Entry into a Material Definitive Agreement.
On December 1, 2020, Hawaiian Holdings, Inc. (the “Company”) entered into an Equity
Distribution Agreement (the “Equity
Distribution Agreement”) with Morgan
Stanley & Co. LLC, BNP Paribas Securities Corp. and
Goldman Sachs & Co. LLC, as the Company’s sales agents (the
“Managers”), pursuant to which the
Company may offer and sell from time to time through the Managers
up to 5,000,000 shares (the “Shares”) of the Company’s common
stock, par value $0.01 per share (“Common
Stock”), in such share amounts as the Company may
specify by notice to the Managers, in accordance with the terms and
conditions set forth in the Equity Distribution Agreement.
Sales, if any, of the Shares pursuant to the Equity Distribution
Agreement may be made in negotiated transactions or transactions
that are deemed to be “at-the-market” offerings as
defined in Rule 415 under the Securities Act of 1933, as amended,
including sales made directly on The Nasdaq Stock Market, or sales
made to or through a market maker other than on an exchange. Under
the Equity Distribution Agreement, the Company will set the
parameters for the sale of the Shares, including the number of the
Shares to be issued, the time period during which sales are
requested to be made, limitation on the number of the Shares that
may be sold in any one trading day and any minimum price below
which sales may not be made. The Company is not obligated to sell
any of the Shares under the Equity Distribution Agreement.
The Shares will be offered and sold pursuant to the Company’s shelf
registration statement on Form S-3 (File No. 333-242409) which was
automatically effective upon filing with the Securities and
Exchange Commission the (“SEC”) on August 7, 2020. The
Company filed a prospectus supplement, dated December 1, 2020,
with the SEC in connection with the offer and sale of the
The Equity Distribution Agreement may be terminated by the Company
upon written notice to the Managers for any reason or by the
Managers upon written notice to the Company for any reason or at
The Equity Distribution Agreement contains customary
representations, warranties and agreements by the Company. Under
the terms of the Equity Distribution Agreement, the Company has
agreed to indemnify the Managers against certain liabilities.
The Company intends to use the net proceeds from the sale, if any,
of the Shares for general corporate purposes. The Company does not
have agreements or commitments for any specific acquisitions or
strategic transactions at this time.
The above summary of the Equity Distribution Agreement does not
purport to be complete and is qualified in its entirety by
reference to the Equity Distribution Agreement, a copy which is
attached as Exhibit 1.1 to this Current Report on Form 8-K and incorporated herein by
reference. The legal opinion of Wilson Sonsini Goodrich &
Rosati, Professional Corporation relating to the Shares being
offered pursuant to the Equity Distribution Agreement is filed as
Exhibit 5.1 to this Current Report on Form 8-K.
Impact of COVID-19
Due to the rapid and unprecedented spread of COVID-19, what began with our
suspension of service to South Korea and Japan in late February
accelerated in March when governments instituted requirements of
self-isolation or quarantine for incoming travel. This was followed
by the announcement in late March and early April 2020 of a
14-day mandatory quarantine
for all travelers to, from and within the State of Hawai‘i. These
restrictions, combined with the ongoing spread and impact of the
COVID-19 pandemic globally,
have continued to significantly suppress customer demand, which
remains at historically low levels.
Despite the evolution of travel restrictions in recent months in
the United States, restrictions for travel to and within the State
of Hawai‘i as well as travel to and from various international
locations, including those in our network, remain in effect. In
September 2020, the Governor of the State of Hawai‘i announced that
a program allowing travelers coming to Hawai‘i from the mainland
U.S. to bypass the quarantine requirement with proof of a negative
COVID-19 test from a
state-approved testing partner would begin on October 15,
2020. The State of Hawai‘i and counties within the state continue
to evaluate and update testing requirements for travel to and
within the state, including the required timing of testing results
and the expansion of the pre-travel testing program to travelers
from international locations, specifically travelers from Canada,
Japan and Korea. Since the announcement and implementation of the
pre-travel testing program,
we have seen an increase in bookings and we have slowly begun
rebuilding our North America, Neighbor Island and International
flight schedules commensurate with anticipated increases in demand.
