216
 4,264
 —
 —
 4,480
Capitalized interest —
 6,258
 —
 —
 6,258
Losses on fuel derivatives —
 (10,228) —
 —
 (10,228)
Loss on extinguishment of debt —
 —
 —
 —
 —
Other, net —
 3,161
 —
 —
 3,161
Total 193,797
 (83,332) —
 (193,581) (83,116)
Income (Loss) Before Income Taxes 189,397
 307,663
 (3,001) (193,581) 300,478
Income tax expense (benefit) (2,514) 111,081
 —
 —
 108,567
Net Income (Loss) $191,911
 $196,582
 $(3,001) $(193,581) $191,911
Comprehensive Income (Loss) $213,837
 $218,508
 $(3,001) $(215,507) $213,837



Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
Nine months ended September 30, 2016
  Parent Issuer /
Guarantor		 Subsidiary
Issuer /
Guarantor		 Non-Guarantor
Subsidiaries		 Eliminations Consolidated
  (in thousands)
Operating Revenue $—
 $1,813,410
 $4,478
 $(281) $1,817,607
Operating Expenses:  
  
  
  
  
Aircraft fuel, including taxes and delivery —
 248,516
 —
 —
 248,516
Wages and benefits —
 395,718
 —
 —
 395,718
Aircraft rent —
 92,345
 —
 —
 92,345
Maintenance materials and repairs —
 164,395
 2,506
 —
 166,901
Aircraft and passenger servicing —
 93,245
 —
 —
 93,245
Commissions and other selling 1
 93,983
 52
 (100) 93,936
Depreciation and amortization —
 79,136
 2,493
 —
 81,629
Other rentals and landing fees —
 78,338
 —
 —
 78,338
Purchased services 121
 72,363
 450
 (45) 72,889
Other 4,135
 89,381
 899
 (136) 94,279
Total 4,257
 1,407,420
 6,400
 (281) 1,417,796
Operating Income (Loss) (4,257) 405,990
 (1,922) —
 399,811
Nonoperating Income (Expense):  
  
  
  
  
Undistributed net income of subsidiaries 235,353
 —
 —
 (235,353) —
Interest expense and amortization of debt discounts and issuance costs 117
 (28,570) —
 —
 (28,453)
Other components of net periodic pension cost —
 (15,218) —
 —
 (15,218)
Interest income 195
 2,849
 —
 —
 3,044
Capitalized interest —
 1,407
 —
 —
 1,407
Gains on fuel derivatives —
 15,421
 —
 —
 15,421
Loss on extinguishment of debt —
 (9,993) —
 —
 (9,993)
Other, net —
 9,884
 —
 —
 9,884
Total 235,665
 (24,220) —
 (235,353) (23,908)
Income (Loss) Before Income Taxes 231,408
 381,770
 (1,922) (235,353) 375,903
Income tax expense (benefit) (2,082) 144,495
 —
 —
 142,413
Net Income (Loss) $233,490
 $237,275
 $(1,922) $(235,353) $233,490
Comprehensive Income (Loss) $220,209
 $223,994
 $(1,922) $(222,072) $220,209



Condensed Consolidating Balance Sheets
September 30, 2017March 31, 2024
 Parent Issuer /
Guarantor		Subsidiary
Issuer /
Guarantor		Non-Guarantor
Subsidiaries		EliminationsConsolidated
 (in thousands)
ASSETS     
Current Assets:     
Cash and cash equivalents$8,817 $190,050 $31,998 $— $230,865 
Restricted cash— — 17,250 — 17,250 
Short-term investments— 666,432 — — 666,432 
Accounts receivable, net1,269 93,977 27,687 (23,816)99,117 
Income taxes receivable— 642 — — 642 
Spare parts and supplies, net— 65,444 — — 65,444 
Prepaid expenses and other— 80,304 — — 80,304 
Total10,086 1,096,849 76,935 (23,816)1,160,054 
Property and equipment at cost— 3,264,937 — — 3,264,937 
Less accumulated depreciation and amortization— (1,160,495)— — (1,160,495)
Property and equipment, net— 2,104,442 — — 2,104,442 
Assets held-for-sale— 224 867 — 1,091 
Operating lease right-of-use assets— 393,769 — — 393,769 
Long-term prepayments and other— 118,057 1,200,000 (1,200,000)118,057 
Goodwill and other intangible assets, net— — 13,500 — 13,500 
Intercompany receivable(713,153)(62,065)— 775,218 — 
Investment in consolidated subsidiaries807,451 (17,310)503 (790,644)— 
Total Assets$104,384 $3,633,966 $1,291,805 $(1,239,242)$3,790,913 
LIABILITIES AND SHAREHOLDERS’ EQUITY     
Current Liabilities:     
Accounts payable$2,048 $226,522 $636 $(14,358)$214,848 
Air traffic liability and current frequent flyer deferred revenue— 749,261 8,594 — 757,855 
Other accrued liabilities— 161,230 13,658 (9,458)165,430 
Current maturities of long-term debt, less discount— 75,132 — — 75,132 
Current maturities of finance lease obligations— 8,791 — — 8,791 
Current maturities of operating leases— 79,281 — — 79,281 
Total2,048 1,300,217 22,888 (23,816)1,301,337 
Long-Term Debt— 1,621,457 1,190,778 (1,200,000)1,612,235 
Intercompany payable142,552 (581,251)127,943 310,756 — 
Other Liabilities and Deferred Credits:    
Noncurrent finance lease obligations— 56,269 — — 56,269 
Noncurrent operating leases— 283,836 — — 283,836 
Accumulated pension and other post-retirement benefit obligations— 142,367 — — 142,367 
Other liabilities and deferred credits— 78,499 — — 78,499 
Noncurrent frequent flyer deferred revenue— 304,099 — — 304,099 
Deferred tax liabilities, net— 52,492 — — 52,492 
Total— 917,562 — — 917,562 
Shareholders’ equity(40,216)375,981 (49,804)(326,182)(40,221)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$104,384 $3,633,966 $1,291,805 $(1,239,242)$3,790,913 
26
  Parent Issuer /
Guarantor		 Subsidiary
Issuer /
Guarantor		 Non-Guarantor
Subsidiaries		 Eliminations Consolidated
  (in thousands)
ASSETS  
  
  
  
  
Current assets:  
  
  
  
  
Cash and cash equivalents $63,745
 $279,055
 $5,249
 $—
 $348,049
Restricted cash —
 1,000
 —
 —
 1,000
Short-term investments —
 270,697
 —
 —
 270,697
Accounts receivable, net 29
 117,103
 1,687
 (197) 118,622
Spare parts and supplies, net —
 26,560
 —
 —
 26,560
Prepaid expenses and other 145
 56,409
 229
 —
 56,783
Total 63,919
 750,824
 7,165
 (197) 821,711
Property and equipment at cost —
 2,214,015
 73,895
 —
 2,287,910
Less accumulated depreciation and amortization —
 (523,089) (10,875) —
 (533,964)
Property and equipment, net —
 1,690,926
 63,020
 —
 1,753,946
Long-term prepayments and other —
 124,874
 52
 —
 124,926
Deferred tax assets, net 31,271
 —
 —
 (31,271) —
Goodwill and other intangible assets, net —
 120,839
 1,271
 —
 122,110
Intercompany receivable —
 342,113
 —
 (342,113) —
Investment in consolidated subsidiaries 1,077,365
 —
 —
 (1,077,365) —
TOTAL ASSETS $1,172,555
 $3,029,576
 $71,508
 $(1,450,946) $2,822,693
LIABILITIES AND SHAREHOLDERS’ EQUITY  
  
  
  
  
Current liabilities:  
  
  
  
  
Accounts payable $703
 $117,454
 $850
 $(197) $118,810
Air traffic liability —
 569,638
 3,735
 —
 573,373
Other accrued liabilities 131
 157,383
 246
 —
 157,760
Current maturities of long-term debt, less discount, and capital lease obligations —
 58,585
 —
 —
 58,585
Total 834
 903,060
 4,831
 (197) 908,528
Long-term debt and capital lease obligations —
 447,533
 —
 —
 447,533
Intercompany payable 330,930
 —
 11,183
 (342,113) —
Other liabilities and deferred credits:  
  
  
  
 =sum(C32:I32)
Accumulated pension and other post-retirement benefit obligations —
 234,206
 —
 —
 234,206
Other liabilities and deferred credits —
 171,937
 855
 —
 172,792
Deferred tax liabilities, net —
 250,114
 —
 (31,271) 218,843
Total —
 656,257
 855
 (31,271) 625,841
Shareholders’ equity 840,791
 1,022,726
 54,639
 (1,077,365) 840,791
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $1,172,555
 $3,029,576
 $71,508
 $(1,450,946) $2,822,693






Condensed Consolidating Balance Sheets
December 31, 20162023
 Parent Issuer /
Guarantor		Subsidiary
Issuer /
Guarantor		Non-Guarantor
Subsidiaries		EliminationsConsolidated
(in thousands)
ASSETS    
Current assets:     
Cash and cash equivalents$8,707 $113,026 $31,540 $— $153,273 
Restricted cash— — 17,250 — 17,250 
Short-term investments— 755,224 — — 755,224 
Accounts receivable, net1,269 101,655 26,261 (23,327)105,858 
Income taxes receivable, net— 669 — — 669 
Spare parts and supplies, net— 60,115 — — 60,115 
Prepaid expenses and other— 78,551 — — 78,551 
Total9,976 1,109,240 75,051 (23,327)1,170,940 
Property and equipment at cost— 3,164,145 — — 3,164,145 
Less accumulated depreciation and amortization— (1,150,529)— — (1,150,529)
Property and equipment, net— 2,013,616 — — 2,013,616 
Assets held-for-sale— 262 873 — 1,135 
Operating lease right-of-use assets— 413,237 — — 413,237 
Long-term prepayments and other— 121,097 1,200,000 (1,200,000)121,097 
Goodwill and other intangible assets, net— — 13,500 — 13,500 
Intercompany receivable(577,961)(57,591)— 635,552 — 
Investment in consolidated subsidiaries807,451 (17,309)502 (790,644)— 
Total Assets$239,466 $3,582,552 $1,289,926 $(1,378,419)$3,733,525 
LIABILITIES AND SHAREHOLDERS’ EQUITY     
Current liabilities:     
Accounts payable$784 $212,464 $590 $(14,615)$199,223 
Air traffic liability and current frequent flyer deferred revenue— 623,324 10,021 — 633,345 
Other accrued liabilities— 170,651 13,652 (8,712)175,591 
Current maturities of long-term debt, less discount— 43,857 — — 43,857 
Current maturities of finance lease obligations— 10,053 — — 10,053 
Current maturities of operating leases— 83,332 — — 83,332 
Total784 1,143,681 24,263 (23,327)1,145,401 
Long-Term Debt— 1,547,626 1,189,526 (1,200,000)1,537,152 
Intercompany payable143,257 (573,873)121,673 308,943 — 
Other Liabilities and Deferred Credits:    
Noncurrent finance lease obligations— 60,116 — — 60,116 
Noncurrent operating leases— 303,119 — — 303,119 
Accumulated pension and other post-retirement benefit obligations— 140,742 — — 140,742 
Other liabilities and deferred credits— 77,154 — — 77,154 
Noncurrent frequent flyer deferred revenue— 308,502 — — 308,502 
Deferred tax liabilities, net— 65,914 — — 65,914 
Total— 955,547 — — 955,547 
Shareholders’ equity95,425 509,571 (45,536)(464,035)95,425 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$239,466 $3,582,552 $1,289,926 $(1,378,419)$3,733,525 
27
  Parent Issuer /
Guarantor		 Subsidiary
Issuer /
Guarantor		 Non-Guarantor
Subsidiaries		 Eliminations Consolidated
  (in thousands)
ASSETS    
  
  
  
Current assets:  
  
  
  
  
Cash and cash equivalents $67,629
 $249,985
 $8,377
 $—
 $325,991
Restricted cash —
 5,000
 —
 —
 5,000
Short-term investments —
 284,075
 —
 —
 284,075
Accounts receivable, net 28
 94,852
 1,392
 (205) 96,067
Spare parts and supplies, net —
 20,363
 —
 —
 20,363
Prepaid expenses and other 29
 66,665
 46
 —
 66,740
Total 67,686
 720,940
 9,815
 (205) 798,236
Property and equipment at cost —
 2,038,931
 69,867
 —
 2,108,798
Less accumulated depreciation and amortization —
 (445,868) (8,363) —
 (454,231)
Property and equipment, net —
 1,593,063
 61,504
 —
 1,654,567
Long-term prepayments and other —
 132,724
 —
 —
 132,724
Deferred tax assets, net 28,757
 —
 —
 (28,757) —
Goodwill and other intangible assets, net —
 121,456
 1,618
 —
 123,074
Intercompany receivable —
 277,732
 —
 (277,732) —
Investment in consolidated subsidiaries 855,289
 —
 —
 (855,289) —
TOTAL ASSETS $951,732
 $2,845,915
 $72,937
 $(1,161,983) $2,708,601
LIABILITIES AND SHAREHOLDERS’ EQUITY  
  
  
  
  
Current liabilities:  
  
  
  
  
Accounts payable $492
 $114,935
 $1,285
 $(205) $116,507
Air traffic liability —
 478,109
 4,387
 —
 482,496
Other accrued liabilities 4,088
 167,864
 262
 —
 172,214
Current maturities of long-term debt, less discount, and capital lease obligations —
 58,899
 —
 —
 58,899
Total 4,580
 819,807
 5,934
 (205) 830,116
Long-term debt and capital lease obligations —
 497,908
 —
 —
 497,908
Intercompany payable 266,699
 —
 11,033
 (277,732) —
Other liabilities and deferred credits:  
  
  
  
 0
Accumulated pension and other post-retirement benefit obligations —
 355,968
 —
 —
 355,968
Other liabilities and deferred credits —
 172,783
 830
 —
 173,613
Deferred tax liabilities, net —
 199,300
 —
 (28,757) 170,543
Total —
 728,051
 830
 (28,757) 700,124
Shareholders’ equity 680,453
 800,149
 55,140
 (855,289) 680,453
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $951,732
 $2,845,915
 $72,937
 $(1,161,983) $2,708,601










Condensed Consolidating Statements of Cash Flows
NineThree months ended September 30, 2017March 31, 2024
 Parent Issuer /
Guarantor		Subsidiary
Issuer /
Guarantor		Non-
Guarantor
Subsidiaries		EliminationsConsolidated
 (in thousands)
Net Cash Provided By (Used In) Operating Activities$(797)$6,887 $(5,836)$— $254 
Cash Flows From Investing Activities:     
Net payments to affiliates— (7,179)6,272 907 — 
Additions to property and equipment, including pre-delivery deposits— (127,018)— — (127,018)
Proceeds from the disposition of aircraft and aircraft related equipment— 83 22 — 105 
Purchases of investments— (15,824)— — (15,824)
Sales of investments— 109,485 — — 109,485 
Net cash provided by (used in) investing activities— (40,453)6,294 907 (33,252)
Cash Flows From Financing Activities:     
Long-term borrowings— 131,400 — — 131,400 
Repayments of long-term debt and finance lease obligations— (18,760)— — (18,760)
Debt issuance costs and discount— (1,849)— — (1,849)
Net payments from affiliates907 — — (907)— 
Payment for taxes withheld for stock compensation— (201)— — (201)
Net cash provided by financing activities907 110,590 — (907)110,590 
Net increase in cash and cash equivalents110 77,024 458 — 77,592 
Cash, cash equivalents, & restricted cash - Beginning of Period8,707 113,026 48,790 — 170,523 
Cash, cash equivalents, & restricted cash - End of Period$8,817 $190,050 $49,248 $— $248,115 
28

  Parent Issuer /
Guarantor		 Subsidiary
Issuer /
Guarantor		 Non-
Guarantor
Subsidiaries		 Eliminations Consolidated
  (in thousands)
Net Cash Provided By (Used In) Operating Activities $(3,491) $300,820
 $(1,852) $—
 $295,477
Cash Flows From Investing Activities:  
  
  
  
  
Net payments to affiliates (2,500) (52,507) —
 55,007
 —
Additions to property and equipment, including pre-delivery deposits —
 (208,759) (3,776) —
 (212,535)
Proceeds from disposition of property and equipment —
 33,511
 —
 —
 33,511
Purchases of investments —
 (171,485) —
 —
 (171,485)
Sales of investments —
 183,930
 —
 —
 183,930
Net cash used in investing activities (2,500) (215,310) (3,776) 55,007
 (166,579)
Cash Flows From Financing Activities:  
  
  
  
  
Repayments of long-term debt and capital lease obligations —
 (52,463) —
 —
 (52,463)
Net payments from affiliates 52,507
 —
 2,500
 (55,007) —
Repurchases of common stock (50,486) —
 —
 —
 (50,486)
Other 86
 (7,977) —
 —
 (7,891)
Net cash provided by (used in) financing activities 2,107
 (60,440) 2,500
 (55,007) (110,840)
Net increase (decrease) in cash and cash equivalents (3,884) 25,070
 (3,128) —
 18,058
Cash, cash equivalents, & restricted cash - Beginning of Period 67,629
 254,985
 8,377
 —
 330,991
Cash, cash equivalents, & restricted cash - End of Period $63,745
 $280,055
 $5,249
 $—
 $349,049





Condensed Consolidating Statements of Cash Flows
NineThree months ended September 30, 2016March 31, 2023
 Parent Issuer /
Guarantor		Subsidiary
Issuer /
Guarantor		Non-
Guarantor
Subsidiaries		EliminationsConsolidated
 (in thousands)
Net Cash Provided By (Used In) Operating Activities$(613)$122,379 $(3,475)$— $118,291 
Cash Flows From Investing Activities:     
Net payments to affiliates— 24,435 (17,206)(7,229)— 
Additions to property and equipment, including pre-delivery deposits— (106,215)— — (106,215)
Proceeds from the disposition of aircraft and aircraft related equipment6,793 20 2,750 — 9,563 
Purchases of investments— (96,806)— — (96,806)
Sales of investments— 144,069 — — 144,069 
Net cash provided by (used in) investing activities6,793 (34,497)(14,456)(7,229)(49,389)
Cash Flows From Financing Activities:     
Repayments of long-term debt and finance lease obligations— (24,953)— — (24,953)
Net payments from affiliates(7,229)— — 7,229 — 
Payment for taxes withheld for stock compensation— (1,066)— — (1,066)
Net cash used in financing activities(7,229)(26,019)— 7,229 (26,019)
Net increase (decrease) in cash and cash equivalents(1,049)61,863 (17,931)— 42,883 
Cash, cash equivalents, & restricted cash - Beginning of Period28,620 151,357 66,643 — 246,620 
Cash, cash equivalents, & restricted cash - End of Period$27,571 $213,220 $48,712 $— $289,503 


29
  Parent Issuer /
Guarantor		 Subsidiary
Issuer /
Guarantor		 Non-
Guarantor
Subsidiaries		 Eliminations Consolidated
  (in thousands)
Net Cash Provided By (Used In) Operating Activities $(4,036) $438,596
 $362
 $—
 $434,922
Cash Flows From Investing Activities:  
  
  
  
  
Net payments to affiliates —
 (27,796) —
 27,796
 —
Additions to property and equipment, including pre-delivery deposits —
 (92,185) (12,065) —
 (104,250)
Proceeds from purchase assignment and leaseback transaction —
 31,851
 —
 —
 31,851
Purchases of investments —
 (217,964) —
 —
 (217,964)
Sales of investments —
 208,075
 —
 —
 208,075
Net cash used in investing activities —
 (98,019) (12,065) 27,796
 (82,288)
Cash Flows From Financing Activities:  
  
  
  
  
Repayments of long-term debt and capital lease obligations —
 (205,532) —
 —
 (205,532)
Repurchase of convertible notes (1,426) —
 —
 —
 (1,426)
Net payments from affiliates 16,763
 —
 11,033
 (27,796) —
Repurchases of Common Stock (13,763) —
 —
 —
 (13,763)
Other 423
 (8,125) —
 —
 (7,702)
Net cash provided by (used in) financing activities 1,997
 (213,657) 11,033
 (27,796) (228,423)
Net increase (decrease) in cash and cash equivalents (2,039) 126,920
 (670) —
 124,211
Cash, cash equivalents, & restricted cash - Beginning of Period 69,420
 208,406
 8,676
 —
 286,502
Cash, cash equivalents, & restricted cash - End of Period $67,381
 $335,326
 $8,006
 $—
 $410,713



Income Taxes
The income tax expense (benefit) is presented as if each entity that is part of the consolidated group files a separate return.


ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 
Forward-Looking Statements
 
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect our current views with respect to certain current and future events and financial performance. Such forward-looking statements include, without limitation, statements regarding:related to the Merger (defined below), including statements related to the timing of completion of the Merger, or the receipt of necessary approvals to complete the Merger; the significance and timing of costs related to the Merger; the impact on us of litigation or other stockholder action related to the Merger; the effects on us and our stockholders if the Merger is not completed; our financial statements and results of operations; any expectations of operating expenses, deferred revenue, interest rates, tax rates, income taxes, deferred tax assets, valuation allowances or other financial items; the extent to which the COVID-19 pandemic and related impacts will materially and adversely affect our business operations, financial performance, results of operations, financial position or achievement of strategic objectives; the demand for air travel in the markets in which we operate; demand for air travel to Maui, Hawai'i; changes in our future capital needs; estimations related to our liquidity requirements; future obligations and related impact of such obligations and our expectations regardingrelated to our financialagreement with Amazon; the number of aircraft that we will be operating under the ATSA by the end of 2024; the availability of aircraft fuel, aircraft parts and personnel; the impact and timing of A321neo engine shortages on our operating performance (including bookings, revenue and results of operations), available seat miles, operating revenue, per available seat mile and operating cost per available seat mile for the fourthsecond quarter of 2017;2024, 2024 and potentially beyond; expectations about the recovery of international travel demand; expectations related to currency fluctuations; expected salary and related costs; our expected fleet as of September 30, 2018;March 31, 2025; estimates of annual fuel expenses and measure of the effects of fuel prices on our business; the impact of inflation on our business, our investments and the broader economy; the impact of climate change or natural disasters; the availability of, and efforts seeking, future financing; changes in our fleet plan and related cash outlays; committed capital expenditures; expected cash payments related to our post-retirement plan obligations; estimated financial charges; expected purchases of aircraft; expected delivery or deferment of new aircraft;aircraft and engines; the impact of accounting standards on our financial statements; the effects of any litigation on our operations or business; the effects of our fuel and currency risk hedging policies; the fair value and expected maturity of our debt obligations; our estimated contractual obligations; and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing. Words such as “expects,” “anticipates,” “projects,” “intends,” “plans,” “believes,” “estimates,” “could,” “would,” “will,” “might,” “may,” variations of such words, and similar expressions are also intended to identify such forward-looking statements. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and assumptions relating to our operations and business environment, all of which may cause our actual results to be materially different from any future results, expressed or implied, in these forward-looking statements.

Factors that could affect such forward-looking statements include, but are not limited to: the impact of our agreement with Amazon and the role of cargo in our business model; fluctuations and the extent of declining demand for air transportation in the markets in which we operate; our dependence on the tourism industry; our ability to generate sufficient cash and manage the cash available to us; our ability to accurately forecast quarterly and annual results; global economic volatility; macroeconomic political and regulatory developments; political developments; our dependence ongeopolitical conflict; the tourism industry;impact of climate change the impact of climate change or natural disasters; the price and availability of fuel;fuel, aircraft parts and personnel; foreign currency exchange rate fluctuations; our competitive environment;pressures, including the potential impact of risingincreasing industry capacity between North America and Hawai’i;
fluctuations in demand for transportation in the markets in which we operate;on our Domestic routes; maintenance of privacy and security of customer-related information and compliance with applicable federal and foreign privacy or data security regulations or standards; our dependence on technology and automated systems; our reliance on third-party contractors; satisfactory labor relations; our ability to attract and retain qualified personnel and key executives; successful implementation of our growth strategy and cost reduction goals; adverse publicity; negative impacts to our intellectual property rights or brand; risks related to the airline industry; our ability to obtain and maintain adequate facilities and infrastructure; seasonal and cyclical volatility; the effect of applicable state, federal and foreign laws and regulations; increases in insurance costs or reductions in coverage; the limited number of suppliers for aircraft, aircraft engines and parts; our existing aircraft purchase agreements; delays in aircraft or engine deliveries or other loss of fleet capacity; timing for entry into service of aircraft; changes in our future capital needs; fluctuations in our share price; our financial liquidity; and our financial liquidity.ability to implement our growth strategy. The risks, uncertainties, and assumptions referred to above that could cause our results to differ materially from the results expressed or implied by such forward-looking statements also include the risks, uncertainties, and assumptions discussed under the heading “Risk Factors” in Part II, Item 1A in this Quarterly Report on Form 10-Q and discussed from time to time in our public filings and public announcements, including, but not limited to, our risk factors set out in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.announcements. All forward-looking statements included in this Quarterly Report on Form 10-Q are based on information available to us as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this quarterly report. The following discussion and analysis should be read in conjunction with our unaudited Consolidated Financial Statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Unless the context otherwise requires, the terms the Company, we, us, and our in this Quarterly Report on Form 10-Q refer to Hawaiian Holdings, Inc. and its direct wholly owned subsidiary, Hawaiian Airlines, Inc. (Hawaiian).

30

Our Business


We are engaged in the scheduled air transportation of passengers and cargo amongst the Hawaiian Islands (the “Neighbor Island”Neighbor Island routes), between the Hawaiian Islands and certain cities in the U.S. mainland (the “North America”North America routes and collectively with the Neighbor Island routes, referred to as our “Domestic”Domestic routes), and between the Hawaiian Islands and the South Pacific, Australia, New Zealand and Asia (the “International”International routes), collectively referred to as our “Scheduled Operations.” We offer non-stop service to Hawai'i from 15 U.S. mainland cities, which is more U.S. gateway cities than any other airline, and also provide approximately 144 daily flights between the Hawaiian Islands. In addition, we operate various charter flights. We are the longest serving airline, as well as the largest airline headquartered in the Statestate of Hawai‘iHawai'i and the tenth largest domestic airline in the United States based on revenue passenger miles (RPMs) as reported by the Research and Innovative Technology Administration Bureau of Transportation Statistics for the monthas of July 2017,January 2024, the latest available data. As of September 30, 2017,March 31, 2024, we had 6,491 7,386active employees.


On October 20, 2022, we entered into an Air Transportation Services Agreement (ATSA) with Amazon.com Services LLC (Customer), a wholly-owned subsidiary of Amazon.com Inc. (Amazon), to provide certain air cargo transportation services to the Customer for an initial term of eight years. Thereafter, the Customer may elect to extend the ATSA for two years and, at the end of such period, the parties may mutually agree to extend the term for three additional years. The ATSA provides for us to initially operate ten A330-300F aircraft for the air cargo transportation services with the Customer having the right to enter into work orders for additional aircraft. We will supply flight crews, perform maintenance and certain administrative functions, and procure aircraft insurance. The Customer will pay us a fixed monthly fee per aircraft, a per flight hour fee, and a per flight cycle fee for each flight cycle operated. The Customer will also reimburse us for certain operating expenses, including fuel, certain maintenance, and insurance premiums. Operations under the ATSA commenced on October 2, 2023 and as of March 31, 2024, we were operating one aircraft with two additional aircraft scheduled to commence operation in the second quarter of 2024. We anticipate that we will be operating six aircraft under the ATSA by the end of 2024.

General information about us is available at https://www.hawaiianairlines.com. Information contained on our website is not incorporated by reference into, or otherwise to be regarded as part of, this Quarterly Report on Form 10-Q unless expressly noted. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments and exhibits to those reports, are available free of charge through our website as soon as reasonably practicable after we file them with, or furnish them to, the Securities and Exchange Commission.

Commission (SEC).


First Quarter 2024 Financial HighlightsOverview


•Passenger revenue in the first quarter was $583.4 million, up 6.4% as compared to the same period in 2023. During the three months ended March 31, 2024, capacity (as measured in Available Seat Miles or ASMs) was up 2.7%, while RPM increased 5.9%, as compared to the same period in 2023, driven by improving demand across our network.

•Operating loss in the first quarter was $148.6 million, as compared to an operating loss of $117.4 million during the same period in 2023.

•GAAP net incomeloss in the thirdfirst quarter of $74.6was $137.6 million, or $1.39$2.65 per diluted share.

Adjustedshare on total revenue of $645.6 million, compared to a net income in the third quarterloss of $102.6$98.3 million, or $1.92$1.91 per diluted share.share, on total revenue of $612.6 million during the same period in 2023.


•Unrestricted cash, and cash equivalents and short-term investments was $897.3 million as of $618.7 million.March 31, 2024, compared to $908.5 million as of December 31, 2023.


•As of March 31, 2024, the Company had federal and state net operating losses (NOLs) of approximately $451.4 million and $968.8 million, respectively, which are available to reduce future pre-tax income. Analysis under GAAP required us to increase the valuation allowance related to the NOLs which resulted in a lower effective tax rate for the period.

See “Results of Operations” below for further discussion of changes in revenue and operating expense. See “Non-GAAP Financial Measures” below

Merger with Alaska Air Group

On December 2, 2023, we entered into an Agreement and Plan of Merger (the Merger Agreement) with Alaska Air Group, Inc., a Delaware corporation (Alaska), and Marlin Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Alaska (Merger Sub), pursuant to which, subject to satisfaction or waiver of conditions therein, Merger Sub will merge with and into the Company (the Merger), with the Company surviving as a wholly owned subsidiary of Alaska.
31


At the effective time of the Merger (the Effective Time), each share of our common stock, Series B Special Preferred Stock, Series C Special Preferred Stock, and Series D Special Preferred Stock issued and outstanding immediately prior to the Effective Time, subject to certain customary exceptions specified in the Merger Agreement, will be converted into the right to receive $18.00 per share, payable to the holder in cash, without interest.

Completion of the Merger is subject to customary closing conditions, including approval by the Company's stockholders, which was obtained on February 16, 2024; performance by the parties in all material respects of their obligations under the Merger Agreement; the receipt of required regulatory approvals; and the absence of an order or law preventing, materially restraining, or materially impairing the consummation of the Merger.

On February 7, 2024, the Company and Alaska each received a request for additional information and documentary material (together, the Second Request) from the Department of Justice (DOJ) in connection with the DOJ’s review of the Merger. On March 27, 2024, Hawaiian and Alaska entered into a timing agreement with the DOJ pursuant to which we agreed, among other things, not to consummate the Merger before 90 days following the date on which both parties have certified substantial compliance with the Second Request unless we have received written notice from the DOJ prior to the end of such 90-day period that the DOJ has closed its investigation of the Merger.

The Merger Agreement includes customary termination rights in favor of each party. In certain circumstances, we may be required to pay Alaska a termination fee of $39.6 million in connection with the termination of the Merger Agreement.

The Merger is expected to close within 12 to 18 months of the date of the Merger Agreement.

Material Changes to our Consolidated Balance Sheet

During the three months ended March 31, 2024, material changes to our Consolidated Balance Sheet consisted of the following:

•As of March 31, 2024, our total debt was $1.7 billion, an increase of $106.4 million, or 6.7%, as compared to $1.6 billion as of December 31, 2023. The increase is attributed to $131.4 million in financing obtained for our reconciliation of non-GAAP measures.

Outlook

We expect our revenue performance to remain consistentfirst Boeing 787-9 aircraft delivery in the fourthfirst quarter of 20172024, partially offset by scheduled debt repayments.
•As of March 31, 2024, our air traffic liability and current frequent flyer deferred revenue was $757.9 million, an increase of $124.5 million, or 19.7%, as compared to the prior year period. We expect available seat miles during the quarter ending$633.3 million as of December 31, 2017 to2023. The increase by 4.0% to 6.0% from the prior year period, while we expect operating revenue per available seat mile to range from down 1.0% to up 2.0% from the prior year period.  We expect operating cost per available seat mile, during the quarter ending December 31, 2017 to decrease by 10.3% to 13.5% from the prior year period,in air traffic liability is primarily due to an expected decreaseincrease in special charges foradvanced ticket sales and the quarter ending December 31, 2017, comparedseasonality of passenger travel.

Refer to the prior year period.Cash Flow and Use of Liquidity section below for additional discussion.


Fleet Summary


The table below summarizes our total fleet as of September 30, 2016March 31, 2023 and 2017,2024, respectively and our expected fleet as of September 30, 2018March 31, 2025 (based on existing agreements)executed agreements as of March 31, 2024):
 March 31, 2023March 31, 2024March 31, 2025 (Expected)
Aircraft TypeLeased (1)Owned (2)TotalLeased (1)Owned (2)TotalLeased (1)Owned (2)Total
A330-20012 12 24 12 12 24 11 12 23 
A330-300F (3)— — — 2 — 2 7 — 7 
A321neo4 14 18 4 14 18 4 14 18 
787-9 (4)— — — — 1 1 — 4 4 
717-200 (5)5 14 19 1 18 19 — 19 19 
ATR 42-500 (6)— 1 1 — — — — — — 
ATR 72-200 (6)— 1 1 — — — — — — 
Total21 42 63 19 45 64 22 49 71 

(1)    Leased aircraft include aircraft under both finance and operating leases.

(2)    Includes unencumbered aircraft as well as those purchased and under various debt financing arrangements.

32

  September 30, 2016 September 30, 2017 September 30, 2018
Aircraft Type Leased (2) Owned Total Leased (2) Owned Total Leased (2) Owned Total
A330-200 11
 12
 23
 11
 13
 24
 11
 13
 24
767-300 4
 4
 8
 7
 1
 8
 7
 —
 7
717-200 3
 15
 18
 5
 15
 20
 5
 15
 20
ATR turboprop (1) —
 6
 6
 —
 6
 6
 —
 7
 7
A321neo —
 —
 —
 —
 —
 —
 2
 8
 10
Total 18
 37
 55
 23
 35
 58
 25
 43
 68
                   
(3)    A330-300F aircraft to be utilized under the ATSA with Amazon. Operations under the ATSA commenced on October 2, 2023. As discussed above, the ATSA provides for the operation of 10 aircraft with customer options to expand the fleet.

(1)The ATR turboprop aircraft are owned by Airline Contract Maintenance & Equipment, Inc., a wholly-owned subsidiary of the Company.

(2)Leased aircraft include aircraft under both capital and operating leases.


(4)    In February 2024, we took delivery of our first Boeing 787-9 aircraft under a financing lease, which did not meet the criteria for a sale under the applicable accounting framework and is therefore recognized as a debt financing, and will be placed into revenue service in April 2024. We took delivery of our second aircraft in April 2024 under a financing arrangement, which we anticipate placing into service in May 2024, with a third aircraft scheduled for delivery in late 2024.

(5)    In December 2023, we entered into an agreement to purchase one 717-200 aircraft that was under a lease agreement. During the first quarter of 2024, we entered into an agreement to purchase three additional 717-200 aircraft previously under lease. We expect to purchase the remaining 717-200 aircraft under lease in the second quarter of 2024.

(6) The ATR 42-500 turboprop and ATR 72-200 turboprop aircraft are owned by Airline Contract Maintenance & Equipment, Inc., our wholly owned subsidiary. In 2021, we announced the termination of our 'Ohana by Hawaiian operations, which operated under a capacity purchase agreement with a third-party provider. As of March 31, 2024, there was one remaining aircraft and certain aircraft parts. The asset group was classified as Assets held-for-sale on the Consolidated Balance Sheets. In October 2023, we completed the sale of the remaining ATR 72-200 aircraft, which did not result in a gain or loss on the transaction. We anticipate completing the sale of remaining aircraft parts in the second quarter of 2024.

Results of Operations
 
For the three months ended September 30, 2017,March 31, 2024, we generated a net incomeloss of $74.6$137.6 million, or $1.39$2.65 per diluted share, compared to a net incomeloss of $102.5$98.3 million, or $1.91 per diluted share, for the same period in 2016. For the nine months ended September 30, 2017, we generated net income of $191.9 million, or $3.57 per diluted share, compared to net income of $233.5 million, or $4.35 per diluted share, for the same period in 2016.2023.





Selected Consolidated Statistical Data (unaudited)
 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
 (in thousands, except as otherwise indicated)
Scheduled Operations (a) :  
  
  
  
(in thousands, except as otherwise indicated)
Scheduled Operations:
Revenue passengers flown
Revenue passengers flown
Revenue passengers flown 3,000
 2,916
 8,588
 8,317
Revenue passenger miles (RPM) 4,290,499
 4,166,487
 12,187,344
 11,554,522
Revenue passenger miles (RPM)
Revenue passenger miles (RPM)
Available seat miles (ASM)
Available seat miles (ASM)
Available seat miles (ASM) 4,946,678
 4,887,608
 14,203,112
 13,805,563
Passenger revenue per RPM (Yield) 
14.79¢ 
14.20¢ 
14.48¢ 
13.78¢
Passenger revenue per RPM (Yield)
Passenger revenue per RPM (Yield)
Passenger load factor (RPM/ASM)
Passenger load factor (RPM/ASM)
Passenger load factor (RPM/ASM) 86.7% 85.2% 85.8% 83.7%
Passenger revenue per ASM (PRASM) 
12.83¢ 
12.10¢ 
12.43¢ 
11.53¢
Total Operations (a) :  
  
  
  
Passenger revenue per ASM (PRASM)
Passenger revenue per ASM (PRASM)
Total Operations:
Total Operations:
Total Operations:
Revenue passengers flown
Revenue passengers flown
Revenue passengers flown 3,001
 2,918
 8,592
 8,321
RPM 4,293,095
 4,170,671
 12,190,846
 11,559,795
RPM
RPM
ASM
ASM
ASM 4,950,800
 4,894,768
 14,208,642
 13,813,955
Operating revenue per ASM (RASM) 
14.53¢ 
13.73¢ 
14.14¢ 
13.16¢
Operating revenue per ASM (RASM)
Operating revenue per ASM (RASM)
Operating cost per ASM (CASM) 
11.02¢ 
10.07¢ 
11.44¢ 
10.26¢
CASM excluding aircraft fuel and special items (b) 
8.80¢ 
8.13¢ 
9.04¢ 
8.46¢
Aircraft fuel expense per ASM (c) 
2.22¢ 
1.94¢ 
2.23¢ 
1.80¢
Operating cost per ASM (CASM)
Operating cost per ASM (CASM)
CASM excluding aircraft fuel and non-recurring items (a)
CASM excluding aircraft fuel and non-recurring items (a)
CASM excluding aircraft fuel and non-recurring items (a)
Aircraft fuel expense per ASM (b)
Aircraft fuel expense per ASM (b)
Aircraft fuel expense per ASM (b)
Revenue block hours operated 49,384
 47,534
 141,955
 134,627
Gallons of aircraft fuel consumed 67,160
 64,918
 193,404
 182,471
Average cost per gallon of aircraft fuel (actual) (c) $1.64
 $1.46
 $1.64
 $1.36
Revenue block hours operated
Revenue block hours operated
Gallons of aircraft fuel consumed (c)
Gallons of aircraft fuel consumed (c)
Gallons of aircraft fuel consumed (c)
Average cost per gallon of aircraft fuel (b)
Average cost per gallon of aircraft fuel (b)
Average cost per gallon of aircraft fuel (b)
 
(a)Includes the operations of our contract carrier under a capacity purchase agreement.
(b)Represents adjusted unit costs, a non-GAAP measure. We believe this is a useful measure because it better reflects our controllable costs. See “Non-GAAP Financial Measures” below for a reconciliation of non-GAAP measures.
(c)Includes applicable taxes and fees.

(a)    Represents adjusted unit costs, a non-GAAP measure. We believe this is a useful measure because it better reflects our controllable costs. See “Non-GAAP Financial Measures” below for a reconciliation of non-GAAP measures.
(b)    Includes applicable taxes and fees.
33

(c)    Excludes operations under the ATSA with Amazon.

Operating Revenue

During the three and nine months ended September 30, 2017,March 31, 2024, operating revenue increased by $47.7$33.0 million, or 7.1%5.4%, and $191.5 million or 10.5%, respectively, as compared to the prior year periods, driven by increased passenger revenue.same period in 2023 and is further discussed below.


Passenger revenue


For the three and nine months ended September 30, 2017,March 31, 2024, passenger revenue increased by $42.9$34.9 million, or 7.3%6.4%, and $173.2 million or 10.9%, respectively, as compared to the prior year periods.same period in 2023. Details of these changesthis change are described in the table below: 
Increase (Decrease) vs. Three Months Ended March 31, 2024
(in thousands)Three months ended March 31, 2024Passenger RevenueYieldRPMsASMsPRASM
Domestic$451,598 2.1 %4.1 %(2.0)%(4.5)%6.9 %
International131,850 24.3 (11.0)39.8 27.9 (2.8)
Total$583,448 6.4 %0.4 %5.9 %2.7 %3.5 %
  Three months ended September 30, 2017 as compared to three months ended September 30, 2016 Nine months ended September 30, 2017 as compared to nine months ended September 30, 2016
  Change in scheduled passenger revenue Change in Yield Change in RPM Change in ASM Change in scheduled passenger revenue Change in Yield Change in RPM Change in ASM
  (in millions)       (in millions)      
Domestic $11.1
 4.3% (1.7)% (2.7)% $63.8
 6.9% (1.6)% (4.1)%
International 31.8
 7.8
 14.2
 9.7
 109.4
 7.2
 23.3
 18.7
Total scheduled $42.9
 4.2% 3.0 % 1.2 % $173.2
 5.1% 5.5 % 2.9 %




Domestic passenger revenue increased $9.2 million, or 2.1%, during the three months ended March 31, 2024 as compared to the same period in 2023, on a capacity reduction, as measured in ASM, of 4.5%. Demand on our domestic network has been supported by improved yields; however, these improvements have been, and continue to be, negatively impacted by engine shortages from Pratt & Whitney and its affiliates, which announced in July 2023 that a significant portion of the PW110G-JM engine fleet, including several engines utilized by Hawaiian, would require accelerated removals and inspections. This unanticipated time out of service resulted in lower-than-expected capacity growth in the quarter and we may continue to experience operational disruptions from our engine shortages from Pratt & Whitney during the remainder of 2024 and potentially beyond.


Our Neighbor Island traffic, which accounted for approximately 22.2% of total Domestic passenger revenue during the three months ended March 31, 2024, increased by 17.8% as compared to the same period in 2023. Despite year-over-year improvement in the Neighbor Island market, revenue during the first quarter was down 25.1% as compared to the same period in 2019 as we continue to face increased competitive pressures with additional capacity in the market combined with the lower priced Neighbor Island route fares.

