Hawaiian Holdings, Inc. (NASDAQ:HA) Q2 2020 Earnings Conference Call July 28, 2020 4:30 PM ET

Company Participants

Alanna James - Managing Director of Investor Relations
Peter Ingram - President & Chief Executive Officer
Brent Overbeek - Senior Vice President of Revenue Management & Network Planning
Shannon Okinaka - Chief Financial Officer

Conference Call Participants

Hunter Keay - Wolfe Research
Catherine O'Brien - Goldman Sachs
Michael Linenberg - Deutsche Bank
Joseph DeNardi - Stifel
Helane Becker - Cowen

Operator

Greetings, and welcome to the Hawaiian Holdings, Inc. Second Quarter 2020 Financial Results Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Alanna James, Managing Director of Investor Relations. Thank you. You may begin.

Alanna James

Thank you, Michelle. Hello, everyone, and welcome to Hawaiian Holdings' second quarter 2020 results conference call. Here with me in Honolulu are Peter Ingram, our President and Chief Executive Officer; Brent Overbeek, our Senior Vice President of Revenue Management and Network Planning; and Shannon Okinaka, our Chief Financial Officer. We also have several other members of our management team in attendance for the Q&A.

Peter will provide an overview of the impact of COVID-19 on our business and our vision for the future. Brent will provide an update on our commercial performance and trends, and Shannon will provide an update on our cash and liquidity. At the end of the prepared remarks, we will open up the call for questions.

By now, everyone should have access to the press release that went out at about 4 o’clock Eastern Time today. If you have not received the release it is available on the Investor Relations page of our website, hawaiianairlines.com. During our call today, we will refer at times to adjusted or non-GAAP numbers and metrics. A detailed reconciliation of GAAP to non-GAAP numbers and metrics can be found at the end of today's press release posted on the Investor Relations page of our website.

As a reminder, the following prepared remarks contain forward-looking statements, including statements about our future plans and potential future financial and operating performance. Management may also make additional forward-looking statements in response to your questions. These statements are subject to risks and uncertainties and do not guarantee future performance, and therefore, undue reliance should not be placed upon them. We refer you to Hawaiian Holdings' recent filings with the SEC for a more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward-looking statements. This includes the most recent annual report filed on Form 10-K as well as subsequent reports filed on Forms 10-Q and 8-K.

I will now turn the call over to Peter.

Peter Ingram

Mahalo, Alanna. Aloha everyone and thank you for joining us today. As you have seen in our press release today, the second quarter was an incredibly challenging period for our company and for the entire industry as we continue to face the unprecedented demand disruption due to the COVID-19 pandemic.

In our home state of Hawaii, we had a 14-day quarantine in place for incoming travelers throughout the quarter, leading us to operate a fraction of the schedule that we had planned at the beginning of the year.

The human toll of the virus was also driven home last week with the passing of one of our long-time flight attendants. Jeff Kurtzman joined our ohana in 1986 and over the past three decades had become well-known to his in-flight colleagues for his passion for discovering new places, people and cultures, his terrific sense of humor and knack for easy conversation and his caring heart. He embodied the values of Aloha and Malama that we hold dear. He will not be forgotten.

We're also reminded this past weekend that even as COVID-19 has rendered much of our operation dormant, mother nature's volatility is still in effect as Hurricane Douglas made a pass by the island chain. Hurricane season is a regular feature of living in the middle of the Pacific Ocean, but this one was a bit unusual for us to prepare for given that much of our fleet has been parked in Honolulu rather than spread throughout our network on a daily basis.

In anticipation, we moved the majority of our long-haul aircraft to the West Coast and most of our neighbor island fleet to Kona which was further away from the direct path of Douglas. Fortunately for us, this most destructive winds associated with the storm stayed offshore to the North and all of the islands of Hawaii were spared a direct hit.

Throughout this unparalleled period, our team has been nothing short of remarkable. We've worked and are working collaboratively with the unions that represent our frontline employees to establish voluntary leave options and more recently voluntary separation and early retirement programs to mitigate the need for involuntary reductions to right-size our workforce.

Our employees have been active in our communities supporting food drives for people whose economic wellbeing has been overwhelmed by the crisis, delivering food to the elderly and infirm and revitalizing local schools among many other initiatives. My pride in being a part of this wonderful team has never been greater.