For example, our North American scheduled capacity has increased
from approximately 19% of 2019 capacity in September 2020 to
approximately 62% in the period from December 20, 2020 through
December 31, 2020. By the end of the fourth quarter, we
anticipate reinstating service from all thirteen of our current
mainland gateways, and from Tokyo (Narita and Haneda) and Osaka in
Japan as well as Seoul, South Korea.
New bookings for travel from our mainland markets over the next
four months (December to March) continue to occur at similar levels
experienced since the implementation of the pre-travel testing program. We have
seen, however, an increase in cancellations (disproportionately for
November/December travel) attributable to recent changes in the
pre-travel testing program
implemented by the State of Hawai‘i, the recent resurgence of
COVID-19 infections in the
United States and internationally, Centers for Disease Control
recommendations regarding holiday travel, implementation of
restrictions and quarantines in some key origin points, and other
factors affecting public sentiment. Additionally, while certain
markets have reopened, others, particularly international markets,
remain closed or continue to enforce extended quarantines. And in
light of the recent spike in reported cases on the mainland U.S.,
the County of Kaua‘i recently suspended its participation in the
testing program, meaning all travelers to Kaua‘i are once again
subject to a 14-day
self-quarantine. Neighbor Island bookings remain depressed, in line
with trends previously disclosed, with the exception of travel to
and from Kaua‘i for which bookings are more materially curtailed.
There can be no assurance whether at some point other counties or
the entire State of Hawai‘i may limit or suspend the pre-travel testing program should the
prevalence of the COVID-19
pandemic worsen. As a result of these factors, our bookings and
revenue continue to be volatile and may decrease from our existing
or anticipated levels, which decrease could be material. We will
continue to assess our routes and schedule in response to changes
in demand, including related to the COVID-19 pandemic.
In response to the COVID-19
pandemic, we have implemented enhanced safety protocols focusing on
our staff and guests, while at the same time working to mitigate
the impact of the pandemic on our financial position and
Guest and Employee
Experience. We have enhanced cleaning procedures and revised
guest-facing protocols in an effort to minimize the risk of
transmission of COVID-19.
These procedures are in line with current recommendations from
leading public health authorities and include:
Performing enhanced aircraft cleaning between flights and during
overnight parking, including recurring electrostatic spraying of
Frequent cleaning and disinfecting of counters and self-service
check-in kiosks in our
Ensuring hand sanitizers are readily available for guests at
airports we serve.
Requiring guests and guest facing employees to wear a face mask or
covering, with guests required to keep them on from check-in to deplaning (except when
eating or drinking on board).
Modifying boarding and deplaning processes.
Limiting the capacity of available seats on all aircraft to
approximately 70% of normalized capacity through (but not beyond)
Modifying in-flight service
to minimize close interactions between crew members and guests.
Eliminating change fees on all domestic and international flights
in order to provide guests with travel flexibility across our
Launching a program to offer our guests pre-travel COVID-19 testing through mail-in kits and proprietary
drive-through testing labs in select U.S. mainland gateways.
Capacity Impacts. In
response to the reduced passenger demand as a result of the
COVID-19 pandemic, we
significantly reduced system capacity late in the first quarter of
2020 to a level that maintained essential services and have
continued to make adjustments to better align capacity with
expected passenger demand. For the month ended October 31,
2020, system capacity was reduced approximately 84.8% as compared
to October 2019. We estimate system capacity for November 2020 was
approximately 72% lower compared to November 2019. For the fourth
quarter of 2020, we expect system capacity to decrease 71% - 74%
compared to the prior year quarter.