International route passenger revenue increased by $25.8 million, or 24.3%, during the three months ended March 31, 2024, as compared to the same period in 2023, primarily driven by increased capacity, which was up 27.9%. Despite improvements, our International route network remains depressed in comparison to pre-COVID-19 pandemic levels, with revenue down 15.4% during the three months ended March 31, 2024, as compared to the same period in 2019. We expect demand on our International routes to continue to lag behind demand on our Domestic routes as we expect the weakening of the Japanese Yen, which has increased the cost of travel for customers from Japan, to continue to negatively impact international demand until the Japanese Yen recovers.
We expect our ASMs for the second quarter of 2024 to be up approximately 3.5% to 6.5% compared to the same period in 2023. We expect RASM will range between down 1.5% and up 1.5% for the second quarter of 2024 as compared to the same period in 2023.
Other Operating Revenue

For the three and nine months period ended September 30, 2017,March 31, 2024, Other operating revenue on our domestic routes increaseddecreased by $11.1$2.0 million, or 2.5%3.1%, and $63.8 million, or 5.1%, respectively, as compared to the prior year periods. The increase wassame period in 2023, primarily driven by a reduction in cargo revenue of $1.4 million due to improved yields within our North America routes of approximately 4.3%lower cargo volumes during the period. Other components in Other operating revenue include, but are not limited to, commissions, and 6.9% forfees earned under certain marketing agreements, which collectively decreased during the three and nine month periodsmonths ended September 30, 2017, respectivelyMarch 31, 2024 by approximately $0.6 million, as compared to the prior year periods.same period in 2023.


International
34

For the three and nine months period ended September 30, 2017, revenue on our international routes increased by $31.8 million, or 23.1%, and $109.4 million, or 32.2%, respectively, as compared to the prior year periods. The increase was due to improved yields within our international routes of approximately 7.8% and 7.2% for the three and nine month periods ended September 30, 2017, respectively as compared to the prior year periods. Another contributing factor for the increased revenue (period over period) was our expanded Hawai'i to Tokyo, Japan service. This included the introduction of service from Honolulu to Narita, Japan (July 2016), Kona to Tokyo Haneda Airport (December 2016), and expansion of existing Honolulu to Haneda service (December 2016).


Other operating revenue

For the three and nine months ended September 30, 2017, other operating revenue increased by $4.7 million or 5.9%, and $18.3 million, or 8.1%, respectively, as compared to the prior year periods. The increase was primarily due to an increase in cargo revenue during the respective periods of approximately 26.4% and 27.7% offset by a reduction in baggage revenue of approximately 3.7% and 3.2% for the three and nine months ended September 30, 2017, respectively.

The new revenue standard ASC 606, once effective, will affect our accounting policies and processes (including systems) regarding frequent flyer revenue, passenger revenue, other operating revenue, and selling costs.  The adoption of the standard will have a significant impact on our financial statements. See Note 2 to the Consolidated Financial Statements for additional information.

Operating Expense
 
Operating expenses were $545.8$794.2 million and $1,625.5 million forduring the three and nine months ended September 30, 2017, respectively, and $492.9 million and $1,417.8 million for the three and nine months ended September 30, 2016, respectively.March 31, 2024. Increases (decreases) in operating expenses for the three and nine months ended September 30, 2017March 31, 2024, as compared to the same period in 2023, are detailed below:

Increase / (decrease) for the three months ended March 31, 2024 compared to the three months ended March 31, 2023
$%
Operating expenses(in thousands)
Wages and benefits$20,002 8.3 %
Aircraft fuel, including taxes and delivery(8,847)(4.5)
Maintenance, materials and repairs20,684 41.1 
Aircraft and passenger servicing2,892 6.8 
Commissions and other selling205 0.7 
Aircraft rent1,535 5.4 
Other rentals and landing fees4,407 11.4 
Depreciation and amortization300 0.9 
Purchased services3,403 9.7 
Special items8,482 100.0 
Other11,120 32.0 
Total$64,183 8.8 %
Wages and benefits

Wages and benefits expense increased $20.0 million, or 8.3%, during the three months ended March 31, 2024, as compared to the prior year periods are detailed below:

  Increase / (decrease) for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 Increase / (decrease) for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016
  $ % $ %
Operating expenses (in thousands)   (in thousands)  
Wages and benefits $24,703
 18.1 % $71,054
 18.0 %
Aircraft fuel, including taxes and delivery 15,293
 16.1
 67,907
 27.3
Maintenance, materials and repairs (2,416) (4.7) (5,535) (3.3)
Aircraft and passenger servicing 2,389
 7.0
 11,324
 12.1
Commissions and other selling 3,450
 11.7
 4,732
 5.0
Aircraft rent 2,304
 7.0
 10,538
 11.4
Other rentals and landing fees 2,063
 7.1
 8,425
 10.8
Depreciation and amortization 952
 3.5
 2,158
 2.6
Purchased services (878) (3.4) 6,539
 9.0
Special items —
 —
 23,450
 100.0
Other 5,020
 15.9
 7,097
 7.5
Total $52,880
 10.7 % $207,689
 14.6 %


Wages and benefits

Wages and benefits expense for the third quarter increased by $24.7 million or 18.1%, and $71.1 million or 18.0% for the three and nine months ended September 30, 2017, respectively.period. The increase was primarily due to the recent signing of the Air Line Pilots Association (ALPA) contract amendment effective April 1, 2017 as well as an increase in employee benefits (such as health insurance) expenses. We have also increased the number of flight crew personnel and training to prepare for the induction of our A321neo fleet, resulting in higher wages and benefits expense is primarily attributed to increased headcount and training costs as we prepared for the ramp up of our ATSA operations with Amazon, as well as the introduction of our first Boeing 787 aircraft, which was placed into service in additionApril 2024, scheduled contractual wage increases and increased inflationary and hiring costs. In February 2023, the pilots ratified a new four year collective bargaining agreement (CBA), which included, amongst other things, a signing bonus, pay scale increases across all fleet types, improved health benefits and cost sharing, and enhancements to an overallthe Company's postretirement and disability plans.

We expect that wages and benefits will increase in employee headcount by approximately 6.8%during the second quarter of 2024, as compared to September 30, 2016 which includes flight attendants, machinist,the same period in 2023, as a result of scheduled contractual wage increases, hiring and non-contract employees.training costs associated with the commencement of operations under the ATSA in October 2023 and our Boeing 787 operations beginning in April 2024, and continued inflationary pressures.


Aircraft fuel
 
Aircraft fuel expense increaseddecreased during the three and nine months ended September 30, 2017,March 31, 2024, as compared to the prior year periods,period, primarily due to the increasea decrease in the average fuel pricecost per gallon, and an increase inoffset by increased consumption, as illustrated in the following table: 
 Three months ended September 30, Nine months ended September 30,
 2017 2016 % Change 2017 2016 % Change
 (in thousands, except per-gallon amounts)   (in thousands, except per-gallon amounts)  
Three months ended March 31,
Three months ended March 31,
Three months ended March 31,
2024
2024
2024
(in thousands, except per-gallon amounts)
(in thousands, except per-gallon amounts)
(in thousands, except per-gallon amounts)
Aircraft fuel expense, including taxes and delivery
Aircraft fuel expense, including taxes and delivery
Aircraft fuel expense, including taxes and delivery $110,111
 $94,818
 16.1% $316,423
 $248,516
 27.3%
Fuel gallons consumed 67,160
 64,918
 3.5% 193,404
 182,471
 6.0%
Fuel gallons consumed
Fuel gallons consumed
Average fuel price per gallon, including taxes and delivery $1.64
 $1.46
 12.3% $1.64
 $1.36
 20.6%
Average fuel price per gallon, including taxes and delivery
Average fuel price per gallon, including taxes and delivery
 
Fuel consumption increased by 4.3% during the three months ended March 31, 2024, as compared to the prior year period. The fuel consumption increase was a result of increased operations and aircraft up-gauging as a result of supply chain and engine availability issues impacting certain of our A321neo aircraft.

We believe economic fuel expense is a good measure of the effect of fuel prices on our business as it most closely approximates the net cash outflow associated with the purchase of fuel for our operations in a period and is consistent with how our
35

management manages our business and assesses our operating performance. We define economic fuel expense as rawGAAP fuel expense, including taxes and delivery, plus (gains)/losses realized through actual cash payments to/(receipts from) hedge counterparties foron settlement of fuel derivatives settledcontracts in the period, inclusive of costs related to hedging premiums.

Economic fuel expense is calculated as follows: 

 Three months ended September 30,  Nine months ended September 30,
 2017 2016 % Change 2017 2016 % Change
 (in thousands, except per-gallon amounts)   (in thousands, except per-gallon amounts)  
Three months ended March 31,
Three months ended March 31,
Three months ended March 31,
2024
2024
2024
(in thousands, except per-gallon amounts)
(in thousands, except per-gallon amounts)
(in thousands, except per-gallon amounts)
Aircraft fuel expense, including taxes and delivery
Aircraft fuel expense, including taxes and delivery
Aircraft fuel expense, including taxes and delivery $110,111
 $94,818
 16.1% $316,423
 $248,516
 27.3 %
Realized losses on settlement of fuel derivative contracts 2,787

2,525

10.4%
2,100

30,349
 (93.1)%
Realized losses on settlement of fuel derivative contracts
Realized losses on settlement of fuel derivative contracts
Economic fuel expense
Economic fuel expense
Economic fuel expense $112,898
 $97,343
 16.0% $318,523
 $278,865
 14.2 %
Fuel gallons consumed 67,160
 64,918
 3.5% 193,404
 182,471
 6.0 %
Economic fuel costs per gallon $1.68
 $1.50
 12.0% $1.65
 $1.53
 7.8 %
Fuel gallons consumed
Fuel gallons consumed
Economic fuel price per gallon
Economic fuel price per gallon
Economic fuel price per gallon

See Item 3, "QuantitativeWe expect that fuel gallons consumed will be up between 2.5% to 5.0% during the second quarter of 2024 as compared to the same period in 2023. 

Maintenance, materials and Qualitative Disclosures About Market Risk" for additional discussionrepairs

Maintenance, materials and repairs expense increased $20.7 million, or 41.1%, during the three months ended March 31, 2024, as compared to the same period in 2023.In December 2022, we entered into a Memorandum of Understanding (MOU) with one of our aircraft fuel coststhird-party service providers to terminate our Amended and related hedging program.Restated Complete Fleet Services (CFS) Agreement (Amended CFS) covering A330-200 aircraft. The Amended CFS was originally scheduled to run through December 2027, and terminated in April 2023. Upon execution of the MOU, we agreed to pay a total of $12.5 million in termination fees, which was recognized in fiscal year 2022. As of December 31, 2022, we had approximately $24.1 million in deferred liabilities which was amortized into earnings as contra-maintenance materials and repairs expense during the remainder of the contract period. During the three months ended March 31, 2023, we recognized approximately $18.1 million in amortization. Excluding this reduction in 2023, maintenance, materials and repairs expense increased $2.6 million, or 3.8%, during the three months ended March 31, 2024, as compared to the same period in 2023.


We expect maintenance, materials and repairs expense to increase during the second quarter of 2024, as compared to the same period in 2023 as a result of scheduled heavy maintenance events expected in the period and increased PBH costs.

Aircraft and passenger servicing


Aircraft and passenger servicing expense increased by $2.4 million, or 7.0%, and $11.3$2.9 million, or 12.1%6.8%, for the three and nine months ended September 30, 2017, respectively,March 31, 2024, as compared to the prior year periods. The increase was a direct result of our higher passenger counts, which resultedsame period in an increase in various aircraft and passenger servicing expenses such as our food and beverage and ground handling costs.



Commissions and other selling

Commission and other selling increased by $3.5 million, or 11.7%, and $4.7 million, or 5.0%, for the three and nine months ended September 30, 2017, respectively, as compared to the prior year periods.2023. The increase was primarily due to increases in credit card feeshigher volume-related expenses associated with increased passenger demand and advertisinginflationary pressures. We expect aircraft and promotion expenses.

Aircraft rent

Aircraft rent increased by $2.3 million, or 7.0%, and $10.5 million, or 11.4%, forpassenger service expense to increase during the three and nine months ended September 30, 2017, respectively,second quarter of 2024, as compared to the prior year periods. The increase was primarily due to a sale leaseback transaction for three Boeing 767-300 aircraftsame period in April 2017, the addition of two leased Boeing 717-200 aircraft, and an Airbus A330-200 aircraft.2023.


Other rentals and landing fees


Other rentals and landing fees increased by $2.1$4.4 million, or 7.1%, and $8.4 million, or 10.8%11.4%, for the three and nine months ended September 30, 2017, respectively,March 31, 2024, as compared to the prior year periods.same period in 2023. A portion of our other rentals and landing fees are variable in nature and are dependent on factors such as the number of departures and passengers. The increase in landing fees and other rentals is attributed to an increase in rates and operations as discussed above. We expect other rentals and landing fees expense to increase during the second quarter of 2024, as compared to the same period in 2023 due primarily to increased airport costs.

Purchased services

Purchased services increased by $3.4 million, or 9.7%, for the three months ended March 31, 2024, as compared to the same period in 2023. The increase in purchased services is primarily related to our increased operations during the three months ended March 31, 2024 as compared to the same period in 2023. We expect other purchased services expense to increase during the second quarter of 2024, as compared to the same period in 2023.

36

Special Items

During the three months ended March 31, 2024, we recorded $8.5 million in Special items as a result of expenses related to our merger with Alaska, primarily consisting of legal, advisory, and other fees. Refer to the Merger with Alaska Air Group subsection above for additional information on the Merger.

Other expense

Other expense increased $11.1 million, or 32.0%, for the three months ended March 31, 2024, as compared to the same period in 2023. The increase was primarily duerelated to increases in landing fee rates, landing frequencies,personnel-related expenditures for crew travel, professional and airport rental fees.

Purchased services

Purchased services decreased by $0.9 million, or 3.4%,technical expenditures, and increased by $6.5 million, or 9.0%, for the three and nine months ended September 30, 2017, respectively, as compared to the prior year periods. The increase was primarily due to an increase in third-party vendor IT services during the nine month period ended September 30, 2017.

Special items

Below is a summary of our special item charges for the three and nine months ended September 30, 2017:
 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
 (in thousands)
Loss on sale of aircraft$—
 $—
 $4,771
 $—
Collective bargaining charge—
 —
 18,679
 —
Total Special items$—
 $—
 $23,450
 $—

In March 2017, we announced the ratification of a 63-month contract amendment with our pilots as represented by the ALPA. The agreement became effective April 1, 2017 and has a term of 63 months. The agreement includes, among other various benefits, a pay adjustment and ratification bonus computed based on previous service.miscellaneous expense. During the first two quartersquarter of 2017,2023, we expensed $18.7also recognized a $10.2 million related to (1) a one-time payment to reducegain on the future 401K employer contribution for certain pilot groups, which is not recoverable once paid and (2) a one-time true-up of the pilot vacation accrual at the revised rates set forth in the agreement.

In April 2017, we executed a sale leaseback transaction with an independent third-party for three Boeing 767-300 aircraft. The lease terms for the three aircraft commenced in April 2017 and continue through November 2018, December 2018, and January 2019, respectively. During the nine months ended September 30, 2017, we recorded a loss on sale of aircraft of $4.8 million.commercial real estate.


Nonoperating Income (Expense)


Net nonoperating expense increaseddecreased by $39.4$4.2 million, or 266.9% and $59.2 million, or 247.6%50.0%, forduring the three and nine months ended September 30, 2017,March 31, 2024, as compared to the prior year periods.same period in 2023. The increasechange was primarily dueattributed to a partial settlementfavorable movements in unrealized gains (losses) associated with our foreign denominated debt and curtailment loss as well as a loss on plan termination, recorded in Other nonoperating special items infuel derivatives portfolio, offset by decreased generation of interest income commensurate with the period.

In 2016, the Hawaiian Airlines, Inc. Pension Plan for Salaried Employees (the Salaried Plan) was consolidated into the Hawaiian Airlines, Inc. Pension Plan for Employees Represented by the International Association of Machinists (IAM), which established the Hawaiian Airlines, Inc. Salaried & IAM Merged Pension Plan (the Merged Plan). At that time, the net liabilities of the Salaried Plan were transferred to the Merged Plan. In August 2017, we completed the termination of the Merged Plan by


transferring the assets and liabilities to a third-party insurance company. We contributed a total of $18.5 million in cash to fully fund the plan and recognized a one-time financial loss of $35.2 million as an other nonoperating special item on our Consolidated Statement of Operations.

During the three-months ended September 30, 2017, we recognized a one-time settlement loss of $15.0 million related to the settlement of a portionreduction of our pilots' other post-retirement medical plan liability, pursuant to which the parties agreed to eliminate the post-65 post-retirement medical benefit for all active pilots and to replace the benefit with a health retirement account (HRA) managed by ALPA. This transaction represented a curtailment and partial settlement of the pilots' other post-retirement benefit plan. In August 2017, we made a one-time cash payment of approximately $101.9 million to fund the HRA and settle the post-65 post-retirement medical plan obligation. The cash contributed was distributed to the trust funding the individual health retirement notional accounts of the participants.investment portfolio.

 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
 (in thousands)
Partial settlement and curtailment loss$15,001
 $—
 $15,001
 $—
Loss on plan termination35,201
 —
 35,201
 —
Total special items$50,202
 $—
 $50,202
 $—

Also, during the three-months ended September 30, 2017, there was a fluctuation in gains/losses of fuel derivatives of $6.9 million and an increase in capitalized interest of $1.7 million.

During the nine-months ended September 30, 2017, net nonoperating expense increased by $59.2 million, or 247.6%, as compared to the prior year period. The increase was primarily due to the nonoperating special items as described above as well as a period over period fluctuation in gains/losses of fuel derivatives of $25.6 million partially offset by a $10.0 million fluctuation in losses related to extinguishment of debt.


Income Taxes


Our effective tax rate was 37.7% and 37.6%approximately 10.0% for the three months ended September 30, 2017 and 2016, respectively, and 36.1% and 37.9% forMarch 31, 2024 as compared to 21.9% during the nine months ended September 30, 2017 and 2016, respectively. We consider a variety of factorssame period in determining our2023. The effective tax rate includingrepresents a blend of federal and state taxes, the impact of certain nondeductible items, and the valuation allowance on certain federal and state net operating loss carryforwards, realized capital losses, and unrealized capital losses on equity securities during the periods.

As of March 31, 2024, we generated federal and state NOLs of approximately $451.4 million and $968.8 million, respectively, which are available to reduce future taxable income. Our ability to use NOL carryforwards depend on the amount of taxable income generated in future periods. During the first quarter of 2024, we increased our forecasted full-year pretax results,valuation allowance on our net deferred tax assets. The incremental valuation allowance recorded by the U.S.Company during the first quarter of 2024 was primarily due to uncertainties in the future utilization of deferred tax assets related to our NOL carryforwards for federal statutoryincome tax purposes. As a result of the incremental increase in the valuation allowance, our annual effective tax rate expected nondeductible expenses, and estimated state taxes.decreased to approximately 10.0%.


Liquidity and Capital Resources


Our liquidity is dependent on the cash we generate from operating activities and our debt financing arrangements. As of September 30, 2017, we had $348.0 million in cash andCash, cash equivalents and $270.7 million in short-term investments an increase(excluding restricted cash) totaled approximately $897.3 million as of $8.7March 31, 2024, compared to approximately $908.5 million fromas of December 31, 2016.2023.


We have been ableAs of March 31, 2024, our current assets exceeded our current liabilities by approximately $141.3 million as compared to generate sufficient funds from our operations to meet our working capital requirements and periodically finance our aircraft through secured debt and lease financings. At September 30, 2017, we had approximately $506.1$25.5 million as of December 31, 2023. Approximately $757.9 million of debtour current liabilities relate to our advanced ticket sales and capital lease obligations, including approximately $58.6 million classified as a current liability in our unaudited Consolidated Balance Sheets. See the Contractual Obligations table below for a description of our estimated contractual obligations as of September 30, 2017.frequent flyer deferred revenue.

We also have access to a secured revolving credit and letter of credit facility in an amount of up to $225 million, maturing in December 2019. As of September 30, 2017, we had no outstanding borrowings under the revolving credit facility.


Cash FlowsFlow and Uses of Liquidity


Operating Activities

Net cash provided by operating activities was $295.5$0.3 million and $434.9 million forduring the ninethree months ended September 30, 2017March 31, 2024 compared to net cash provided by operating activities of $118.3 million during the prior year period. Our operating cash flows are impacted by the following factors:

Advanced Ticket Sales. We sell tickets for air travel and 2016, respectively.record the receipt on advance sales as deferred revenue in air traffic liability. The decrease was primarilyair traffic liability typically increases during the winter and spring months as advanced ticket sales grow prior to the summer and fall peak travel seasons and decreases upon utilization during these seasons. As discussed above, we noted marked improvements in air travel demand during the three months ended March 31, 2024, as compared to the same period in 2023; however, overall demand (measured in passengers flown) remains below 2019 levels, down approximately 7.1%, largely due to a reduction in net income as well as cash expendituresinternational travel demand lagging the recovery of domestic travel.

37

Aircraft Fuel. Fuel expense represented approximately 23.8% of our total operating expense during the three months ended March 31, 2024 compared to 27.1% during the same period relatingin 2023. The market price for jet fuel is volatile, which can impact the comparability of our cash flows from operations. During the three months ended March 31, 2024, the average fuel price per gallon decreased 8.5%, as compared to the terminated Mergedsame period in 2023.