In the second quarter, we stabilized our operation to sustain our business amidst the short-term pressures of nearly zero revenue and very limited flight activity. We closed the quarter with a comfortable cash position albeit short of our estimate as a result of a delay in certain of our planned aircraft financing activities.

I am pleased that subsequent to the end of the second quarter we have closed two sale-leaseback transactions raising $114 million and are presently commencing a double ETC transaction through which we expect to raise another approximately $262 million. Upon the successful conclusion of this transaction cash and liquid assets will exceed $1 billion.

Beyond these transactions, we expect to have access to a $364 million loan through the CARES Act loan program and we will have preserved a buffer of unencumbered aircraft following these transactions. While much remains uncertain about the months ahead, we are confident that the strong financial position we had entering this crisis has left us in good shape to manage through this ongoing uncertainty and positions us to rebuild as demand begins to recover in earnest.

The most impactful constraint on demand for our business currently is the 14-day quarantine for Hawaii travelers. So let me take a moment to review how this has evolved through the second quarter and up to today.

I'll start with the simpler part of the story which is the effect of the quarantine on our neighbor island business. This particular element of the governor's quarantine order went into place on April 1st and was lifted on June 16th. As you would expect, we have seen some recovery in demand since the lifting which has provided us the opportunity to restore more of our prior schedule.

Brent will provide you more details on the magnitude of demand recovery and our schedule in a few moments. The 14-day quarantine on incoming arrivals to the state which went into place on March 26th remains in place. In late June, Hawaii's Governor announced a plan to lift the first -- for travelers who obtain a negative COVID-19 test within 72 hours of arrival. As case count increased in recent weeks both in Hawaii and in our key visitor markets on the Mainland this August 1st date was pushed back to September 1st.

We remain engaged with state and county officials as specific protocols for the testing requirements are being established.

On the surface, pretesting is an elegant solution to preserve Hawaii's low COVID incidents, while simultaneously stimulating our home state's devastated economy. There are many details that remain uncertain, however that will affect the ability of potential travelers to access tests and the corresponding level of demand we can expect.

Certainly, the ability to avoid quarantine will open-up some of the demand that is currently suppressed, but there remains a high degree of uncertainty about the magnitude of demand recovery. A priority for us is for the state to finalize details about applicable tests and approved providers, so that we can provide this information to potential guests seeking clarity about what is required to unlock the Hawaii vacation they are looking for.

Before I leave the subject of quarantines, I should note that, while Hawaii's restrictions have the single greatest impact on our ability to realize demand, we're also affected by quarantine restrictions in the international markets we traditionally serve. Brent will discuss this more in his remarks.

Pivoting from dealing with the immediate circumstances, we have also spent significant effort planning for our emergence from the crisis. While we don't know the pace of the return to demand for travel to Hawaii, we know that it will occur, but we also know that it will take years not months to get back to pre-COVID-19 levels.

With an uncertain demand recovery time line, our primary planning scenario focuses on being a smaller airline by about 15% to 25% next summer compared to 2019 levels. With this in mind, we are taking steps to right-size our company for this new baseline allowing us to build back the business over time from this smaller base.

Key to managing this is adjusting our staffing level, and on that front we are working through each work group and engaging with union representatives, where applicable. Voluntary separation packages have already been offered to our administrative employees, and early retirement options have offered to pilots.

Plans for other groups are in work. Our goal is to reduce the workforce through voluntary means to the extent feasible, but we acknowledge that it will – that it is likely we will need to proceed with in voluntary separations as well. We expect to issue WARN Act notifications to our employees who are at risk of being impacted by involuntary furloughs in the coming days.

Having to shrink the company that, our team has worked so painstakingly to build is heartbreaking, but it is essential to preserve the viability, competitiveness and success of our business over the long term. We'll manage through this and emerge strongly. We have also continued to have productive discussions with Boeing to re-phase our 787 order. While not finalized, we do not expect to put the first two 787s into service until 2022 or 2023.

As I think about the future, I know that demand for travel to Hawaii will return. While technology like Zoom and the emerging prominence of remote work may have a longer-lasting impact on business travel, the beauty of Hawaii can only be fully experienced in person. As the virus is brought under control, and the economy stabilizes, and eventually recovers, demand for leisure travel will return to its long-term growth trend. Our positioning as a premium leisure airline is ideal to be successful in this environment.