Expense Management. In
response to the reduction in revenue, we have implemented, and will
continue to implement, cost savings and liquidity measures,
In 2020, we commenced various initiatives to reduce labor costs as
In the first quarter of 2020, we instituted a temporary hiring
freeze, except with respect to operationally critical and essential
In the second quarter of 2020, we operationalized various temporary
voluntary leave and vacation purchase programs to balance our
workforce with our reduced levels of operations.
During the third quarter of 2020, we announced and completed the
majority of our voluntary separation and temporary leave programs
across each of our labor groups. Additionally, we completed the
majority of our involuntary separations, most of which were
effective October 1, 2020. Combined, separation and temporary
leave programs resulted in an approximate 32% reduction of our
Our officers reduced their base salaries between 10% and 50%
through September 30, 2020, and our Board of Directors also
reduced their compensation through September 30, 2020.
We reduced capital expenditures for 2020 and continue to vigorously
expenditures. During October 2020, capital expenditures were
approximately $2.8 million.
On October 26, 2020, we amended our purchase agreement with
Boeing to, among other things, change the delivery schedule of our
787-9 aircraft from 2021
through 2025 to 2022 through 2026, with the first delivery now
scheduled in September 2022. Refer to Note 11 in the Notes to
Consolidated Financial Statements in our Quarterly Report on Form
10-Q, filed on
October 28, 2020, for additional discussion, including the
impact of this amendment on our future financial commitments.
We may implement further discretionary changes and other cost
reduction and liquidity preservation measures as needed to address
the volatile and rapidly changing dynamics of passenger demand and
changes in revenue, regulatory and public health directives and
prevailing government policy and financial market conditions.
Cash Flow and Liquidity
Management. Our cash, cash equivalents and short-term
investments as of October 31, 2020 was $913.2 million as
a result of various actions taken to increase liquidity and
strengthen our financial position during 2020, including, but not
During the first quarter of 2020, we fully drew down our previously
undrawn $235.0 million revolving credit facility. Refer to
Note 9 in the Notes to Consolidated Financial Statements in our
Quarterly Report on Form 10-Q filed on October 28, 2020,
for additional discussion.
During the first quarter of 2020, we suspended our stock repurchase
program and on April 22, 2020, we suspended dividend
During the second and third quarters of 2020, we received
$240.6 million in grants and $60.3 million in loans
pursuant to the Coronavirus Aid, Relief, and Economic Security Act
(the “CARES Act”) Payroll Support Program.
During the third quarter 2020, we entered into a Loan and Guarantee
Agreement (the “Loan Agreement”) with the U.S. Treasury pursuant to
the Economic Relief Program under the CARES Act to provide for a
secured term loan which permits us to borrow up to
$420.0 million. As of September 30, 2020, we had borrowed
$45.0 million under the Economic Relief Program. On
October 23, 2020, we amended and restated our Loan Agreement
with the U.S. Treasury to increase the maximum facility available
to be borrowed by the Company to $622 million.
During the third quarter 2020, we completed $376.0 million in
aircraft financings, including the issuance of enhanced equipment
trust certificates and two sale and lease back transactions. See
Note 2 and Note 9 in the Notes to Consolidated Financial Statements
in our Quarterly Report on Form 10-Q filed on October 28, 2020,
for more information on our financing activities during the three
and nine months ended September 30, 2020.
We will continue to explore and pursue options to raise additional
financing as opportunities arise.
We expect our cash burn for the fourth quarter of 2020 will be in
line with or slightly more favorable than our previously disclosed
forecast of $2.2 million per day. However, the continuation of
this trend will be dependent on bookings in the remainder of the
quarter, which continue to be volatile and may be negatively
impacted by the aforementioned changes in the pre-travel testing program implemented
by the State of Hawai‘i, the recent resurgence of COVID-19 infections in the United
States and internationally, implementation of restrictions and
quarantines in some key origin points, and other factors. Cash burn
includes net sales, operating cash outflows, debt service, interest
payments, capital expenditures, tax refunds, and severance
Load Factor. Our October
2020 flown load factor was 35.6%. For November 2020, we estimate
our flown load factor will be approximately 43 - 45%.