Pension and Other Postretirement Benefit Plan Funding. During the three months ended March 31, 2024 and partial settlement2023, we were not required to, and did not, make contributions to our defined benefit and other postretirement plans. Future funding requirements for our defined benefit and other postretirement plans are dependent upon many factors such as interest rates, funded status, applicable regulatory requirements and the level and timing of asset returns. Given available funding credits in the defined benefit plan from past contributions in excess of required minimums, we continue to evaluate whether any cash contributions will be made to our pilots'defined benefit plan during 2024.

Operating Lease Obligations. As of March 31, 2024, we had $363.1 million of operating lease obligations, which range between approximately $29.7 million to $84.6 million on an annual basis between 2024 and 2027. We have approximately $75.8 million in operating lease obligations during the remainder of 2023.

Other Commitments. We have certain purchase obligations under which we are required to make minimum payments for goods and services, including, but not limited to aircraft maintenance, IT, capacity purchases, and reservations. Total contractual obligations do not include long-term contracts where the commitment is variable in nature (with no minimum guarantee), such as aircraft maintenance deposits due under operating leases and fees under certain other post-retirement medical plan (as discussed in Note 10).agreements such as aircraft maintenance PBH, computer reservation systems and credit card processing agreements, or when the agreements contain short-term cancellation provisions. As of March 31, 2024, we had approximately $120.5 million of such obligations, which range from approximately $3.3 million to $18.3 million on an annual basis over the next five years.



Investing Activities
Net cash used in investing activities was $166.6$33.3 million forduring the ninethree months ended September 30, 2017 dueMarch 31, 2024 compared to purchasesnet cash used in investing activities of property$49.4 million during the prior year period. Investing activities include capital expenditures, primarily related to aircraft and other equipment, and pre-delivery payments for future aircraft deliveries, partially offset by athe purchases and sales of short-term investments.
Short-term Investments. During the three months ended March 31, 2024, our purchases and proceeds from the sale and maturity of short-term investments resulted in net cash inflow of $93.7 million as compared to net cash inflow of $47.3 million during the same period in 2023.
Capital Expenditures. Our capital expenditures are primarily related to investment activity.

Net cash used in financing activities was $110.8the purchase of aircraft, fleet modifications, and technology enhancements. Our capital expenditures were $127.0 million forduring the ninethree months ended September 30, 2017,March 31, 2024 as compared to $106.2 million in capital expenditures during the same period in 2023, primarily duerelated to the repurchasesdelivery of our common stock in the period along with repayments of the Company's long-term debtfirst Boeing 787-9 aircraft and lease obligations.scheduled predelivery payments for scheduled future deliveries.

Capital Commitments


As of September 30, 2017,March 31, 2024, we had the following capital commitments consisting of firm aircraft and engine orders and purchase rights: 
Aircraft Type Firm Orders Purchase Rights Expected Delivery Dates
A321neo aircraft 16
 9
 Between 2017 and 2020
A330-800neo aircraft 6
 6
 Between 2019 and 2021
Pratt & Whitney spare engines:  
  
  
A321neo spare engines 3
 2
 Between 2017 and 2019
Rolls-Royce spare engines:  
  
  
A330-800neo spare engines 2
 2
 Between 2019 and 2026
Aircraft TypeFirm OrdersPurchase RightsExpected Delivery Dates
A321neo aircraft— 9 N/A
Boeing 787-9 aircraft118Between 2024 and 2027
General Electric GEnx spare engines:   
Boeing 787-9 spare engines3 1 Between 2024 and 2027
 
Committed expenditures for these aircraft, engines, and related flight equipment approximates $115are approximately $225.9 million for the remainder of 2017, $4552024, $419.6 million in 2018, $5012025, $665.5 million in 2019, $2422026, and $252.9 million in 2027.

In October 2020, $170 millionwe entered into an amendment to our Boeing 787-9 purchase agreement, which changed the scheduled delivery of each aircraft and related engines to between 2022 and 2026. In December 2022, we entered into a supplemental agreement to the purchase agreement, pursuant to which (a) we agreed with Boeing to defer delivery of the Boeing 787-9 aircraft, and (b) agreed to exercise purchase options for an additional two Boeing 787-9 aircraft. In February 2024, we took delivery of our first Boeing 787-9 aircraft. This aircraft was placed into service in 2021 and $132 million thereafter.April 2024. We took delivery of our second

38

aircraft in April 2024 with a third aircraft scheduled for delivery in late 2024. Refer to Note 12 in the Notes to Consolidated Financial Statements for additional discussion.
In order to complete the purchase of these aircraft and fund related costs, we may need to secure acceptable financing. We have backstop financing available from aircraft and engine manufacturers, subject to certain customary conditions. Financing may be necessary to satisfy our capital commitments for firm order aircraft and other related capital expenditures. We are also currently exploring variouscan provide no assurance that any financing alternatives,not already in place for aircraft and while we believe that such financingspare engine deliveries will be available to us there can be no assurance that financing will be available when required, or on acceptable terms when necessary or at all. The inability to secure such

Financing Activities

Net cash provided by financing could have an impact on our ability to fulfill our existing purchase commitments and a material adverse effect on our operations.

Stock Repurchase Program and Dividends

In April 2017, our Board of Directors approved a modification to our stock repurchase program under which we may repurchase up to $100activities was $110.6 million of our outstanding common stock. The stock repurchase program is subject to further modification or termination at any time.

We spent $46.2 million and $50.5 million to repurchase and retire approximately 1.1 million shares and 1.2 million shares of our common stock in open market transactions during the three and nine months ended September 30, 2017,March 31, 2024 compared to net cash used in financing activities of $26.0 million during the prior year period. Our financing cash flows are impacted by the following factors:

Debt and Finance Lease Obligations.During the three months ended March 31, 2024 and 2023, we repaid $18.8 million and $25.0 million of long-term debt and finance lease obligations, respectively. In February 2024, we took delivery of our first Boeing 787-9 aircraft, which was financed. The transaction did not qualify as a sale under the applicable accounting framework and we recorded $131.4 million as debt in the Consolidated balance sheet.

As of September 30, 2017,March 31, 2024, scheduled maturities of our debt remaining in 2024 were $33.5 million. The scheduled maturities total $64.4 million in 2025, $1.3 billion in 2026, $21.7 million in 2027, $22.7 million in 2028, and beyond 2028, scheduled maturities aggregate to $178.6 million. In addition, we are obligated to make periodic interest payments at fixed and variable rates, depending on the terms of the applicable debt agreements. Based on applicable interest rates and scheduled debt maturities as of March 31, 2024, these interest obligations total $65.3 million remaining in 2024, $88.4 million in 2025, $32.7 million in 2026, $11.8 million in 2027, $10.7 million in 2028, and $26.7 million thereafter.

As of March 31, 2024, we had $49.5$75.9 million remaining to spendof finance lease obligations. We have approximately $8.5 million in finance lease obligations during the remainder of 2024, approximately $11.3 million for each year between 2025 and 2028, and approximately $22.3 million in the aggregate thereafter.

Undrawn Lines of Credit. As of March 31, 2024, our revolving line of credit, which matures in December 2025, remained undrawn and available under the stock repurchase program. See Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds” of this report for additional information on the stock repurchase program.our $235.0 million revolving credit facility.
In October 2017, we announced that our Board of Directors declared a quarterly cash dividend of $0.12 per share payable on November 30, 2017, to stockholders of record as of November 17, 2017.

Credit Card Holdbacks

Holdbacks. Under our bank-issued credit card processing agreements, certain proceeds from advance ticket sales may be held back to serve as collateral to cover any possible chargebacks or other disputed charges that may occur. These holdbacks, which are included in restricted cash in our unaudited Consolidated Balance Sheets set forth in our unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q, totaled $1.0 million and $5.0 million asAs of September 30, 2017March 31, 2024 and December 31, 2016, respectively.

2023, there were no holdbacks held by our credit card processors. In the event of a material adverse change in our business, the holdbackscredit card processors could increase holdbacks to an amount up to 100% of the applicableoutstanding credit card tickets that are unflown (e.g., air traffic liability, excluding frequent flyer deferred revenue), which would also result in an increase in the required levelrestriction of restricted cash. If we arewere unable to obtain a waiver of, or otherwise mitigate the increase in the restriction of cash, it could have a material adverse impact on our operations.operations, business or financial condition.




Pension and Postemployment Benefit Plan Funding

Covenants. We contributed $14.2 millionand$28.6 million (excluding the one-time special charge transactions discussedwere in this Part I. Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the heading "Nonoperating Income (Expense)") tocompliance with covenants contained in our defined benefit and other post-retirement plans during the three and nine months ended September 30, 2017, respectively. Future funding requirements for our defined benefit plans are dependent upon many factors such as interest rates, funded status, applicable regulatory requirements and the level and timing of asset returns. See the discussion in this Part I. Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the heading "Nonoperating Income (Expense)" concerning special charges for a description of one-time cash payments made into the Merged Plan and our pilots' other post-retirement medical plan which are not included in the amounts above.

Contractual Obligations
Our estimated contractual obligationsfinancing agreements as of September 30, 2017 are summarized in the following table: March 31, 2024.

Contractual Obligations Total Remaining in 2017 2018 - 2019 2020 - 2021 2022 and
thereafter
  (in thousands)
Debt and capital lease obligations (1) $625,737
 $11,882
 $192,341
 $119,008
 $302,506
Operating leases—aircraft and related equipment (2)  661,964
 31,984
 245,306
 162,447
 222,227
Operating leases—non-aircraft 137,112
 1,643
 14,250
 13,459
 107,760
Purchase commitments - Capital (3)  1,614,967
 114,916
 955,659
 412,558
 131,834
Purchase commitments - Operating (4)  672,248
 23,089
 133,470
 115,259
 400,430
Projected employee benefit contributions (5)  30,710
 1,510
 29,200
 —
 —
Total contractual obligations $3,742,738
 $185,024
 $1,570,226
 $822,731
 $1,164,757

(1)Amounts reflect capital lease obligations for one Airbus A330-200 aircraft, two Boeing 717-200 aircraft, one A330 flight simulator, and aircraft and IT related equipment.

(2)Amounts reflect leases for ten Airbus A330-200 aircraft, seven Boeing 767-300 aircraft, and three Boeing 717-200 aircraft.

(3)Amounts include our firm commitments for aircraft and aircraft related equipment.

(4)Amounts include commitments for services provided by third-parties for aircraft maintenance for our Airbus fleet, accounting, IT, capacity purchases, and the estimated rental payments for a cargo and maintenance hangar. Total contractual obligations do not include long-term contracts where the commitment is variable in nature (with no minimum guarantee), such as aircraft maintenance deposits due under operating leases and fees due under certain other agreements such as aircraft maintenance power-by-the-hour, computer reservation systems and credit card processing agreements, or when the agreements contain short-term cancellation provisions.

(5)Amounts include our estimated minimum contributions to our pension plans (based on actuarially determined estimates) and contributions to our pilots’ disability plan. Amounts are subject to change based on numerous factors, including interest rate levels, the amount and timing of asset returns and the impact of future legislation. We are currently unable to estimate the projected contributions beyond 2019.

Non-GAAP Financial Measures


We believe the disclosure of non-GAAP financial measures is useful information to readers of our financial statements because:


•We believe it is the basis by which we are evaluated by many industry analysts and investors;


•These measures are often used in management and boardBoard of directorsDirectors decision making analysis;


•It improves a reader’s ability to compare our results to those of other airlines; and


•It is consistent with how we present information in our quarterly earningsfinancial results press releases.



39


See tabletables below for reconciliation between GAAP consolidated net income (loss) to adjusted consolidated net income (loss), including per share amounts (in thousands unless otherwise indicated)., adjusted Operating Costs per Available Seat Mile (CASM), and adjusted EBITDA. The adjustments are described below:


•CBA related expense. In February 2023, pilots represented by the Air Line Pilots Association ratified a new four-year CBA, which included, amongst other things, a signing bonus, pay scale increases across all fleet types, improved health benefits and cost sharing, and enhancements to the Company's postretirement and disability plans. In connection with the ratification, we recorded a signing bonus and vacation liability true-up of approximately $17.7 million in wages and benefits during the first quarter of 2023.
•Contract termination amortization. In December 2022, we entered into a Memorandum of Understanding (MOU) with one of our third-party service providers to early terminate our Amended and Restated Complete Fleet Services Agreement (Amended CFS) covering A330-200 aircraft. The Amended CFS was originally scheduled to run through December 2027, but was terminated in April 2023. During the three months ended March 31, 2023, we recognized approximately $18.1 million in amortization within Maintenance, materials and repairs in the Consolidated Statements of Operation.

•Special items. During the three months ended March 31, 2024, we recorded $8.5 million in Special items as a result of expenses related to our merger with Alaska, primarily consisting of legal, advisory, and other fees.

•Gain on sale of commercial real estate. In February 2023, we entered into an agreement for the sale of our commercial real estate and recognized a gain on the transaction of $10.2 million, which was recorded in Other operating expense in the Consolidated Statements of Operations.

•Interest income on federal tax refund. In March 2023, we received $4.7 million in interest in connection with a $66.8 million federal tax refund received related to fiscal year 2018. The interest was recorded in Interest income in the Consolidated Statements of Operations.

•Changes in fair value of fuel derivative contracts. Changes in fair value of derivative contracts, net of tax, are based on market prices for open contracts as of the end of the reporting period. This line item includes the unrealized amounts of fuel and interest rate derivatives (not designated as hedges) that will settle in future periods and the reversal of prior period unrealized amounts.
•Unrealized gain on foreign debt. Unrealized gain on foreign debt is based on the fluctuation in exchange rates and the measurement of foreign-denominated debt to our functional currency.
•Unrealized gain on equity securities. Unrealized gain on equity securities is driven by changes in market prices and currency fluctuations, which is recorded in Other nonoperating expense in the Consolidated Statements of Operations.
We believe that excludingadjusting for the impact of thesethe changes in fair value of equity securities and fuel derivative adjustmentscontracts, fluctuations in exchange rates on debt instruments denominated in foreign currency, and non-recurring expenses and income/gains (including CBA-related expense, contract termination amortization, Special items, interest income on federal tax refunds, and gain on sale of commercial real estate), helps investors better analyze our operational performance and compare our results to other airlines in the periods presented below.
Loss on extinguishment of debt, net of tax, is excluded to help investors analyze our operational performance and compare our results to other airlines in the periods presented below.
The collective bargaining charge related to (1) a one-time payment to reduce the future 401K employer contribution for certain pilot groups, and (2) a one-time true up of the pilot vacation accrual at the revised rates set forth in an agreement with our pilots represented by ALPA. The loss on sale of aircraft was a result of a sale-leaseback transaction covering three Boeing 767 aircraft as part of the planned exit from our 767 fleet. In August 2017, we terminated the Merged Plan and settled a portion of the pilots other post-retirement medical plan liability. In connection with the reduction of these liabilities we recorded one-time special charges of $35.2 million related to the Merged Plan termination and $15.0 million related to the settlement of a portion of our outstanding other post-retirement medical plan obligation with our pilots. These one-time charges are considered special items by us and are not expected to represent ongoing expenses. We believe that excluding such special items helps investors analyze our operational performance and compare our results to other airlines in the periods presented below.presented.
40

  Three months ended September 30, Nine months ended September 30,
  2017 2016 2017 2016
  Total Diluted Per Share Total Diluted Per Share Total Diluted Per Share Total Diluted Per Share
GAAP net income, as reported $74,566
 $1.39
 $102,454
 $1.91
 $191,911
 $3.57
 $233,490
 $4.35
Add (deduct): changes in fair value of derivative contracts (6,069) (0.11) 1,076
 0.02
 8,128
 0.15
 (45,770) (0.85)
Add: loss on extinguishment of debt —
 —
 —
 —
 —
 —
 9,993
 0.19
Add: special items —
 —
 —
 —
 23,450
 $0.44
 —
 $—
Add: other nonoperating special items 50,202
 0.94
 —
 —
 50,202
 0.93
 —
 —
Add (deduct): tax effect of adjustments (16,091) (0.30) (409) (0.01) (29,817) (0.55) 13,595
 0.25
Adjusted net income $102,608
 $1.92
 $103,121
 $1.92
 $243,874
 $4.54
 $211,308
 $3.94
 Three months ended March 31,
 20242023
 TotalDiluted Net Loss Per ShareTotalDiluted Net Loss Per Share
(in thousands, except for per share data)
Net Loss, as reported$(137,565)$(2.65)$(98,257)$(1.91)
Adjusted for:
CBA related expense— — 17,727 0.35 
Contract termination amortization— — (18,114)(0.35)
Special items8,482 0.16 — — 
Gain on sale of commercial real estate— — (10,179)(0.20)
Interest income on federal tax refund— — (4,672)(0.09)
Changes in fair value of fuel derivative contracts(1,816)(0.04)3,552 0.07 
Unrealized gain on foreign debt(8,555)(0.17)(2,488)(0.05)
Unrealized gain on equity securities(5,115)(0.10)(944)(0.02)
Tax effect of adjustments1,037 0.03 1,568 0.03 
Adjusted net loss$(143,532)$(2.77)$(111,807)$(2.17)


Operating Costs per Available Seat Mile (CASM)


We have listed separately in the table below our fuel costs per ASM and our non-GAAP unit costs, excluding fuel and specialnon-recurring items. These amounts are included in CASM, but for internal purposes we consistently use unit cost metrics that exclude fuel and specialnon-recurring items (if applicable) to measure and monitor our costs.




CASM and CASM - excludingCASM-excluding aircraft fuel and specialnon-recurring items are summarized in the table below: 
  Three months ended September 30, Nine months ended September 30,
  2017 2016 2017 2016
  (in thousands, except as otherwise indicated)
GAAP operating expenses $545,808
 $492,928
 $1,625,485
 $1,417,796
Less: aircraft fuel, including taxes and delivery (110,111) (94,818) (316,423) (248,516)
Less: special items $—
 $—
 $(23,450) $—
Adjusted operating expenses - excluding aircraft fuel and special items $435,697
 $398,110
 $1,285,612
 $1,169,280
Available Seat Miles 4,950,800
 4,894,768
 14,208,642
 13,813,955
CASM - GAAP 
11.02¢ 
10.07¢ 
11.44¢ 
10.26¢
Less: aircraft fuel (2.22) (1.94) (2.23) (1.80)
Less: special items —
 —
 (0.17) —
CASM - excluding aircraft fuel and special items 
8.80¢ 
8.13¢ 
9.04¢ 
8.46¢
 Three months ended March 31,
 20242023
 (in thousands, except as otherwise indicated)
GAAP Operating Expenses$794,213 $730,030 
Adjusted for:
CBA related expense— (17,727)
Special items(8,482)— 
Contract termination amortization— 18,114 
Gain on sale of commercial real estate— 10,179 
Operating expenses excluding non-recurring items$785,731 $740,596 
Aircraft fuel, including taxes and delivery(188,778)(197,625)
Operating expenses excluding aircraft fuel and non-recurring items$596,953 $542,971 
Available Seat Miles5,050,841 4,917,517 
CASM - GAAP15.72 ¢14.85 ¢
Adjusted for:
CBA related expense— (0.36)
Special items(0.16)— 
Contract termination amortization— 0.37 
Gain on sale of commercial real estate— 0.20 
Aircraft fuel, including taxes and delivery(3.74)(4.02)
CASM excluding aircraft fuel and non-recurring items11.82 ¢11.04 ¢
 
Adjusted EBITDA

We believe that adjusting earnings for interest, taxes, depreciation and amortization, non-recurring operating expenses (such as changes in unrealized gains and losses on financial instruments) and one-time charges helps investors better analyze our
41

financial performance by allowing for company-to-company and period-over-period comparisons that are unaffected by company-specific or one-time occurrences.

We reclassified prior period EBITDA and Adjusted EBITDA to conform to the current period presentation.

Three months ended March 31,
20242023
(in thousands)
Net Loss$(137,565)$(98,257)
Income tax benefit(15,285)(27,574)
Depreciation and amortization32,967 32,667 
Interest expense and amortization of debt discounts and issuance costs24,069 22,880 
Interest income(10,021)(16,465)
Capitalized interest(3,134)(1,458)
EBITDA, as reported(108,969)(88,207)
Adjusted for:
CBA related expense— 17,727 
Contract termination amortization— (18,114)
Gain on sale of commercial real estate— (10,179)
Interest income on tax refund— (4,672)
Changes in fair value of fuel derivative instruments(1,816)3,552 
Unrealized gain on foreign debt(8,555)(2,488)
Special items8,482 — 
Unrealized gain on equity securities(5,115)(944)
Adjusted EBITDA$(115,973)$(103,325)

Critical Accounting Policies


The discussion and analysis of our financial condition and results of operations are based upon financial statements that have been prepared in accordance with U.S. generally accepted accounting principles.GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities as of the date of the financial statements. Actual results may differ from these estimates under different assumptions and/or conditions.


Critical accounting policies and estimates are defined as those accounting policies and accounting estimates that are reflective of significant judgments and uncertainties that potentially result in materially different results under different assumptions and conditions. There have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2024. For a detailed discussion of the application ofmore information on our critical accounting policies, see Note 2 herein, "Significant Accounting Policies," Note 10 herein, "Employee Benefits Plans,"Part II, Item 7 "Management's Discussion and the section, titled “Critical Accounting PoliciesAnalysis of Financial Condition and Estimates,” and Note 1, “SummaryResults of Significant Accounting Policies,” toOperations" of our Consolidated Financial StatementsAnnual Report on Form 10-K for the year ended December 31, 2016 each included in our Annual Report on Form 10-K.2023.


