New York, January 31, 2022 -- Moody's Investors Service affirmed the B1 corporate family ("CFR")
and B1-PD probability of default ratings of Hawaiian Holdings,
Inc. ("Hawaiian"). Moody's also affirmed the Ba3 rating
assigned to Hawaiian Airlines, Inc.'s ("Airlines") Series
2013-1 Class A enhanced equipment trust certificates and the Ba3
rating assigned to the $1.2 billion of senior secured notes
due in January 2026 issued by HawaiianMiles Loyalty, Ltd.
("Notes"). The company's HawaiianMiles loyalty
program and brand secure the Notes, which are also guaranteed by
Hawaiian. The company's speculative grade liquidity rating
is unchanged at SGL-1. The ratings outlook was changed to
stable from negative.
"The ratings affirmations and stable outlook reflect Moody's
expectation that earnings and operating cash flows will continue their
recovery towards 2019 levels through 2023, as Hawaiian restores
service on its international routes," said Moody's Lead
Analyst, Jonathan Root. "Hawaiian's strong liquidity,
with $1.7 billion of cash and about $200 million
of net debt at the end of 2021 also support the ratings affirmation and
stable outlook," said Root. Moody's projects
free cash flow to range between negative $75 million and negative
$175 million in 2022 because of headwinds the company will face,
mainly as it awaits relaxation of the travel restrictions in place in
its international destinations. Implicit in Moody's projections
is that once opened, borders around the world will remain open for
air travel.
Affirmations:
..Issuer: Hawaiian Holdings, Inc.
.... Corporate Family Rating, Affirmed
B1
.... Probability of Default Rating,
Affirmed B1-PD
..Issuer: Hawaiian Airlines, Inc.
....Gtd. Senior Secured Enhanced Equipment
Trust Ser. 2013-1 Class A due 2026, Affirmed Ba3
..Issuer: HawaiianMiles Loyalty, Ltd.
....Gtd. Senior Secured Regular Bond/Debenture,
Affirmed Ba3 (LGD3)
Outlook Actions:
..Issuer: Hawaiian Airlines, Inc.
....Outlook, Changed To Stable From
Negative
..Issuer: Hawaiian Holdings, Inc.
....Outlook, Changed To Stable From
Negative
..Issuer: HawaiianMiles Loyalty, Ltd.
....Outlook, Changed To Stable From
Negative
RATINGS RATIONALE
The B1 corporate family rating reflects Hawaiian's competitive positions
across its continental US to Hawaii; Japan, South Korea and
a few countries in Oceania to Hawaii and inter-island route networks.
The B1 rating also reflects the company's strong liquidity and Moody's
expectations that there will be a meaningful recovery of passenger demand
in the international operations as the respective governments lower travel
restrictions. The B1 rating also reflects Moody's expectations
that credit metrics will strengthen over the next 24 months, more
so in 2023 than 2022. Moody's projects operating margin could
reach 10% in 2023 and debt/EBITDA could fall meaningfully below
5x by the end of 2023, if travel restrictions subside in 2022.
Hawaiian has a record of solid operating performance and a relatively
conservative financial policy, demonstrated by debt/EBITDA sustained
below 2.6x between 2016 and 2019. Moody's expects Hawaiian
to prioritize the restoration of its historical balance sheet strength;
however, the pace of demand recovery and the willingness to incur
premiums to retire debt before maturity dates will dictate the timing.
Premiums for the early redemption of the Notes may prove to be uneconomic.
In this case, Moody's expects Hawaiian will hold significantly
more cash than the about $600 million it held in 2019, helping
to de-risk financial leverage based on gross debt while the Notes
remain outstanding.
LOYALTY FINANCING
The Ba3 rating on the Notes reflects the essentiality of the Hawaiian
Airlines' brand and related intellectual property for it to operate its
business and the importance of its loyalty program to its day-to-day
operations and cash flows. This is balanced by relatively low recovery
prospects if the collateral ever needed to be monetized to pay off the
Notes under an Airlines liquidation scenario. The Notes rating,
one notch above the B1 corporate family rating, reflects Moody's
assumption of a lower probability of default relative to that of the company's
other senior secured debt obligations, which are unrated.
EETCs
The Ba3 rating on the Series 2013-1 Class A EETC reflects Moody's
estimate that there is no equity cushion for the transaction. There
is $195 million outstanding on the obligation, which is secured
by six Airbus A330-200 widebody aircraft, one 2013 and five
2014s. Moody's estimates the value of these models at about
$30 and $32 million apiece, respectively. The
pandemic exerted significantly more pressure on the values of A330-200s
versus the larger A330-300 and other widebody aircraft models,
given the sustained interruption of medium to long-haul international
travel and the A33-200's higher per unit operating costs.
Nonetheless, the A330-200 will remain important to Hawaiian's
operations over the transaction's remaining term through January
15, 2026. The one notch uplift from the corporate family
rating reflects the high probability that the EETC would be affirmed by
the airline in the event of a bankruptcy.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The CFR could be downgraded if borders remained closed such that there
is no recovery of services and passenger volumes in the company's
International network, or if Moody's expects a material reduction
in the company's liquidity. Expectations of debt-to-EBITDA
being sustained above 5x beyond 2023 could also pressure the ratings.
There will be no upwards pressure on the ratings until after a sustained
material recovery of the company's international network.
EBITDA margins approaching 20%, debt/EBITDA sustained below
4.5x and retained cash flow-to-debt approaching 15%
while the company takes delivery of the 787s in upcoming years could support
a ratings upgrade.
Changes in the EETC ratings can result from any combination of changes
in the underlying credit quality or ratings of the company, Moody's
opinion of the importance of the aircraft collateral to the company's
operations and/or its estimates of current and projected aircraft market
values, which will affect estimates of loan-to-value.
The principal methodology used in rating Hawaiian Holdings, Inc.
and HawaiianMiles Loyalty, Ltd. was Passenger Airlines published
in August 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1277191.
The principal methodologies used in rating Hawaiian Airlines, Inc.
were Passenger Airlines published in August 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1277191,
and Enhanced Equipment Trust and Equipment Trust Certificates published
in July 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1125852.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
Headquartered in Honolulu, Hawaii, Hawaiian Holdings,
Inc. is the holding company parent of Hawaiian Airlines,
Inc., Hawaii's biggest and longest-serving airline.
Hawaiian offers nonstop service to Hawaii from 16 US gateway cities,
along with service from Japan, South Korea, Australia,
American Samoa and Tahiti. Hawaiian also provides approximately
130 jet flights daily between the Hawaiian Islands. The company
reported revenue of $1.6 billion in 2021, down from
$2.8 billion in 2019.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
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provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
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and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
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The Global Scale Credit Rating on this Credit Rating Announcement was
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Jonathan Root, CFA
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Jessica Gladstone, CFA
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
