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Rating Action:

Moody's rates Hawaiian Holdings, CFR at B3, outlook stable

14 May 2013

Ratings assigned to Hawaiian Airlines' Series 2013-1 EETCs, A-tranche at Ba1, B-tranche at B1

New York, May 14, 2013 -- Moody's Investors Service assigned ratings to Hawaiian Holdings, Inc. ("HH"): Corporate Family of B3, Probability of Default of B3-PD ("CFR" and "PDR", respectively) and Speculative Grade Liquidity rating of SGL-3. The outlook is stable. These are first time ratings being assigned to HH.

Hawaiian Airlines, Inc. ("Hawaiian"), the airline operating company subsidiary of HH announced its first ever offering of Enhanced Equipment Trust Certificates ("EETCs"), the proceeds of which will finance six newly-manufactured Airbus A330-200 aircraft to be delivered to Hawaiian between November 2013 and October 2014. Moody's assigned Ba1 and B1 ratings, respectively, to the Class A and Class B Pass Through Certificates, Series 2013-1 (the "Certificates") of the 2013-1 Pass Through Trusts that Hawaiian will establish. The Trustees of the Pass Through Trusts will purchase the equipment notes ("Notes") that Hawaiian will issue using the proceeds of the Certificates. Interest and principal payments made by Hawaiian on the Notes will fund the distributions of interest and scheduled principal due on the Certificates. HH will guarantee Hawaiian's performance under the Notes' indentures.

Assignments:

..Issuer: Hawaiian Airlines, Inc.

....Senior Secured Enhanced Equipment Trust, A-Tranche, Assigned Ba1

....Senior Secured Enhanced Equipment Trust, B-Tranche, Assigned B1

..Issuer: Hawaiian Holdings, Inc.

.... Corporate Family Rating, Assigned B3

.... Probability of Default Rating, Assigned B3-PD

.... Speculative Grade Liquidity Rating, Assigned SGL-3

Outlook Actions:

..Issuer: Hawaiian Airlines, Inc. and Hawaiian Holdings Inc, Assigned Stable

RATINGS RATIONALE

The ratings of the Certificates consider the credit quality of Hawaiian, Moody's opinion of the collateral protection of the Notes, the applicability of Section 1110 of Title 11 of the United States Code (the "Code") to the Notes, the credit support provided by the liquidity facilities, and the cross-default and cross-collateralization of the Notes. The assigned ratings reflect Moody's opinion of the ability of the Pass-Through Trustees to make timely payment of interest and the ultimate payment of principal on the final scheduled regular distribution dates of January 15, 2026 and January 15, 2022 for the A and B certificates, respectively. The ratings also reflect the importance of the A330-200 aircraft to Hawaiian's multi-year strategy to modernize its fleet and significantly grow its international network with a focus on connecting Hawaii to Asia and the South Pacific.

Amounts due under the respective Certificates will be subordinated to any amounts due on the separate Class A and Class B Liquidity Facilities ("Liquidity Facility"). Natixis S.A., acting through is New York Branch ((P)A2, stable) will provide the separate liquidity facility for each of the Class A and Class B Certificates and will also act as the Depositary, which holds the Certificate proceeds pending the delivery of each aircraft in the transaction.

Moody's estimates the initial loan-to-value of the tranches before inclusion of the claims of the liquidity provider at about 60% and about 80%, respectively based on its estimates of market values and after applying its LTV benefit for cross-collateralization. The company had 12 A330s in its fleet at May 1, 2013 and will have 22 when the remaining ten aircraft in the order book deliver through 2015. Seven Boeing B767-300ERs will remain in the fleet in 2015, leaving the carrier with 29 operating wide-body aircraft at that time. The six aircraft in this transaction will represent 27% of the A330s and 20% of all wide-body aircraft in the fleet in 2015. The company also has six Airbus A350XWB-800s on order, scheduled to begin to deliver in 2017.

Any combination of future changes in the underlying credit quality or ratings of Hawaiian, unexpected changes in Hawaiian's route strategy that de-emphasizes long-haul service, or unexpected material changes in the market value of the A330-200 could cause Moody's to change its ratings of the Certificates.

The B3 Corporate Family Rating considers the company's relatively small size, its geographic concentration, the aggressive growth strategy, and expected negative free cash flow over the next two years and again when deliveries of the A350XWB and A321neo aircraft commence in 2017. With $2 billion of annual revenue and a current operating fleet of 47 aircraft, 18 of which are narrow-bodies used in its inter-island service, Hawaiian is one of the smaller U.S. airlines operating mainline aircraft. The health of the company's financial performance and cash generation rests on growing demand from leisure travelers, particularly from Japan, Australia and the U.S. West Coast and from rational capacity management by its competitors on the routes it serves, each of which are beyond the company's control. Current credit metrics such as Debt to EBITDA of about 5.6 times, EBIT to Interest of about 1.8 times and an EBIT margin of about 9% are reflective of the mid- to low-single B rating category. Adequate liquidity supports the ratings assignment.

The SGL-3 Speculative Grade Liquidity Rating reflects Moody's opinion that Hawaiian's liquidity is adequate. Moody's anticipates that the company's unrestricted cash should remain above 16% of revenue over the next 18 months, even as it incurs about $350 million of negative free cash flow because of the deliveries of the A330s. A $75 million revolver, typically undrawn, is modestly sized and matures in December 2014. Unencumbered assets are modest. Ongoing access to the bank or debt capital markets will be important to fund aircraft deliveries beyond 2013 without sacrificing the current good cash cushion. Hawaiian disclosed in its 10-K that it has either financing or sale-leaseback commitments for four of the five A330's scheduled to deliver in 2013. The financing of the fifth delivery in 2013 will be addressed by the Series 2013-1 EETC.

The stable outlook reflects Moody's belief that credit metrics are likely to remain near or modestly weaker than current levels over the next 12 to 24 months as earnings growth is not likely to be significant enough in the near term to offset the effect of higher debt associated with the deliveries of new aircraft. A positive rating action could follow if the company demonstrates the ability to sustain its EBIT margin above 9% and have Debt to EBITDA approach 5.0 times or lower while it inducts the remaining ten A330s into its operations. Sustaining EBIT to Interest above 1.5 times and Retained Cash Flow to Net Debt above 11% could also positively pressure the rating. A negative rating action could follow if operating margins and cash flows deteriorate such that Debt to EBITDA is sustained above 7.0 times, EBIT to Interest below 1.0 time or Retained Cash Flow to Net Debt that approaches 7%.

The principal methodologies used in this rating were the Global Passenger Airlines Industry Methodology published in May 2012 and the Enhanced Equipment Trust and Equipment Trust Certificates Methodology published in December 2010. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Hawaiian Holdings, Inc., headquartered in Honolulu, HI, is the holding company parent of Hawaiian Airlines, Inc, ("Hawaiian"). Hawaiian is Hawaii's biggest and longest-serving airline, as well as the largest provider of passenger air service from its primary visitor markets on the U.S. West Coast. According to Hawaiian, it is the eleventh largest domestic airline in the United States based on revenue passenger miles. The airline operates about 215 flights per day, spanning services connecting the U.S., mainly the west coast, Asia, Australia and the South Pacific with Hawaii and flights connecting the four major islands of Hawaii.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement 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 case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Jonathan Root
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Michael J. Mulvaney
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's rates Hawaiian Holdings, CFR at B3, outlook stable
No Related Data.
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