The new revenue standard (ASU 2014-09), once effective, will affect our accounting policies and processes (including systems) regarding frequent flyer, ticket breakage, credit card fees, booking fees, and upgrade fee accounting.  The adoption of the standard will have a significant impact on our financial statements, and we are currently in the process of quantifying the effects of the new standard on our financial statements.  See Note 2 to our Consolidated Financial Statements for additional information.



ITEM 3.                QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
We are subject to certain market risks, including commodity price risk (e.g. aircraft fuel prices), interest rate risk and foreign currency risk. WeThere have market-sensitive instruments in the form of financial derivatives used to offset our exposure to aircraft fuel price increases and financial hedge instruments used to hedge our exposure to foreign currency exchange risk. The adverse effects of potentialbeen no material changes in these market risks are discussed below.

The sensitivity analyses presented do not considerrisk from the effects that such adverse changes may have on overall economic activity nor do they consider additional actions we might undertake to mitigate our exposure to such changes. Actual results may differ.

Aircraft Fuel Costs

Aircraft fuel costs constitute a significant portion of our operating expense. Fuel costs represented 20%information provided in Part II, Item 7A "Quantitative and 19% of our operating expenses for the three and nine months ended September 30, 2017, respectively, and 19% and 18% for the three and nine months ended September 30, 2016, respectively. Approximately 72% of our fuel was based on Singapore jet fuel prices, 27% was based on U.S. West Coast jet fuel prices, and 1% on other jet fuel prices. Based on the amount of fuel expected to be consumed for the remainder of 2017, for every one cent increase in the cost of a gallon of jet fuel, our fuel expense would increase by approximately $0.7 million, excluding the impact of our fuel hedge program.

We periodically enter into derivative financial instruments to manage our exposure to changes in the price of jet fuel. During the three and nine months ended September 30, 2017, our fuel hedge program primarily consisted of crude oil call options and jet fuel swaps. Swaps provide for a settlementQualitative Disclosures About Market Risk", in our favor in the event the prices exceed a predetermined contractual level and are unfavorable in the event prices fall below a predetermined contractual level. With call options, we are hedged against spikes in crude oil prices and during a period of decline in crude oil prices we only forfeit cash previously paid for hedge premiums.2023 Annual Report on Form 10-K.


As of September 30, 2017, we hedged approximately 51% of our projected fuel requirements for the remainder of 2017 with crude oil call options and jet fuel swaps. As of September 30, 2017, the fair value of these fuel derivative agreements reflected a net asset of $8.7 million which is recorded as a prepaid expense and other asset in our unaudited Consolidated Balance Sheet.

We expect to continue our program of offsetting some of our exposure to future changes in the price of jet fuel with a combination of fixed forward pricing contracts, swaps, calls, collars and other option-based structures. We do not hold or issue derivative financial instruments for trading purposes.

Interest Rates
Changes in market interest rates have a direct and corresponding effect on our pre-tax earnings and cash flows associated with interest-bearing cash accounts. Based on the balances of our cash and cash equivalents and restricted cash as of September 30, 2017, a change in interest rates is unlikely to have a material impact on our results of operations.

At September 30, 2017, we had $518.1 million of fixed-rate debt including capital lease obligations, facility agreements for aircraft purchases, and the outstanding equipment notes related to our 2013 EETC financing. Market risk for fixed-rate long-term debt is estimated as the potential increase in fair value resulting from a hypothetical 10% decrease in interest rates, and amounted to approximately $7.2 million as of September 30, 2017.

Foreign Currency

We generate revenues and incur expenses in foreign currencies. Changes in foreign currency exchange rates impact our results of operations through changes in the dollar value of foreign currency-denominated operating revenues and expenses. Our most significant foreign currency exposures are the Japanese Yen and Australian Dollar. Based on expected remaining 2017 revenues and expenses denominated in Japanese Yen and Australian Dollars, a 10% strengthening in value of the U.S. dollar, relative to the Japanese Yen and Australian Dollar, would result in a decrease in operating income of approximately $6.8 million and $4.4 million, respectively, which excludes the offset of the hedges discussed below. This potential impact to the results of our operation is driven by the inherent nature of our international operations, which requires us to accept a large volume of sales transactions denominated in foreign currencies while few expense transactions are settled in foreign currencies. This disparity is the primary factor in our exposure to foreign currencies.

As of September 30, 2017, the fair value of our foreign currency forwards reflected a net asset of $1.4 million and $0.7 million recorded in prepaid expenses and other, and long-term prepayments and other, respectively, in our unaudited Consolidated Balance Sheets.



ITEM 4.CONTROLS AND PROCEDURES.
 
Evaluation of Disclosure Controls and Procedures


Our management, including our Chief Executive Officer (CEO)principal executive officer and Chief Financial Officer (CFO), performed an evaluationprincipal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) underof the Securities Exchange Act of 1934, as amended (the "Exchange Act")Exchange Act)), which have been designed to permit us to effectively identify and timely disclose important information. Based on that evaluation, our management, including our CEOprincipal executive officer and CFO,principal financial officer, concluded that our disclosure controls and procedures were effective as of September 30, 2017March 31, 2024 to provide reasonable assurance that
42

the information required to be disclosed by the Companyus in reports it fileswe file under the Exchange Act, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and is accumulated and communicated to our management, including our CEOprincipal executive officer and CFO,principal financial officer, to allow timely decisions regarding required disclosure.disclosures.


Changes in Internal Control over Financial Reporting


ThereDuring the three months ended March 31, 2024, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2017 whichthat materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Inherent Limitations on Effectiveness of Controls


A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.




43

PART II.  OTHER INFORMATION
 
ITEM 1.LEGAL PROCEEDINGS.
 
We are not a party to any litigation that is expected to have a significant effect on our operations or business.
 

ITEM 1A.RISK FACTORS.

RISK FACTOR SUMMARY

Our business operations are subject to numerous risks and uncertainties, including those outside of our control, that could cause our actual results to be harmed, including risks regarding the following:

Alaska Air Group Merger Risks
•the pendency of the Merger may cause disruption in our business
•failure to complete the Merger in a timely manner or at all could negatively impact the market price of our common stock, as well as our future business and our results of operations and financial condition
•to complete the Merger, certain government approvals must be obtained

Business Risks
•future obligations and related impacts of such obligations with respect to our agreements with Amazon

Economic Risks
•global economic and market volatility
•our dependence on tourism to, from, and amongst the Hawaiian Islands
•our dependence on the price and availability of fuel
•our exposure to foreign currency exchange rate fluctuations

Liquidity Risks
•credit market conditions
•our debt, including covenants that restrict our financial and business operations
•requirements for us to maintain reserves under our credit card processing agreements

Competitive Environment Risks
•the extremely competitive environment in which we operate
•the effect of inflation on our profitability
•the effect of interest rate increases on the fair value of our fixed income investments
•the concentration of our business within Hawai'i
•the competitive advantages held by network carriers in the North America market and our reliance on commercial relationships with other airlines to provide access to Domestic and International routes
•the effect of increased capacity provided by our competitors on our North American and Neighbor Island routes
•the effect of competition from domestic and foreign carriers on our International routes

Information Technology and Third-Party Risks
•compliance with U.S. and foreign laws and regulations relating to privacy, data protection, and data security and security standards imposed by our commercial partners
•actual or perceived failure to protect customer or other personal or confidential information
•our increasing dependence on technology and automated systems to operate our business
•our reliance on third-party contractors to provide certain facilities and services

Labor Relations and Related Costs Risks
•our dependence on satisfactory labor relations
•our ability to attract and retain qualified personnel and key executives

Strategy and Brand Risks
•our ability to successfully implement our route and network strategy
•damage to our reputation or brand image
•adverse publicity
44

•our ability to protect our intellectual property rights
•concentration of our cargo business with Amazon
•our ability to realize the full benefits of our agreements with Amazon

Airline Industry, Regulation and Related Costs Risks
•the substantial operating leverage of the airline industry and other conditions beyond our control
•any inability to maintain adequate facilities and infrastructure at airports within the state of Hawai'i
•substantial seasonal and cyclical volatility of our business
•terrorist attacks or international hostilities, or the fear of terrorist attacks or hostilities
•extensive government regulation, new regulations and taxes impacting the airline industry
•climate change, including increased regulation and the impact of severe weather events
•federal budget constraints
•compliance with various environmental laws and regulations required of the airline industry
•our expansion into non-U.S. jurisdictions and the related laws and regulations to which we are subject
•litigation or regulatory action in the normal course of business or otherwise
•changes in tax laws or regulations and our ability to use our net operating loss carryforwards
•increases in our insurance costs or reductions in coverage
•extended interruptions or disruptions in service

Fleet and Fleet-Related Risks
•our dependence on a limited number of suppliers for aircraft, aircraft engines and parts
•significant future financial commitments and operating costs related to our agreements to purchase Boeing 787-9 aircraft
•delays in scheduled aircraft deliveries or other loss of fleet capacity
•any impairment and other related charges related to the value of our long-lived assets

Common Stock Risks
•fluctuations in our share price
•we do not expect to repurchase our common stock or pay dividends on our common stock
•future earnings and earnings per share impacts from fluctuations in the value of the Amazon warrants
•dilution of existing stockholders and market price impacts related to the exercise of our outstanding warrants
•limitations on voting and ownership by non-U.S. citizens in our certificate of incorporation and exclusive forum provisions in our bylaws
•provisions of our certificate of incorporation and bylaws and our agreements with Amazon may delay or prevent a change of control
•Amazon may become a significant stockholder
•the publication of research about us by analysts

Securities Offerings Risks
•the effect of our indebtedness and liabilities related to our debt offerings on the cash flow available for our operations and to satisfy our obligations related such debt

ALASKA AIR GROUP MERGER

The pendency of the Merger may cause disruption in our business.

The Merger Agreement restricts us from taking specified actions without Alaska's consent until the Merger is completed or the Merger Agreement is terminated. These restrictions are more fully described in the Merger Agreement. These restrictions may affect our ability to execute our business strategies and attain our financial and other goals and may impact our business, results of operations and financial condition.

The pendency of the Merger could cause disruptions to our business or business relationships, which could have an adverse impact on our results of operations. Parties with which we have business relationships, including guests, employees and labor groups, suppliers, third-party service providers and third-party distribution channels, may be uncertain as to the future of such relationships and may delay or defer certain business decisions, seek alternative relationships with third parties or seek to alter their present business relationships with us. Parties with whom we otherwise may have sought to establish business relationships may seek alternative relationships with third parties.

45

The pursuit of the Merger is expected to place a significant burden on our management and internal resources. The diversion of management’s attention away from day-to-day business concerns and any difficulties encountered in the transition and integration process could adversely affect our business, results of operations and financial condition.

In addition, we have incurred and will continue to incur significant costs, expenses and fees in connection with the Merger. The substantial majority of these costs will be non-recurring expenses relating to the Merger, and many of these costs are payable regardless of whether or not the Merger is consummated. Litigation has been filed in connection with the Merger, and further litigation may arise prior to closing. Defending the litigation could prove costly and time consuming.

Failure to complete the Merger in a timely manner or at all could negatively impact the market price of our common stock, as well as our future business and our results of operations and financial condition.

The Merger cannot be completed until the conditions to closing are satisfied or (if permissible under applicable law) waived. The failure to satisfy the required conditions could delay the completion of the Merger for a significant period of time or prevent it from occurring. Further, there can be no assurance that the conditions to the closing of the Merger will be satisfied or waived or that the Merger will be completed.

If the Merger is not completed in a timely manner or at all, our ongoing business may be adversely affected, including as follows:

•we may experience negative reactions from the financial markets, and our stock price could decline to the extent that the current market price reflects an assumption that the Merger will be completed;
•we may experience negative reactions from employees, guests, suppliers, communities or other third parties;
•we may be subject to further litigation, which could result in significant costs and expenses;
•management’s focus may be diverted from our day-to-day business operations and from pursuing other opportunities that could have been beneficial to the Company;
•our costs of pursuing the Merger may be higher than anticipated;
•we may have difficulties in attracting and/or retaining key employees; and
•our access to capital markets may be limited and we may experience increased borrowing costs.

If the Merger is not consummated, there can be no assurance that these risks will not materialize and will not materially adversely affect our stock price, business, results of operations and financial condition.

The Merger Agreement includes customary termination rights in favor of each party. In certain circumstances, we may be required to pay Alaska a termination fee of $39.6 million in connection with the termination of the Merger Agreement. In certain circumstances, Alaska may be required to pay us a termination fee of $100.0 million. Any requirement to pay a termination fee to Alaska may have an adverse effect on our liquidity and results of operations. The receipt of any termination fee from Alaska may not be sufficient to compensate us for all of the expenses incurred, and opportunities forgone, as a result of our pursuit of the Merger.

In order to complete the Merger, the Company and Alaska must obtain certain regulatory approvals, and if such approvals are not granted or are granted with conditions, completion of the Merger may be jeopardized or the anticipated benefits of the Merger could be reduced.

Although the Company and Alaska have agreed to use reasonable best efforts, subject to certain limitations, to make certain governmental filings and obtain the required regulatory approvals, there can be no assurance that the relevant approvals will be obtained (including through the expiration of applicable waiting periods). Governmental authorities may also commence litigation against us, Alaska or both to prevent the Merger from occurring. Defending any such lawsuit will be time-consuming and expensive and there can be no assurance that we and Alaska would ultimately be successful.

Additionally, if the Merger is not consummated, our stockholders and holders of RSUs, options, and warrants will not receive the merger consideration that would have been paid at the closing of the Merger.

BUSINESS RISKS

Our agreement with Amazon increases the role of cargo in our business model, which may have negative impacts on our operating results and financial condition.

46

Our business has historically focused on passenger flights. The ATSA with Amazon is anticipated to increase our cargo operations. Historically, our revenue from non-passenger operations, which includes cargo, accounted for approximately 9.4%, 11.6%, and 14.1% of total revenue during the years ending December 31, 2023, 2022, and 2021, respectively. During the three months ended March 31, 2024, our revenue from non-passenger operations accounted for 9.6% of our total revenue. Under the ATSA, cargo operations are expected to account for a larger portion of our revenue. Our cargo operations for Amazon may not generate the levels of revenue anticipated. We expect to incur additional costs in order to ramp up and prepare for increased cargo operations, including hiring crew, opening mainland bases and preparing to provide line maintenance for the Amazon fleet. Our pre-service efforts could be costly and be time-consuming and distracting to our management. Additionally, we will incur costs before we generate revenue from our cargo operations for Amazon, which may negatively impact our business and results of operations. Once we begin generating revenue from cargo operations for Amazon, some or all of that revenue will be offset against the value of Amazon’s vested warrant shares due to our accounting policies.

ECONOMIC RISKS

Our business is affected by global economic volatility, including any future economic downturns.

Our business and results of operations are significantly impacted by general world-wide economic conditions, including any future economic downturns. For example, the COVID-19 pandemic and associated decline in economic activity and increase in unemployment levels had a severe and prolonged effect on the global economy generally and, in turn, resulted in a prolonged period of depressed demand for air travel in general. As a result of the COVID-19 pandemic, we experienced a significant decrease in demand for air travel and reduced load capacity on flights. For the three months ended March 31, 2024, our passenger revenue was $583.4 million, up approximately $34.9 million compared to 2023, but down $17.9 million, or 3.0% from the pre-pandemic period in 2019. Across our business and as a result of the COVID-19 pandemic, we have faced operational challenges, including continued delay in the recovery of international travel. Our business depends on the demand for travel to, from and within the Hawaiian Islands and such demand for discretionary air travel remains unpredictable. Further deterioration or instability in demand, including resulting from any future pandemic or other public health related travel restrictions, recommendations or other impacts on travel behavior, such as those that occurred during the COVID-19 pandemic, ongoing economic uncertainty or recession may result in sustained reduction in our passenger traffic and/or increased competitive pressure on fares in the markets we serve, which could continue to negatively impact our results of operations and financial condition. There can be no assurance that we will be able to offset passenger revenue reductions with other revenue, by reducing our costs or by seeking financing arrangements or other programs or opportunities. We also may not have sufficient cash flows to support our debt obligations, on which more detail is provided in Note 9 of the Notes to Consolidated Financial Statements.In addition, a rapid economic expansion following the height of the COVID-19 pandemic resulted in significant inflationary pressures and volatility in certain currencies, which have increased our costs for aircraft fuel, wages and other goods and services we require to operate our business.

In 2023, concerns arose with respect to the financial condition of certain banking institutions in the United States, in particular those with exposure to certain types of depositors and large portfolios of investment securities. In March 2023, both Silicon Valley Bank (SVB) and Signature Bank (Signature) entered receivership. While we do not maintain accounts with either SVB or Signature, we maintain our cash at other financial institutions in balances that exceed the current Federal Deposit Insurance Corporation insurance limits.If more banks and financial institutions experience financial hardship, enter receivership or become insolvent in the future due to financial conditions affecting the banking system and financial markets, our ability to access our cash, cash equivalents and short-term investments may be threatened and could have a material adverse effect on our business and financial condition.

Our business is highly dependent on tourism to, from, and amongst the Hawaiian Islands and our financial results have been impacted and may continue to be impacted by the current and any future downturn in tourism levels.

Our principal base of operations is in Hawai'i and our revenue is linked primarily to the number of travelers (mainly tourists) to, from and amongst the Hawaiian Islands. As a result of the COVID-19 pandemic and government mandates related to travel, we experienced a significant decline in the demand for travel to, from and amongst the Hawaiian Islands. The State of Hawai'i stopped imposing quarantine, testing and vaccination requirements at the end of the first quarter of 2022, but certain foreign government restrictions remained in effect for international travelers during 2022. We have and will continue to incur costs as we further increase our number of flights as passenger traffic to and within the Hawaiian Islands increases, which we incur before the anticipated additional revenue is earned.

Hawai'i tourism levels are generally affected by the economic and political climate impacting air travel and tourism markets generally, including the availability of hotel accommodations, the popularity of tourist destinations relative to other vacation destinations, and other global factors including health crises, natural disasters, safety, and security. While we have seen some increased tourism activity in the state of Hawai'i since the start of the COVID-19 pandemic, we cannot predict if and when tourism levels will be sustained at levels seen prior to the COVID-19 pandemic, particularly with respect to international
47

markets. Additionally, from time to time, various events and industry-specific problems such as labor strikes have had a negative impact on tourism generally and in Hawai'i specifically. The occurrence of natural disasters, such as wildfires, hurricanes, earthquakes, volcanic eruptions, and tsunamis, in Hawai'i or other parts of the world, could also have an adverse effect on our business or financial condition. For example, as a result of the August 2023 wildfires in West Maui, we have experienced a decline in tourism in this region that has adversely impacted our business and financial results. We expect demand for travel to Maui to remain depressed and continue to impact our business and financial results while West Maui continues to rebuild from wildfire devastation. In addition, the potential or actual occurrence of terrorist attacks, wars, and/or the threat of other negative world events have had, and may in the future have, a material adverse effect on or impede the recovery of tourism from the COVID-19 pandemic.

Our business is highly dependent on the price and availability of fuel.

Our results, operations, and plans for decarbonization are heavily impacted by the price and availability of jet fuel. The cost of jet fuel remains high and the availability of jet fuel remains volatile. The cost and availability of jet fuel are subject to political, economic, and market factors that are generally outside of our control, including those related to the conflict between Russia and Ukraine and the widening conflict in the Middle East. Prices may be affected by many factors including, without limitation, the impact of political instability, crude oil production and refining capacity, sustainable aviation fuel (SAF) production volume, unexpected changes in the availability of petroleum products due to disruptions to distribution systems or refineries, unpredicted increases in demand due to weather or the pace of global economic growth, inventory reserve levels of crude oil and other petroleum products, the relative fluctuation between the U.S. dollar and other major currencies, government taxes, regulations and subsidies that change the price or reduce the availability of jet fuel, and the actions of speculators in commodity markets. Because of the effects of these factors on the price and availability of jet fuel, the cost and future availability of fuel cannot be predicted with any degree of certainty. Also, due to the competitive nature of the airline industry, there can be no assurance that we will be able to increase our fares or other fees to sufficiently offset any increase in fuel prices.

While we may enter into derivative agreements to protect against the volatility of fuel costs, there is no assurance that such agreements will protect us during unfavorable market conditions or that counterparties will be able to perform under these hedge arrangements.

See Part I, Item 1A., “Risk Factors”7A “Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the fiscal year ended December 31, 20162023 for further information regarding our exposure to the price of fuel.

Our business is exposed to foreign currency exchange rate fluctuations.

Prior to the COVID-19 pandemic, our business had been expanding internationally with an increasing percentage of our passenger revenue generated from our International routes. The fluctuation of the U.S. dollar relative to foreign currencies can significantly affect our results of operations and financial condition. For example, the value of the Japanese Yen has experienced significant volatility versus the U.S. dollar recently. Any weakening of the Japanese Yen relative to the U.S. dollar causes our flights, and travel in general, from Japan to Hawai'i to become more expensive to customers in Japan, which has and could continue to negatively impact our business. To manage the effects of fluctuating exchange rates, we periodically enter into foreign currency forward contracts and execute payment of expenditures in those locations in local currency. As of March 31, 2024, we have Japanese Yen denominated debt totaling $111.4 million. If our business continues to expand internationally, there is no assurance that these agreements will protect us against foreign currency exchange rate fluctuations during unfavorable market conditions or that our counterparties will be able to perform under these hedge arrangements.

See Item 7A “Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for further information regarding our exposure to foreign currency exchange rates.

LIQUIDITY RISKS

Our financial liquidity could be adversely affected by credit market conditions.

Our business requires access to capital markets to finance equipment purchases, including aircraft, and to provide liquidity in seasonal or cyclical periods of weaker revenue generation. In particular, we will face specific funding requirements with respect to our obligation under purchase agreements with Boeing to acquire new aircraft. We may finance these upcoming aircraft deliveries; however, the unpredictability of global credit market conditions, particularly in light of the U.S. Federal Reserve System (Federal Reserve) raising interest rates, may adversely affect the availability of financing or may result in unfavorable terms and conditions.

48

Our current unencumbered aircraft can be financed to increase our liquidity, but such financings may be subject to unfavorable terms. In light of current market conditions, any such financings are likely to reflect loan-to-value ratios and interest rates and other terms and conditions less favorable than our recent aircraft financings.

Additionally, there can be no assurance that we will not face credit rating downgrades as a result of weaker than anticipated performance of our business or other factors, as demonstrated by our credit rating downgrades in 2020. Future downgrades could adversely affect our cost of funds and related margins, liquidity, competitive position and access to capital markets.

We can offer no assurance that financing we may need in the future will be available when required or that the economic terms on which it is available will not adversely affect our financial condition. In addition, our ability to refinance our existing or future indebtedness as we may need or desire will depend on the capital markets, including prevailing interest rates, and our financial condition and performance, which, among other things, is subject to economic, financial, competitive and other factors beyond our control. If we cannot obtain financing, we are unable to refinance our existing or future indebtedness, or we cannot obtain financing or refinance our existing or future indebtedness on commercially reasonable or desirable terms, we may default on our existing or future indebtedness and our business and financial condition may be adversely affected.

Our debt could adversely affect our liquidity and financial condition, and include covenants that impose restrictions on our financial and business operations.

As of March 31, 2024, we had approximately $1.6 billion in outstanding commercial debt, excluding funds borrowed under the federal PSP. Our debt and related covenants could:

•require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow for other purposes;
•limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
•limit, along with the financial and other restrictive covenants in the agreements governing our debt, our ability to borrow additional funds;
•place us at a competitive disadvantage compared to other less leveraged competitors and competitors with debt agreements on more favorable terms than us; and
•adversely affect our ability to secure additional financing in the future on acceptable terms or at all, which would impact our ability to fund our working capital, capital expenditures, acquisitions or other general corporate purpose needs.

These agreements require us to meet certain covenants. If we breach any of these covenants we could be in a default under these facilities, which could cause our outstanding obligations under these facilities to accelerate and become due and payable immediately, and could also cause us to default under our other debt or lease obligations and lead to an acceleration of the obligations related to such other debt or lease obligations. The existence of such a default could also preclude us from borrowing funds under other credit facilities.

Our ability to comply with the provisions of financing agreements can be affected by events beyond our control and a default under any such financing agreements if not cured or waived, could have a material adverse effect on us. In the event our debt is accelerated, we may not have sufficient liquidity to repay these obligations or to refinance our debt obligations, resulting in a material adverse effect on our financial condition.

We are required to maintain reserves under our credit card processing agreements which could adversely affect our financial and business operations.

Under our bank-issued credit card processing agreements, certain proceeds from advance ticket sales may be held back to serve as collateral to cover any possible chargebacks or other disputed charges that may occur. As of March 31, 2024, there were no holdbacks held by our credit card processors.

In the event of a material adverse change in our business, the holdback could incrementally increase to an amount up to 100% of the applicable credit card activity for all unflown flights, which would also cause an increase in the level of restricted cash. If we are unable to obtain a waiver, or otherwise mitigate the increase in restricted cash, it could adversely affect our liquidity and also cause a covenant violation under other debt or lease obligations and have a material adverse effect on our financial condition.

49

COMPETITIVE ENVIRONMENT RISKS

We operate in an extremely competitive environment.

The airline industry is characterized by low profit margins, high fixed costs, and significant price competition. We compete with other airlines on all of our Domestic and International routes. The commencement of, or increase in, service on our routes by existing or new carriers at aggressive prices has and could continue to negatively impact our operating results, including as demand for air travel rebuilds. Most of our competitors are much larger and have greater financial resources and brand recognition than we do. Moreover, competitors or potential competitors may merge or enter alliances that increase their financial resources and other strategic advantages. Aggressive marketing tactics or a prolonged fare competition initiated by one or more of these competitors could adversely affect our financial resources and our ability to compete in these markets. Additionally, our competitors have been and may continue to be more successful in recovering from the impacts of the COVID-19 pandemic, which could impact our ability to compete successfully in the future. Since airline markets have few natural barriers to entry, we also face the constant threat of new entrants in all of our markets.

Additional capacity to or within Hawai'i, whether from network carriers or low-cost carriers, could decrease our share of the markets in which we operate, could cause a decline in our yields, or both, which could have a material adverse effect on our results of operations and financial condition.

Inflation may adversely affect us by increasing costs beyond what we can recover through price increases and may contribute to a recession.

In the past year, inflation increased throughout the U.S. economy to levels not seen in decades. Although inflation rates have recently declined, inflation can adversely affect us by increasing the costs of labor, fuel, and other costs as well as by reducing demand for air travel. In an inflationary environment, depending on airline industry and other economic conditions, we may be unable to raise prices enough to keep up with the rate of inflation, which would reduce our profit margins. We have experienced, and continue to experience, increases in the prices of labor, fuel and other costs of providing service. Continued inflationary pressures could further impact our profitability.

In response to inflation, the Federal Reserve has increased interest rates in an effort to reduce inflationary pressures. The Federal Reserve's actions increase the risk of a recession in which demand for air travel is reduced, which could adversely affect our financial condition and results of operations.

Interest rate increases may adversely affect the fair value of our investments

The Federal Reserve's interest rate increases have reduced and could continue to reduce, the fair value of our investments. Reductions in the fair value of our investments could have a negative impact on our earnings and liquidity.

The concentration of our business within Hawai'i, and between Hawai'i and the U.S. mainland, provides little diversification of our revenue.

During the three months ended March 31, 2024, approximately 77.4% of our passenger revenue was generated from our Domestic routes. Most of our competitors, particularly major network carriers with whom we compete on North America and Neighbor Island routes, enjoy greater geographical diversification of their passenger revenue. As Domestic routes account for a detailed discussionsignificantly higher proportion of our revenue than they do for most of our competitors, a proportionately higher decline in demand for our domestic routes is likely to have a relatively greater adverse effect on our financial results than on those of our competitors. Sustained reduction in demand on our Domestic routes and continued industry capacity of major network carriers on routes to, from and within Hawai'i could adversely affect our financial results.

Our business is affected by the competitive advantages held by network carriers in the North America market.

The majority of competition on our North America routes is from network carriers such as Alaska Airlines, American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines, all of whom have a number of competitive advantages. Primarily, network carriers generate passenger traffic from and throughout the U.S. mainland, which enables them to attract higher customer traffic levels as compared to us.

In contrast, we lack a comparable direct network to feed passengers to our North America flights and are therefore more reliant on passenger demand in the specific cities we serve. We also rely on our code-share partner agreements (e.g. with JetBlue) to provide customers access to and from North American destinations currently unserved by us. Most network carriers operate
50

from hubs, which can provide a built-in market of passengers depending on the economic strength of the hub city and the size of the customer group that frequents the airline. Our Honolulu and Maui hubs do not originate a large proportion of North American travel, nor do they have the population or potential customer franchise of a larger city to provide us with a significant built-in market. Passengers in the North American market, for the most part, do not originate in Honolulu, but on the U.S. mainland, making Honolulu primarily a destination rather than an origin of passenger traffic.

Our North America and Neighbor Island routes are affected by increased capacity provided by our competitors.

Prior to and during the COVID-19 pandemic, certain of our competitors increased capacity to and within Hawai'i by introducing new routes and increasing the frequency of existing routes from North America to Hawai'i and by the introduction of additional flights within the neighbor islands. We are unable to predict competitor capacity related to air travel to Hawai'i or between the neighbor islands. Any increased competitor capacity that decreases our share of traffic to Hawai'i or between the neighbor islands could ultimately have a material adverse effect on our results of operations and financial condition.

Our International routes are affected by competition from domestic and foreign carriers.

During the three months ended March 31, 2024, approximately 22.6% of our passenger revenue was generated from our International routes. Our competitors on these routes include both domestic and foreign carriers. Both domestic and foreign competitors have a number of competitive advantages that may enable them to attract higher customer traffic levels as compared to us.

Many of our domestic competitors are members of airline alliances, which provide customers access to each participating airline’s international network, allowing for convenience and connectivity to their destinations. These alliances formed by our domestic competitors have increased in recent years. In some instances, our domestic competitors have been granted antitrust exemptions to form joint venture arrangements in certain geographies, further deepening their cooperation on certain routes. To mitigate this risk, we rely on code-share agreements with partner airlines to provide customers access to international destinations currently unserved by us.

Many of our foreign competitors are network carriers that benefit from network feed to support international routes on which we compete. In contrast, we lack a comparable direct network to feed passengers to our international flights, and are therefore more reliant on passenger demand in the specific destinations that we serve. Most network carriers operate from hubs, which can provide a built-in home base market of passengers. Passengers on our International routes, for the most part, do not originate in Hawai'i, but rather internationally, in these foreign carriers’ home bases. We also rely on our code-share agreements and our relationships with travel agencies and wholesale distributors to provide customers access to and from International destinations currently unserved by us.

INFORMATION TECHNOLOGY AND THIRD-PARTY RISKS

If we do not maintain the privacy and security of personal information or other information relating to our customers or others, or fail to comply with applicable U.S. and foreign privacy, data protection, or data security laws or security standards imposed by our commercial partners, our reputation could be damaged, we could incur substantial additional costs, and we could become subject to litigation or regulatory penalties.

We receive, retain, transmit and otherwise process personal information and other information about our customers and other individuals, including our employees and contractors, and we are subject to increasing legislative, regulatory and customer focus on privacy, data protection, and data security both domestically and internationally. Numerous laws and regulations in the U.S. and in various other jurisdictions in which we operate relate to privacy, data protection, and security, including laws and regulations regarding the collection, processing, storage, sharing, disclosure, use and security of personal information and other data from and about our customers and other individuals. For example, in the European Union, the General Data Protection Regulation (GDPR) became effective in 2018.The United Kingdom has adopted legislation that substantially implements the GDPR.Additionally, California enacted the California Consumer Privacy Act (CCPA), effective as of January 1, 2020, which was modified significantly by the California Privacy Rights Act (CPRA), which became effective in most material respects on January 1, 2023. Other states, including Colorado, Connecticut, Delaware, Florida, Indiana, Iowa, Montana, New Jersey, Oregon, Tennessee, Texas, Utah, and Virginia have enacted similar legislation. The U.S. federal government also is contemplating federal privacy legislation. The GDPR and CCPA, other new laws and regulations, and changes in laws or regulations relating to privacy, data protection and information security may require us to modify our practices with respect to the collection, use and disclosure of data. The GDPR provides for significant penalties in the case of non-compliance of up to €20 million or four percent of worldwide annual revenues, whichever is greater. The United Kingdom legislation implementing the GDPR provides for a similar penalty structure. The GDPR, CCPA, CPRA and other existing and proposed laws and
51

regulations can be costly to comply with and can delay or impede our processing of data, result in negative publicity, increase our operating costs and subject us to claims or other remedies. The scope of laws and regulations relating to privacy, data protection, and security is changing, subject to differing interpretations, may be costly to comply with, and may be inconsistent among countries and jurisdictions or conflict with other obligations of ours.

A number of our commercial partners, including payment card companies, have imposed data security standards or other obligations relating to privacy, data protection, or data security upon us. We strive to comply with applicable laws, regulations, policies, and contractual and other legal obligations relating to privacy, data protection, and data security. However, these legal, contractual, and other actual and asserted obligations may be interpreted and applied in new ways and/or in manners that are inconsistent, and may conflict with other obligations or our practices.

Any failure or perceived failure by us to comply with laws or regulations, our privacy or data protection policies, or other actual or asserted privacy-, data protection-, or information security-related obligations to customers or other third parties, or any actual or perceived compromise of security resulting in the unauthorized disclosure, transfer, loss, unavailability, use, or other processing of personal or other information, may result in governmental investigations and enforcement actions, governmental or private litigation, other liability, our loss of the ability to process payment card transactions, or us becoming subject to higher costs for such transactions, or public statements critical of us by consumer advocacy groups, competitors, the media or others that could cause our current or prospective customers to lose trust in us, any of which could have an adverse effect on our business. Additionally, if third-party business partners that we work with, such as vendors, violate or are alleged to violate applicable laws, applicable policies or other privacy-, data protection-, or security-related obligations, such violations may also put our customers’ or others’ information at risk and could in turn have an adverse effect on our business. Governmental agencies may also request or take customer data for national security or informational purposes, and also can make data requests in connection with criminal or civil investigations or other matters, which could harm our reputation and our business.

We will continue our efforts to comply with new and increasing privacy, data protection, and information security obligations; however, it is possible that such obligations may require us to expend additional resources, and may be difficult or impossible for us to meet. Any actual or alleged failure to comply with applicable U.S. or foreign privacy, data protection, or data security laws or regulations, any privacy or security standards imposed by our commercial partners, or any other actual or asserted obligations relating to privacy, data protection, or information security, may result in claims, regulatory investigations and proceedings, private litigation and proceedings, and other liability, all of which may adversely affect our reputation, business, results of operations and financial condition.

Our actual or perceived failure to protect customer information or other personal information or confidential information could result in harm to our business.

Our business and operations involve the storage, transmission and processing of information about our customers, our employees and contractors, our business partners, and others, as well as our own confidential information. We have not experienced a material cybersecurity incident, but we have experienced cybersecurity incidents in the past and we may experience cybersecurity incidents in the future, including incidents through cyber-attacks by third parties seeking unauthorized access to any of these types of information or to disrupt our business or operations. Ransomware and other malware, business e-mail compromises, fraudulent sales of frequent flier miles, and general hacking have become more prevalent in our industry. While we have taken steps to protect customer information and other confidential information to which we have access, there can be no assurance that any security measures that we or our third-party service providers have implemented will be effective against current or future security threats. The security risks that we and our third-party service providers face have been heightened by an increase in employees and service providers working remotely. Additionally, these risks may be elevated in connection with geopolitical events such as the conflict between Russia and Ukraine and the widening conflict in the Middle East. We and our third-party service providers may be unable to anticipate attempted security breaches and to implement adequate preventative measures, and our security measures or those of our third-party service providers could be breached or otherwise compromised, we could suffer data loss, corruption, or unavailability, unauthorized access to or use of the systems or networks used in our business and operations, and unauthorized, accidental, or unlawful access to, or disclosure, modification, misuse, loss, unavailability, destruction, or other unauthorized processing of our or our customers’ information. We may also experience security breaches or other incidents that may remain undetected for an extended period. Further, third parties may also conduct attacks designed to disrupt or deny access to the systems and networks used in our business and operations.

Actual or perceived security breaches or other security incidents could result in unauthorized use of or access to systems and networks, unauthorized, accidental, or unlawful access to, or disclosure, modification, misuse, loss, unavailability or destruction of, our or our customers’ information, and may lead to litigation, claims, indemnity obligations, regulatory investigations and other proceedings, severe reputational damage adversely affecting customer or investor confidence and causing damage to our brand, indemnity obligations, disruption to our operations, damages for contract breach, and other liability, and may adversely affect our revenues and operating results. Additionally, our service providers may suffer security breaches or other incidents
52

that may result in unauthorized access or otherwise compromise data stored or processed for us that may give rise to any of the foregoing.

Any such actual or perceived security breach or other incident may lead to the expenditure of significant financial and other resources in efforts to investigate or correct a breach or other incident, address and eliminate vulnerabilities, and to prevent future security breaches or incidents, as well as significant costs for remediation that may include liability for stolen assets or information and repair of system damage that may have been caused, incentives offered to customers or other business partners in an effort to maintain business relationships after a breach, costs in connection with payment card brand fines, and other liabilities. Certain breaches affecting payment card information or the environment in which such information is processed may also result in a loss of our ability to process payment cards or increased costs associated with doing so. We have incurred and expect to incur ongoing expenditures in an effort to prevent information security breaches and other security incidents.

We cannot be certain that our insurance coverage will be adequate for information security liabilities actually incurred or to cover any indemnification claims against us relating to any incident. Furthermore, we cannot be certain that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.

We are increasingly dependent on technology and automated systems to operate our business.

We depend heavily on technology and automated systems to effectively operate our business. These systems include flight operations systems, communications systems, airport systems, reservations systems, management and accounting systems, commercial websites, including www.hawaiianairlines.com, and other IT systems, many of which must be able to accommodate high traffic volumes, maintain secure information and provide accurate flight information, as well as process critical financial transactions. Any substantial, extended, or repeated failures of these systems could negatively affect our customer service, compromise the security of customer information or other information stored on, transmitted by, or otherwise processed by these systems, result in the loss of or damage to important data, loss of revenue and increased costs, and generally harm our business. Additionally, loss of key talent required to maintain and advance these systems could have a material impact on our operations. Like other companies, our systems may be vulnerable to disruptions due to events beyond our control, including natural disasters, power disruptions, software or equipment failures, terrorist attacks, cybersecurity incursions, computer viruses and hackers. There can be no assurance that the measures we have taken to reduce the adverse effects of certain potential failures or disruptions are adequate to prevent or remedy disruptions of our systems or prevent or mitigate all attacks. In addition, we will need to continuously make significant investments in technology to periodically upgrade and replace existing systems. If we are unable to make these investments or fail to successfully implement, upgrade or replace our systems, our operations and business could be adversely impacted. For example, in May 2023, a maintenance failure caused a power disruption at our Honolulu internet provider, which interrupted our operations and resulted in significant flight delays and, during our transition to the Amadeus Altéa Passenger Service System in April 2023, we experienced intermittent issues, including issues related to our website, mobile and kiosk passenger check-in capability and booking through our website, which could have a significant impact on our operations. We do not carry business interruption insurance sufficient to compensate us for the potentially significant losses, including the potential harm to our business, results of operations, financial condition and reputation that may result from system interruptions or system failures.

We are highly reliant on third-party contractors to provide certain facilities and services for our operations, and their failure to provide adequate products and services, or the termination of our third-party agreements could have a potentially adverse effect on our financial results.

There are a limited number of qualified employees and personnel in the airline and information technology industry, especially within the Hawai'i market. Due to these limitations, we have historically relied on outside vendors for a variety of services and functions critical to our business, including aircraft maintenance and parts, code-sharing, distribution and reservations, computer services including hosting and software maintenance, accounting, frequent flyer programs, passenger processing, ground facilities, baggage and cargo handling, personnel training, and the distribution and sale of airline seats. Our reliance on outside vendors may continue to increase in the future.

The failure of any of our third-party service providers to adequately perform their service obligations, or other interruptions of services are likely to reduce our revenues, increase expenses, and/or prevent us from operating our flights and providing other services to our customers. Our reliance on third-party distribution channels means we depend, in part, on their willingness and ability to reach customers and sell ancillary products and services that we offer. Such distribution channels may be more expensive or have less functionality than the distribution channels that we operate. Our business and financial performance
53

would be materially harmed if our customers believe that any of our, or our contractors', services are unreliable or unsatisfactory.

LABOR RELATIONS AND RELATED COSTS RISKS

We are dependent on satisfactory labor relations.
Labor costs are a significant component of airline expenses and can substantially impact an airline’s results of operations. A significant portion of our workforce is represented by labor unions. We have entered into collective bargaining agreements with our pilots, mechanical group employees, clerical group employees, flight attendants, and dispatchers. We cannot ensure that future agreements with our employees’ labor unions will be on terms in line with our expectations or comparable to agreements entered into by our competitors, and any future agreements may increase our labor costs or otherwise adversely affect our business. We may make strategic and operational decisions that may require the consent of one or more of these labor unions, and these labor unions could demand additional wages, benefits or other consideration in return for their consent.

Application of state and local laws to our operations may conflict with federal laws, or with the laws of other states and local governments, and may subject us to additional requirements and restrictions, which might affect our relationship with our workforce and cause our expenses to increase. Application of conflicting laws may result in operational disruption or have negative effects on our collective bargaining agreements, and any failure or perceived failure by us to comply with federal, state or local labor laws may lead to litigation.

Our operations may be adversely affected if we are unable to attract and retain qualified personnel and key executives.

We believe that our future success is dependent on the knowledge and expertise of our key executives and highly qualified management, technical, and other personnel. Attracting and retaining such personnel in the airline industry is highly competitive. We cannot be certain that we will be able to retain our key executives or attract other qualified personnel in the future. Any inability to retain our key executives, or other senior technical personnel, or attract and retain additional qualified executives, could have a negative impact on our operations.

In addition, as we rebuild our operations as passenger demand recovers, and expand our operations through the acquisition of new aircraft and introduction of service to new markets, it may be challenging to attract a sufficient number of qualified personnel including pilots, mechanics and other skilled labor. As we compete with other carriers for qualified personnel, we also face the challenge of attracting individuals who embrace our team-oriented, friendly and customer-driven corporate culture. Our inability to attract and retain qualified personnel who embrace our corporate culture could have a negative impact on our reputation and overall operations.

STRATEGY AND BRAND RISKS
Our failure to successfully implement our route and network strategy could harm our business.
Our route and network strategy (how we determine to deploy our fleet) includes initiatives to increase revenue, decrease costs, mature our network, and improve distribution of our sales channels. It is critical that we execute upon our planned strategy in order for our business to attain economies of scale and to sustain or improve our results of operations. If we are unable to utilize and fill increased capacity provided by additional aircraft entering our fleet, hire and retain skilled personnel, or secure the required equipment and facilities in a cost-effective manner, we may be unable to successfully develop and grow our new and existing markets, which may adversely affect our business and operations.

We continue to strive toward aggressive cost-containment goals which are an important part of our business strategy to offer the best value to passengers through competitive fares while maintaining acceptable profit margins and return on capital. We believe a lower cost structure will better position us to fund our strategy and take advantage of market opportunities. If we are unable to adequately contain our non-fuel unit costs, our financial results may suffer.

54

Any damage to our reputation or brand image could adversely affect our business or financial results.

Maintaining a good reputation globally is critical to our business. Our reputation or brand image could be adversely impacted by, among other things, any failure to maintain our safety record, our high ethical, social and environmental sustainability practices for all of our operations and activities, our ability to provide on-time operational service to our customers, our impact on the environment, public pressure from investors or policy groups to change our policies, such as initiatives to address climate change, customer perceptions of our advertising campaigns, sponsorship arrangements or marketing programs, or customer perceptions of statements made by us, our employees and executives, agents or other third parties. Damage to our reputation or brand image or loss of customer confidence in our services could adversely affect our business and financial results, as well as require additional resources to rebuild our reputation.

We also increasingly use social media to communicate news and events. The inappropriate and/or unauthorized use of certain platforms or outlets could damage our brand image and reputation, and could lead to a loss of goodwill with our customers and stakeholders. Inappropriate or unauthorized use of social media could have legal implications if, for example, employees improperly collect or disseminate personally identifiable information of employees, customers or other stakeholders. Further, disclosure of our non-public information by our employees or others, whether intentional or unintentional, through social media could lead to information loss.

Our intellectual property rights, particularly our brand, are valuable, and any inability to protect them may adversely affect our business and financial results.

We consider our intellectual property rights, particularly our brand and its associated trademarks, to be valuable assets. We protect our intellectual property rights through a combination of trademark, copyright and other forms of legal protection, contractual agreements and policing of third-party misuses of our intellectual property. Our failure to obtain or adequately protect our intellectual property or any change in law that reduces or removes the current legal protections of our intellectual property may diminish our competitiveness and adversely impact our business and financial results. Any litigation or disputes regarding intellectual property may be costly and time-consuming and may divert the attention of our management and key personnel from our business operations, either of which may adversely impact our business and financial results.

Our reputation and financial results could be harmed in the event of adverse publicity, such as in the event of an aircraft accident or incident, or if we are unable to achieve certain sustainability goals.

Our customer base is broad and our business activities have significant prominence, particularly in Hawai'i and other destinations we serve. Consequently, negative publicity, including on social media, resulting from real or perceived shortcomings in our customer service, employee relations, business conduct, third-party aircraft components or other events or circumstances affecting our operations could negatively affect the public image of our company and the willingness of customers to purchase services from us, which could affect our financial results.

Additionally, we are exposed to potential losses that may be incurred in the event of an aircraft accident or incident. Any such accident or incident involving our aircraft or an aircraft operated by one of our code-share partners could involve not only the repair or replacement of a damaged aircraft or aircraft parts, and its consequential temporary or permanent loss of revenue, but also significant claims of injured passengers and others. We are required by the DOT to carry liability insurance, and although we currently maintain liability insurance in amounts consistent with the industry, we cannot be assured that our insurance coverage will adequately cover us from all claims and we may be forced to bear substantial losses incurred with an accident. In addition, any aircraft accident or incident could cause a public perception that we are less safe or reliable than other airlines, which would harm our business.

The airline industry is also subject to increasing scrutiny for its greenhouse gas emissions and impact on the environment. We are investing and intend to continue to invest towards achieving our environmental goals. While we are working to achieve our environmental goals, our sustainability plans and our ability to execute those sustainability plans are subject to substantial risks and uncertainties, including ongoing support from governments and other third-parties, the need for significant capital investment, and research and development as well as commercialization of new technologies. There can be no guarantee that we can achieve any or all of our environmental goals, and our brand, reputation and financial results may be harmed as a result of our inability to achieve such goals.

Our cargo business will be concentrated with Amazon, and any decrease in volumes or increase in costs, or a termination of our commercial agreement with Amazon, could have a significant impact on our business, operations, financial condition and brand.

55

We expect that a significant portion of our cargo revenue will consist of air cargo transportation services provided to Amazon under the ATSA. The ATSA does not require a minimum amount of volume or revenue and Amazon is permitted to decrease volume at any time. Our cargo business would not achieve its expected financial benefits if Amazon’s use of our cargo services does not reach forecasted levels for any reason, including due to general economic conditions or preferences of Amazon and its customers. Such a shortcoming could significantly impact our business and results of operations.

In addition, the profitability of the ATSA is dependent on our ability to manage and accurately predict costs. Our projections of operating costs, crew productivity and maintenance expenses contain assumptions, including as to flight hours, aircraft reliability, crewmember productivity, compensation and benefits expense, and maintenance costs. If actual costs are higher than projected or aircraft reliability is less than expected, or aircraft become damaged and are out of revenue service for repair, the profitability of the ATSA and future operating results may be negatively impacted. We also rely on flight crews that are unionized. If collective bargaining agreements increase our costs and we cannot recover such increases, our operating results would be negatively impacted.

Performance under the ATSA is subject to a number of challenges and uncertainties, such as: unforeseen maintenance and other costs; our ability to hire pilots and other personnel necessary to support our services; interruptions in the operations under the ATSA as a result of unexpected or unforeseen events, whether as a result of factors affectingwithin our control or outside of our control; and the level of operations and results of operations, including margins, under the ATSA being less than our current expectations and projections. The ATSA also contains monthly incentive payments for reaching specific on-time arrival performance thresholds, as well as providing for monetary penalties for on-time arrival performance below certain thresholds. As a result, our operating revenues may vary from period to period depending on the achievement of monthly incentives or the imposition of penalties. Further, we could be found in default if we do not maintain certain minimum reliability thresholds over an extended period of time. If we are placed in default due to the failure to maintain reliability thresholds, Amazon may elect to terminate all or part of the services we provide and pursue rights and remedies available to it at law or in equity. The ATSA is also subject to two extension options, which Amazon may choose not to exercise. To the extent that our volume of flying for Amazon is less than we anticipate or costs associated with our cargo business are higher than we forecast, or if the ATSA is terminated for any reason, our business, results of operations and financial condition could be significantly and adversely affected.

Our agreements with Amazon confer certain termination rights which, if exercised or triggered, may result in our inability to realize the full benefits of the agreements.

Our agreements with Amazon give Amazon the option to terminate in certain circumstances and upon the occurrence of certain events of default, including a change of control of Hawaiian or our failure to meet certain performance requirements. In particular, Amazon will have the right to terminate the agreement without cause after March 31, 2027, upon providing us prior written notice of termination and paying an early termination fee.

Upon termination, Amazon will generally, subject to certain exceptions, retain the warrants that have vested prior to the time of termination and, depending on the circumstances giving rise to the termination, may have the right to accelerated vesting of the remaining warrants upon a change of control of our company. Upon termination, Amazon or we may also have the right to receive a termination fee from the other party depending on the circumstances giving rise to the right of termination.

An exercise by Amazon of any of these termination rights could have an adverse effect on our business, results of operations and financial condition.


AIRLINE INDUSTRY, REGULATION AND RELATED COSTS RISKS

The airline industry has substantial operating leverage and is affected by many conditions that are beyond its control, which could harm our financial condition and results of operations.

Due to the substantial fixed costs associated with operating an airline, there is a disproportionate relationship between the cost of operating each flight and the number of passengers carried. However, the revenue generated from a particular flight is directly related to the number of passengers carried and the respective average fares applied. Accordingly, a decrease in the number of passengers carried and, when applicable, the aggregate effect of decreasing flights scheduled, causes a corresponding decrease in revenue that is likely to result in a disproportionately greater decrease in profits. Therefore, any future reductions in airline passenger traffic as a result of the following or other factors, which are largely outside of our control, will likely harm our business, financial condition, and results of operations:

•decline in general economic conditions;
•threat of terrorist attacks and conflicts overseas;
•actual or threatened war and political instability;
•increased security measures or breaches in security;
•adverse weather and natural disasters, such as the Maui wildfires;
56

•changes in consumer preferences, perceptions, or spending patterns;
•increased costs related to security and safety measures;
•increased fares as a result of increases in fuel costs;
•outbreaks of contagious diseases or fear of contagion that affect travel behavior, such as occurred during the COVID-19 pandemic; and
•congestion or major construction at airports and actual or potential disruptions in the air traffic control system.

Our results of operations are and may continue to be volatile due to the conditions identified above. We cannot ensure that our financial resources will be sufficient to absorb the effects of any unexpected events, including those identified above.

Our operations may be disrupted if we are unable to obtain and maintain adequate facilities and infrastructure at airports within the state of Hawai'i.

We must be able to maintain and/or obtain adequate gates, maintenance capacity, office space, operations areas, and ticketing facilities, especially at airports within the state of Hawai'i, to be able to operate our existing and proposed flight schedules. Failure to maintain such facilities and infrastructure may adversely impact our operations and financial performance.

Our business is subject to substantial seasonal and cyclical volatility.

Our results of operations reflect the impact of seasonal volatility primarily due to passenger leisure and holiday travel patterns. Because of fluctuations in our results from seasonality, operating results for a historical period are not necessarily indicative of operating results for a future period and operating results for an interim period are not necessarily indicative of operating results for an entire year. Moreover, due to the widespread impact of the COVID-19 pandemic on the demand for air travel generally and travel to and within Hawai'i specifically, we have seen significant declines in demand for air travel in fiscal years 2020 through 2023, as compared to the years before the COVID-19 pandemic. As Hawai'i is a popular vacation destination, demand from North America, our largest source of visitors, is typically stronger during the months of June, July, August and December and considerably weaker at other times of the year. Because of fluctuations in our results from seasonality, operating results for a historical period are not necessarily indicative of operating results for a future period and operating results for an interim period are not necessarily indicative of operating results for an entire year.

Our cargo operations are also subject to seasonal volatility. Global trade flows are typically seasonal in nature, with peak activity during the retail holiday season. Demand for air cargo capacity is historically low following the seasonal holiday peak in the fourth quarter of the previous year. While we expect our revenues to fluctuate seasonally, a significant proportion of the costs associated with our cargo business, such as crew salaries and benefits, facilities and overhead costs, cannot easily be reduced to match the seasonal drop in demand.

Because of fluctuations in our results from seasonality, operating results for a historical period are not necessarily indicative of operating results for a future period and operating results for an interim period are not necessarily indicative of operating results for an entire year.

Terrorist attacks or international hostilities, or the fear of terrorist attacks or hostilities, even if not made directly on the airline industry, could negatively affect us and the airline industry.

Terrorist attacks, even if not made directly on the airline industry, or the fear of such attacks, hostilities or acts of war, could adversely affect the airline industry, including us, and could result in a significant decrease in demand for air travel, increased security costs, increased insurance costs covering war-related risks, and increased flight operational loss due to cancellations and delays. Any future terrorist attacks or the implementation of additional security-related fees could have a material adverse effect on our business, financial condition and results of operations, and on the airline industry in general.

The airline industry is subject to extensive government regulation, new regulations, and taxes which could have an adverse effect on our financial condition and results of operations.

Airlines are subject to extensive regulatory requirements that result in significant costs. New, and modifications to existing, laws, regulations, taxes and airport rates, and charges imposed by domestic and foreign governments have been proposed from time to time that could significantly increase the cost of airline operations, restrict operations or reduce revenue. The Federal Aviation Administration (FAA) from time to time issues directives and other regulations relating to the maintenance and operation of aircraft that require significant expenditures. Some FAA requirements cover, among other things, retirement of older aircraft, security measures, aircraft landing safety measures, including with respect to the interaction of aircraft systems with new technologies such as 5G C-band service, collision avoidance systems, airborne windshear avoidance systems, noise
57

abatement and other environmental concerns, commuter aircraft safety and increased inspections, and maintenance procedures to be conducted on older aircraft. A failure to be in compliance, or a modification, suspension or revocation of any of our DOT/FAA authorizations or certificates, would have a material adverse impact on our operations.

In 2018, Congress passed a five-year funding authorization for the FAA which was scheduled to expire in September 2023, and has been extended through May 10, 2024. The legislative process to renew this authorization (the FAA Reauthorization) could impact us, and the airline industry more generally, in numerous ways. As part of the FAA Reauthorization, Congress could seek to impose new rules or regulations concerning, among other things, customer service and consumer protection, aviation safety, labor requirements, investments in FAA staffing and resources and improvements to the air traffic control system, as well as new or increased fees or taxes intended to fund these policies. Any new or enhanced requirements resulting from the FAA Reauthorization have the potential to increase our costs or impact our operations.

We cannot predict the impact that laws or regulations may have on our operations, nor can we ensure that laws or regulations enacted in the future will not adversely affect our business. Further, we cannot guarantee that we will be able to obtain or maintain necessary governmental approvals. Once obtained, operating permits are subject to modification and revocation by the issuing agencies. Compliance with these and any future regulatory requirements could require us to incur significant capital and operating expenditures.

In addition to extensive government regulations, the airline industry is dependent on certain services provided by government agencies (DOT, FAA, U.S. Customs and Border Protection (CBP) and the Transportation Security Administration (TSA)). Furthermore, because of significantly higher security and other costs incurred by airports since September 11, 2001, many airports have significantly increased their rates and charges to airlines, including us, and may continue to do so in the future. In addition to passenger security requirements, the TSA has adopted comprehensive regulations governing air cargo transportation, covering things like cargo screening and security clearances for people with access to cargo. Additional measures have been proposed, which, if adopted, may have an adverse impact on our ability to efficiently process cargo and could increase our costs.

We are subject to risks associated with climate change, including increased regulation of our CO2 emissions and the potential increased impacts of severe weather events on our operations and infrastructure.

There is increasing global regulatory focus on climate change and emissions of greenhouse gases, including CO2. In particular, the International Civil Aviation Organization (ICAO) has adopted rules such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which is a market-based emissions offset program. Although the U.S. federal government has not yet enacted legislation to mandate that U.S. airlines participate in CORSIA, we are currently monitoring our international emissions for reporting purposes, and such data will be used in calculations to determine subsequent carbon offsetting requirements under the CORSIA program. At this time, we cannot predict the costs of complying with any future obligations under the CORSIA program. Regardless of the method of regulation or application of CORSIA, further policy changes with regard to climate change are possible, which could increase operating costs in the airline industry and, as a result, adversely affect our operations.

In the event that CORSIA does not come into force as expected, we and other airlines could become subject to an unpredictable and inconsistent array of national or regional emissions restrictions, creating a patchwork of complex regulatory requirements that may affect global competitors differently. Concerns over climate change may result in the adoption of municipal, state, regional, and federal requirements or in changing business environments that may result in increased costs to the airline industry and us. In addition, several countries and U.S. states have adopted or are considering adopting programs to regulate greenhouse gas emissions. On January 20, 2021, the United States rejoined the Paris Climate Accord and the current Presidential administration has made climate change mitigation an important policy priority. For example, on September 9, 2021, the current Presidential administration launched the Sustainable Aviation Fuel Grand Challenge to scale up the production of SAF, aiming to reduce greenhouse gas emissions from aviation by 20% by 2030. Additionally, the U.S. Environmental Protection Agency pressed for ambitious new aircraft greenhouse gas emission standards at international negotiations organized by ICAO in 2022. The current Presidential administration may adopt additional regulatory changes that could impact the airline industry and our business. Moreover, certain airports have adopted, and others could in the future adopt, greenhouse gas emission or climate-neutral goals that could impact our operations or require us to make changes or additional investments in our infrastructure.

All such climate change-related regulatory activity and developments may adversely affect our business and financial results by requiring us to reduce our emissions, make capital investments to modernize aspects of our operations, purchase carbon offset credits, or otherwise pay for our emissions. Such activity may also impact us indirectly by increasing our operating costs, including fuel costs. We may not be able to increase revenue in proportion with such additional costs.
58


We could incur significant costs to improve the climate resiliency of our infrastructure and otherwise prepare for, respond to, and mitigate such physical effects of climate change. We could also experience significant operational disruption, reduced demand and increased costs as a result of increases in the frequency, severity or duration of natural disasters, such as wildfires, like the August 2023 wildfires in West Maui, and severe weather events, like hurricanes, exacerbated by climate change. Such severe weather events may increase the incidence of delays and cancellations, increase turbulence-related injuries, impact fuel consumption to avoid weather, require repositioning of aircraft to avoid damage or accommodate changed flights, or reduce demand for travel. We are not able to accurately predict the materiality of any potential losses or costs associated with the physical effects of climate change.

Federal budget constraints may adversely affect our industry, business, results of operations and financial position.

Many of our airline operations are regulated by governmental agencies, including the FAA, the DOT, the CBP, the TSA, and others. If a failure by the federal government to reach budgetary consensus for fiscal year 2024, or future periods, results in mandatory furloughs and/or other budget constraints, our business and results of operations could be materially negatively impacted, including as a result of actual or potential disruption in the air traffic control system, actual or perceived delays at various airports, and delays in deliveries of new aircraft, which may materially adversely impact our industry, our business, results of operations and financial positions.

The airline industry is required to comply with various environmental laws and regulations, which could inhibit our ability to operate and could also have an adverse effect on our results of operations.

Many aspects of airlines’ operations are subject to increasingly stringent federal, state, local, and foreign laws protecting the environment. U.S. federal laws that have a particular impact on us include the Airport Noise and Capacity Act of 1990, the Clean Air Act, the Resource Conservation and Recovery Act, the Clean Water Act, the Safe Drinking Water Act, the Comprehensive Environmental Response Act and the Compensation and Liability Act. Compliance with these and other environmental laws and regulations can require significant expenditures, and violations can lead to significant fines and penalties. Governments globally are increasingly focusing on the environmental impact caused by the consumption of fossil fuels and as a result have proposed or enacted legislation which may increase the cost of providing airline service or restrict its provision. We expect the focus on environmental matters to increase.

Concern about climate change and greenhouse gases may result in additional regulation of aircraft emissions in the U.S. and abroad. In addition, other legislative or regulatory action to regulate greenhouse gas emissions is possible. At this time, we cannot predict whether any such legislation or regulation would apportion costs between one or more jurisdictions in which we operate flights. We are monitoring and evaluating the potential impact of such legislative and regulatory developments. In addition to direct costs, such regulation may have a greater effect on the airline industry through increases in fuel costs. The impact to us and our industry from such actions is likely to be adverse and could be significant, particularly if regulators were to conclude that emissions from commercial aircraft cause significant harm to the atmosphere or have a greater impact on climate change than other industries.

Our operations may be adversely affected by our expansion into non-U.S. jurisdictions and the related laws and regulations to which we are subject.

The expansion of our operations into non-U.S. jurisdictions has expanded the scope of the laws and regulations to which we are subject, both domestically and internationally. Compliance with the laws and regulations of foreign jurisdictions and the restrictions on operations that these laws, regulations or other government actions may impose could significantly increase the cost of airline operations or reduce revenue. For example, various jurisdictions have imposed or are currently imposing restrictions that impede or restrict travel in response to the COVID-19 pandemic and certain of our destinations in Asia have been revising their privacy and consumer laws and regulations. Limitations placed on our business as a result of these or other laws and regulations or failure to comply with evolving laws or regulations could result in significant penalties, criminal charges, costs to defend ourselves in a foreign jurisdiction, restrictions on operations and reputational damage. In addition, we operate flights on international routes regulated by treaties and related agreements between the U.S. and foreign governments, which are subject to change as they may be amended from time to time. Modifications of these arrangements could result in an inability to obtain or retain take-off or landing slots for our routes, route authorization and necessary facilities. Any limitations, additions or modifications to government treaties, agreements, regulations, laws or policies related to our International routes could have a material adverse impact on our financial position and results of operations.

We may be party to litigation or regulatory action in the normal course of business or otherwise, which could have an adverse effect on our operations and financial results.
59


From time to time, we are a party to or otherwise involved in legal or regulatory proceedings, claims, government inspections, investigations or other legal matters, both domestically and in foreign jurisdictions, including proceedings related to the COVID-19 pandemic. For example, despite the removal of COVID-19 vaccine requirements as a condition of employment, we continue to be subject to related civil lawsuits and employee grievances that may give rise to legal liability. We believe we have meritorious defenses and intend to vigorously contest such claims. Resolving or defending legal matters, however, can take months or years. The duration of such matters can be unpredictable with many variables that we do not control including adverse party or government responses. Litigation and regulatory proceedings are subject to significant uncertainty and may be expensive, time-consuming and disruptive to our operations. In addition, an adverse resolution of a lawsuit, regulatory matter, investigation or other proceeding could have a material adverse effect on our financial condition and results of operations. We may be required to change or restrict our operations or be subject to injunctive relief, significant compensatory damages, punitive damages, penalties, fines or disgorgement of profits, none of which may be covered by insurance. We may have to pay out settlements that also may not be covered by insurance. There can be no assurance that any of these payments or actions will not be material. In addition, publicity of ongoing legal and regulatory matters may adversely affect our reputation.

Changes in tax laws or regulations could have a material adverse effect on our business, results of operations, and financial conditions.

The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service, the U.S. Department of the Treasury (the Treasury) and state and local tax authorities. Changes in U.S. tax laws or their interpretations (which may have retroactive application) could materially increase the amount of taxes we owe, thereby negatively impacting our results of operations as well as our cash flows from operations. For example, the U.S. enacted the Inflation Reduction Act, which, among other changes, implements a 1% excise tax on certain stock buybacks and a 15% alternative minimum tax on adjusted financial statement income of certain companies. Furthermore, our implementation of new practices and processes designed to comply with changing tax laws and regulations could require us to make substantial changes to our business practices, allocate additional resources, and increase our costs, potentially adversely impacting our business, financial position and results of operations.

As we continue to grow internationally, we may also be subject to taxation in jurisdictions around the world with increasingly complex tax laws, the application of which may be uncertain. The amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, potentially adversely affecting our liquidity and results of operations. For example, the Organization for Economic Cooperation and Development proposed a global minimum tax of 15%, which has been adopted by the European Union effective January 1, 2024. In addition, the authorities in these jurisdictions could review our tax returns and impose additional tax, interest and penalties, and the relevant authorities could claim that various withholding requirements apply to us or assert that benefits of tax treaties are not available to us or our subsidiaries, any of which could adversely impact us and our results of operations.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of March 31, 2024, we had NOLs available to reduce future taxable income of approximately $451.4 million for federal income tax purposes that have indefinite carryover, but are limited to 80% utilization, and approximately $968.8 million for state income tax purposes that will expire, if unused, beginning in 2024. The majority of our state NOLs relate to the state of Hawai'i, most of which have indefinite carryover, but are limited to 80% utilization.

Our ability to use our NOLs will depend on the amount of taxable income generated in future periods. If our financial results continue to be adversely impacted, there can be no assurance that an increase in the valuation allowance on our net deferred tax assets will not be required in the future. Such valuation allowance could be material. Additionally, due to our ongoing financial recovery, the NOLs may expire before we can generate sufficient taxable income to use them.

During the first quarter of 2024, we determined that it is no longer more-likely-than-not that our deferred tax assets will be fully realized based on expected sources of future taxable income. As a result, we increased our valuation allowance resulting in the reduction of our annual effective tax rate to approximately 10.0%.

Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOLs to offset its post-change income may be limited. In general, an “ownership change” will occur if there is a cumulative change in our ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. Our ability to use NOLs to reduce future
60

taxable income and liabilities may be subject to annual limitations as a result of prior ownership changes and ownership changes that may occur in the future.

Our insurance costs are susceptible to significant increases, and further increases in insurance costs or reductions in coverage could have an adverse effect on our financial results.

We carry types and amounts of insurance customary in the airline industry, including coverage for general liability, passenger liability, property damage, aircraft loss or damage, baggage and cargo liability, and workers’ compensation. We are required by the DOT to carry liability insurance on each of our aircraft. We currently maintain commercial airline insurance with a major group of independent insurers that regularly participate in world aviation insurance markets, including public liability insurance and coverage for losses resulting from the physical destruction or damage to our aircraft. However, there can be no assurance that the amount of such coverage will not change or that we will not bear substantial losses from accidents or damage to, or loss of, aircraft or other property due to other factors such as natural disasters. We could incur substantial claims resulting from an accident or damage to, or loss of, aircraft or other property due to other factors such as natural disasters in excess of related insurance coverage that could have a material adverse effect on our results of operations and financial condition. As a result of the COVID-19 pandemic, we have experienced, and may continue to experience, increases in our policy premiums as our policies become eligible for renewal.

Extended interruptions or disruptions in service have and could continue to have a material adverse impact on our operations.

Our financial results have been and may continue to be adversely affected by factors outside our control, including, but not limited to, flight cancellations, significant delays in operations, and facility disruptions. Our principal base of operations is in Hawai'i and a significant interruption or disruption in service has had and may continue to have a serious impact on our business and results of operations. In addition to international health crises, such as the COVID-19 pandemic, natural disasters, such as hurricanes, earthquakes and tsunamis, have in the past and may again impact the demand for transportation in the markets in which we operate.

FLEET AND FLEET-RELATED RISKS
We are dependent on our limited number of suppliers for aircraft, aircraft engines and parts.

We are dependent on a limited number of suppliers (e.g. Airbus, Boeing, Pratt & Whitney, Rolls Royce) for aircraft, aircraft engines, and aircraft-related items. We are vulnerable to malfunction, failure, recall or other problems associated with the supply and performance of these aircraft and parts and/or related operational disruptions, such as those caused by the COVID-19 pandemic and recalls of Pratt & Whitney engines used on our A321neo aircraft due to contamination in the powdered metal used to manufacture certain engine parts. Certain of our suppliers have experienced and continue to experience significant supply chain disruptions. We have experienced delays and part shortages from our suppliers and may experience additional delays and part shortages in the future. These disruptions have and may continue to have a negative impact on our operations, including for example, aircraft out of service due to part unavailability. During 2023, we experienced shortages of Pratt & Whitney engines that resulted in aircraft out of service, and we expect these challenges to continue into 2024 and potentially beyond. We do not yet know the full impact of these operational disruptions resulting from our engine shortages from Pratt & Whitney and its affiliates. We believe that such disruptions could result in reputational harm, increased parts and maintenance costs, increased aircraft down time, and adverse effects on our financial position and results of operations.

Our agreements to purchase Boeing 787-9 aircraft represent significant future financial commitments and operating costs.
As of March 31, 2024, we had the following firm order commitments and purchase rights for additional aircraft:

Aircraft TypeFirm OrdersPurchase RightsExpected Delivery Dates
A321neo aircraft— 9N/A
Boeing 787-9 aircraft118Between 2024 and 2027

We have made substantial pre-delivery payments for aircraft under existing purchase agreements and are required to continue these pre-delivery payments as well as make payments for the balance of the purchase price through delivery of each aircraft. In December 2022, we entered into a supplemental agreement to our Boeing 787-9 purchase agreement with the Boeing Company, pursuant to which (a) we agreed with the Boeing Company to defer the delivery of our Boeing 787-9 aircraft, the first of which we initially expected to receive in the fourth quarter of 2023, with the remaining deliveries scheduled through 2027, and (b) we
61

agreed to exercise purchase options for an additional two Boeing 787-9 aircraft with scheduled delivery dates in 2027. In July 2023, we were notified by Boeing that our 2023 and 2024 Boeing 787-9 deliveries will be delayed by a couple of months. In February 2024, we took delivery of our first Boeing 787-9 aircraft, which was placed into service in April 2024. In April 2024, we received delivery of our second Boeing 787-9 aircraft and anticipate delivery of our third aircraft in late 2024. We have, and may continue to experience delays in the delivery of our future Boeing 787-9 aircraft deliveries.

These future commitments substantially increase our future capital spending requirements and may require us to increase our level of debt in future years. We are continuing to evaluate our options to finance these commitments. There can be no assurance that we will be able to obtain such financing on favorable terms, or at all.

Delays in scheduled aircraft deliveries or other loss of fleet capacity may adversely impact our operations and financial results.

The success of our business depends on, among other things, the ability to effectively operate a certain number and type of aircraft. As noted above, we are uncertain about the future of our contractual commitments to purchase additional aircraft for our fleet and have and may continue to experience supply chain delays that impact the availability of our aircraft. Our inability to purchase and introduce new aircraft into our fleet could negatively impact our business, operations and financial performance. Even if we proceed with some or all of our contractual commitments to purchase additional aircraft, delays in scheduled aircraft or our failure to integrate newly purchased aircraft into our fleet as planned may require us to utilize our existing fleet longer than expected. Such extensions may require us to operate existing aircraft beyond the point at which it is economically optimal to retire them, resulting in increased maintenance costs.

We may never realize the full value of our long-lived assets such as aircraft and non-aircraft equipment, resulting in impairment and other related charges that may negatively impact our financial position and results of operations.

Long-lived assets used in operations consist principally of property and equipment and had a carrying value of approximately $2.1 billion as of March 31, 2024. Economic and intrinsic triggers, which include extreme fuel price volatility, an uncertain economic and credit environment, unfavorable trends in historical or forecasted results of operations and cash flows, as well as other uncertainties, may cause us to record material impairments of our long-lived assets. Additionally, we could be subject to impairment charges in the future that could have an adverse effect on our financial position and results of operations in future periods.

Long-lived assets are tested for impairment when events or changes in circumstances indicate, in management's judgement, that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amount. To determine whether impairment exists for aircraft used in operations, assets are grouped at the fleet-type level (the lowest level for which there are identifiable cash flows) and future cash flows are estimated based on projections of capacity, passenger mile yield, fuel costs, labor costs and other relevant factors. If, at any time, management determines the net carrying value of an asset is not recoverable, the amount is reduced to its fair value during the period in which such determination is made.

We continue to evaluate our current fleet and other long-lived assets for impairment accordingly. As of March 31, 2024, our remaining long-lived assets continued to generate future cash flows from operation of the fleet through the respective retirement dates in excess of their respective carrying values.

COMMON STOCK RISKS

Our share price is subject to fluctuations.

The market price of our stock is influenced by many factors, many of which are outside of our control, and include other factors discussed in the Risk Factors section, as well as the following:

•our operating results and financial condition;
•how our operating results and financial condition compare to securities analyst expectations, particularly with respect to metrics for which we do not give guidance, including whether those results significantly fail to meet or exceed securities analyst expectations;
•changes in the competitive environment in which we operate;
•fuel price volatility including the availability of fuel;
•announcements concerning our competitors including bankruptcy filings, mergers, restructurings or acquisitions by other airlines;
62

•increases or changes in government regulation;
•general and industry specific market conditions;
•changes in financial estimates or recommendations by securities analysts; and
•sales of our common stock or other actions by investors with significant shareholdings.

In recent years the stock market has experienced volatile price and volume fluctuations that often have been unrelated to the operating performance of individual companies. These market fluctuations, as well as general economic conditions, have affected and may continue to affect the price of our common stock.

In the past, securities class action litigation has often been instituted against a company following periods of volatility in its stock price. This type of litigation, if filed against us, could result in substantial costs and divert our management's attention and resources. In addition, the future sale of a substantial number of shares of common stock by us or by our existing stockholders may have an adverse impact on the market price of our common stock. There can be no assurance that the trading price of our common stock will remain at or near its current level.

We do not expect to repurchase our common stock pursuant to our share repurchase program or pay dividends on our common stock for the foreseeable future.

You should not rely on an investment in our common stock to provide dividend income. Although we have historically issued quarterly dividends and repurchased shares, we do not currently anticipate any future dividends or share repurchases and we cannot provide any assurance that we will initiate any dividend or a share repurchase program again in the future. Accordingly, investors may need to rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment. Our decision whether to declare dividends or institute a share repurchase program could be based on, amongst other things, our operating results, financial condition, capital requirements, and general business conditions.

Our future earnings and earnings per share, as reported under generally accepted accounting principles, will be impacted by the Amazon warrants.

The warrants held by Amazon are subject to fair value measurements during periods that they are outstanding. Accordingly, future fluctuations in the fair value of the warrants are expected to adversely impact our reported earnings measures from time to time. See Note 11 in the accompanying consolidated financial statements of this report for further information about the warrants issued to Amazon.

If Amazon or the Treasury exercise their rights to acquire shares of our common stock pursuant to the outstanding warrants held by them, such exercise will dilute the ownership interests of our then-existing stockholders and could adversely affect the market price of our common stock.

If Amazon or the Treasury exercise their rights to acquire shares of our common stock pursuant to their warrants, it will dilute the ownership interests of our then-existing stockholders and reduce our earnings per share. In addition, any sales in the public market of any common stock issuable upon the exercise of the warrants by Amazon or the Treasury, or the perception that such sales could occur, could adversely affect prevailing market prices of our common stock. Moreover, the warrants include anti-dilution adjustments for certain issuances of common stock or convertible securities by us. If such anti-dilution adjustments are made, Amazon would receive more shares for the exercise of its warrants than before the anti-dilution adjustment, increasing their dilutive impact.

Our certificate of incorporation includes a provision limiting voting and ownership by non-U.S. citizens and our bylaws include a provision specifying an exclusive forum for stockholder disputes.

To comply with restrictions imposed by federal law on foreign ownership of U.S. airlines, our certificate of incorporation restricts voting of shares of our common stock by non-U.S. citizens. Our certificate of incorporation provides that the failure of non-U.S. citizens to register their shares on a separate stock record, which we refer to as the “foreign stock record,” would result in a suspension of their voting rights in the event that the aggregate foreign ownership of the outstanding common stock exceeds the foreign ownership restrictions imposed by federal law.

Our certificate of incorporation further provides that no shares of our common stock will be registered on the foreign stock record if the amount so registered would exceed the foreign ownership restrictions imposed by federal law. If it is determined that the amount registered in the foreign stock record exceeds the foreign ownership restrictions imposed by federal law, shares will be removed from the foreign stock record in reverse chronological order based on the date of registration therein, until the
63

number of shares registered therein does not exceed the foreign ownership restrictions imposed by federal law. As of March 31, 2024, we believe we were in compliance with the foreign ownership rules.

Our bylaws provide that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware or, if such court lacks jurisdiction, any other state or federal court located in the State of Delaware will be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of us; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers, stockholders or other employees to us or our stockholders; (iii) any action asserting a claim against us or any of our directors, officers, stockholders or other employees arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws (as each may be amended or restated from time to time); or (iv) any action asserting a claim against us or any of our directors, officers or other employees governed by the internal affairs doctrine. Our amended and restated bylaws further provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. Accordingly, stockholders may be limited in the forum in which they are able to pursue legal actions against us.

Certain provisions of our certificate of incorporation and bylaws, and our issuance of warrants to Amazon, may delay or prevent a change of control, which could materially adversely affect the price of our common stock.

Our certificate of incorporation and bylaws contain provisions that may make it difficult to remove our Board of Directors and management, and may discourage or delay a change of control, which could materially and adversely affect the price of our common stock. These provisions include, among others:

•the ability of our Board of Directors to issue, without further action by the stockholders, series of undesignated preferred stock, or rights to acquire preferred stock, that could dilute the interest of, or impair the voting power of, holders of our common stock or could also be used as a method of discouraging, delaying or preventing a change of control;
•advance notice procedures for stockholder proposals to be considered at stockholders’ meetings and for nominations of candidates for election to our Board of Directors;
•the ability of our Board of Directors to fill vacancies on the board;
•a prohibition against stockholders taking action by written consent;
•a prohibition against stockholders calling special meetings of stockholders; and
•super-majority voting requirements to modify or amend specified provisions of our certificate of incorporation.

In addition, some terms of the agreements between us and Amazon may discourage attempts to acquire our company. Amazon is entitled to notice of certain transactions, including transactions that might result in a change of control of Hawaiian, ten days before we enter into a definitive agreement related to such transactions, subject to certain exceptions. Also, the vesting of the warrants issued by us to Amazon will generally, subject to certain exceptions, be accelerated upon a change of control of the Company.

If Amazon exercises its right to acquire additional shares of our common stock pursuant to its warrants, Amazon may become a significant stockholder.

The warrants issued by us to Amazon grant Amazon the right to purchase, in the aggregate, up to 15%, as of the date of the agreements, of our common stock on a post-issuance basis. If the warrants issued to Amazon, including pursuant to any anti-dilutive adjustments, are exercised, Amazon may become a significant stockholder of our company.

If securities analysts do not publish research or reports about us, or if they issue unfavorable commentary about us or our industry or downgrade the outlook of our common stock, the market price of our common stock could decline.

The trading market for our common stock will depend in part on the research and reports that third-party securities analysts publish about us and our industry. One or more analysts could downgrade the outlook for our common stock or issue other negative commentary about us or our industry. Furthermore, if one or more of these analysts cease coverage of us, we could lose visibility in the market. In addition, analysts and other market observers assessing our performance and prospects will take into account our existing and future amounts of debt, securities offerings, and any offers by us to repurchase our securities. As a result of one or more of these factors, the market price of our common stock could decline and cause you to lose all or a portion of your investment.

64

SECURITIES OFFERINGS RISKS

In connection with the issuance of Hawaiian’s enhanced equipment trust certificate, our indebtedness and liabilities could limit the cash flow available for our operations, and consequently expose us to risks that could materially adversely affect the resources available to us and Hawaiian to satisfy our obligations under such certificates.

As of March 31, 2024, the outstanding principal balance of our enhanced equipment trust certificate (EETC) issuances was $153.1 million. Offerings of structured finance securities, such as the EETC issuances may present risks similar to those of the other types of debt obligations in which we or Hawaiian may invest and, in fact, such risks may be of greater significance in the case of such structured finance securities. In addition, the performance of the EETCs will be affected by a variety of factors, including its priority in the capital structure of the issuer thereof, and the availability of any credit enhancement, the level and timing of payments and recoveries on and the characteristics of the underlying receivables, loans or other assets that are being securitized, remoteness of those assets from the originator or transferor, the adequacy of and ability to realize upon any related collateral and the capability of the servicer of the securitized assets. If we or Hawaiian fail to comply with these covenants or to make payments under such indebtedness when due, then we or Hawaiian would be in default under that indebtedness, which could, in turn, result in ours or Hawaiian’s other indebtedness becoming immediately payable in full.

In connection with the issuance of the senior secured notes due 2026, our indebtedness and liabilities could limit the cash flow available for Hawaiian’s operations, and consequently expose us to risks that could materially adversely affect the resources available to us to satisfy our obligations under the Notes.

In February 2021, we conducted a private offering of 5.75% senior secured notes due 2026 (the Notes) collateralized by certain loyalty and brand assets (Notes Offering). The indebtedness of Hawaiian and its subsidiaries increased significantly as a result of the Notes Offering. As of March 31, 2024, Hawaiian had approximately $1.7 billion of total indebtedness (excluding finance lease obligations of approximately $65.1 million and operating lease obligations of $363.1 million). We incurred approximately $1.2 billion principal amount of indebtedness as a result of the Notes Offering. We may also incur additional indebtedness to meet future financing needs. The indebtedness of Hawaiian and its subsidiaries could have significant negative consequences for our security holders and the resources available to satisfy our obligations under the Notes, including the following:

•greater difficulty satisfying our obligations with respect to the Notes;
•increasing Hawaiian’s vulnerability to adverse economic and industry conditions;
•limiting Hawaiian’s ability to obtain additional financing;
•requiring the dedication of a substantial portion of Hawaiian’s cash flow from operations to service Hawaiian’s indebtedness, which will reduce the amount of cash available for other purposes;
•limiting Hawaiian’s flexibility to plan for, or react to, changes in its business;
•placing Hawaiian at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital; and
•potentially causing Hawaiian’s credit ratings to be reduced and causing our and Hawaiian’s debt and equity securities to significantly decrease in value.

Hawaiian’s business, including the HawaiianMiles Program, may not generate sufficient funds, and we and Hawaiian may otherwise be unable to maintain sufficient cash reserves, to pay amounts due under our and Hawaiian’s indebtedness, including the Notes, and our and Hawaiian’s cash needs may increase in the future. In addition, future indebtedness that we or Hawaiian may incur may contain financial and other restrictive covenants that limit our ability to operate our business, including with respect to the HawaiianMiles Program, raise capital or make payments under our or Hawaiian’s indebtedness. If we or Hawaiian fail to comply with these covenants or to make payments under ours or Hawaiian’s indebtedness when due, then we or Hawaiian would be in default under that indebtedness, which could, in turn, result in ours and Hawaiian’s other indebtedness becoming immediately payable in full.
65

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table displays information with respect to our repurchases of shares of our common stock during the three months ended September 30, 2017:None.


Period Total number of shares purchased (i) Average price paid per share (ii) Total number of shares purchased as part of publicly announced plans or programs (i) Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions) (i)
July 1, 2017 - July 31, 2017 89,092
 $43.48
 89,092
  
August 1, 2017 - August 31, 2017 417,878
 41.54
 417,878
  
September 1, 2017 - September 30, 2017 620,559
 40.21
 620,559
  
Total 1,127,529
   1,127,529
 $49.5

In April 2017, our Board of Directors approved the repurchase of up to $100 million of our outstanding common stock over a two-year period through May 2019 via the open market, established plans or privately negotiated transactions in accordance with all applicable securities laws, rules and regulations. The stock repurchase program is subject to modification or termination at any time.

We spent $46.2 million and $50.5 million to repurchase and retire approximately 1.1 million shares and 1.2 million shares of our common stock in open market transactions during the three and nine months ended September 30, 2017, respectively. As of September 30, 2017, we had $49.5 million remaining to spend under the stock repurchase program.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES.
 
None.
 
ITEM 4.MINE SAFETY DISCLOSURES.
 
Not applicable.


ITEM 5.OTHER INFORMATION.
 
None.Securities Trading Plans of Directors and Executive Officers




During our last fiscal quarter, no director or officer, as defined in Rule 16a-1(f), adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” each as defined in Regulation S-K Item 408.


ITEM 6.EXHIBITS.
 
Exhibit No.Description
Exhibit No.Description
12
31.1
31.1
Rule 13a-14(a) Certification of Chief Executive Officer.principal executive officer.
31.2
32.1
32.2
101.INS
XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Valuation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data Files (formatted as inline XBRL and contained in Exhibit 101)

66



SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 
HAWAIIAN HOLDINGS, INC.
Date:October 20, 2017April 24, 2024By:/s/ Shannon L. Okinaka
Shannon L. Okinaka
Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)



43
67