I'll now turn the call over to Brent to give you more details on our commercial outlook.

Brent Overbeek

Thank you, Peter and aloha, everyone. During the second quarter system revenue was down 91.6% year-over-year, on a 92.1% decline in capacity. For the quarter, passenger revenue was down 96% year-over-year with cargo and other revenue down 50% and 48% respectively.

From a low point in April, we saw gradual improvements in revenue as we progressed throughout the quarter. In North America with a 14-day quarantine for travelers coming into the state in place since the end of March, we've pared down our schedule to a barebones level and initially operated only two round trips per day, Los Angeles and San Francisco to Honolulu. Demand has returned somewhat as both Hawaii residents and visitors have begun to travel a bit more.

During the second quarter, we added Seattle back to the network and have since welcomed Portland, Sacramento and San Diego back in the third quarter. We were encouraged by the state of Hawaii's announcement on June 24 that provided the option for guests traveling from the mainland to be able to test out the quarantine effective August 1.

At that time, we had plans to reenter most of our mainland origin points. While we saw an initial increase in bookings for travel, particularly in early August, in the ensuing weeks as COVID cases on the mainland increased and details about the state's policy were sparse, demand unsurprisingly decelerated.

We've since adjusted our August schedule to be similar to the schedule for the second half of July and estimate we'll fly just under 20% of our planned North America schedule this quarter.

Looking beyond the summer, September book load factor is about a third of what it was last year, while October is about half of last year and subsequent months moderately improving throughout the remainder of the year. Needless to say, there's a fair amount of uncertainty around those numbers, given the status of quarantine here in Hawaii and the state of the pandemic in our key origin points.

Consistent with industry trends, velocity of bookings has slowed in recent weeks. For travel in the latter part of the year, bookings made during the month of June were roughly a third of the last year's levels and has basically been halved over the past several weeks.

Moving over to Neighbor Island. Performance steadily improved throughout the second quarter and we saw material improvement when the quarantine for travel within the state was lifted in mid-June. Load factors at the beginning of the quarter were running in the mid-teens. By May, they increased to the mid- to upper 20s and then in June in the mid-40s on additional capacity added in the back half of the month.

We've ramped up our Neighbor Island schedule and the latest plan for the third quarter has us flying about half of our 2019 schedule. Load factors have leveled off and our July load factor will end up similar to June's in the mid-40s figure. With our reduced schedule, we've been seeing booking volumes run about 40% of historical levels for closer in-travel periods but that tapers off further out and more closely correlates to the volume declines we've seen in our long-haul markets.

Regarding international, our plans for returning service remain uncertain, as there are government-mandated travel restrictions in effect in most of our international geographies, which in addition to the Hawaii quarantine essentially inhibit demand for travel to Hawaii.

As those foreign restrictions left, we will have the ability to welcome guests back to Hawaii. We are confident that Hawaii will remain an attractive destination for those geographies. Our expectation at this point, is that we would re-enter Japan and the Korea markets before, Australia and New Zealand.

Overall, in the third quarter, we're planning to operate about 15% of the ASMs we originally planned for at the start of the year. This estimate assumes we operate the same schedule in September, as we have planned for August. However, we are currently reviewing our schedule on an ongoing basis.

And we'll make adjustments to our network to align with the demand environment. We are ready to bring back more service, as demand warrants. Throughout our network we've capped our load factors at 70% or less, depending on aircraft type to promote physical separation on our aircraft and at the airport. This policy will remain in place, through at least the end of September.

The safety of our employees and guests is a top priority. And we'll continue to evaluate our policies. And make changes that we feel are necessary, to ensure their continued safety and gain their confidence, in resuming travel. Our team is working hard to adapt to this new environment, constantly adjusting our network and our policies to ensure we can succeed and continue to deliver the products and services that our guests value.

And with that, I'll turn the call over to Shannon.

Shannon Okinaka

Thanks, Brent. And thanks everyone for joining us today. Today we reported an adjusted net loss of $174.7 million for the second quarter or $3.81 per share, reflecting the continued impact of COVID-19 on our business. We closed the quarter with $761 million in cash and short-term investments, which includes the receipt of $263 million of CARES Act funding through the payroll support program.

This amount was below our estimate of $1 billion, due to the delay of a few financing transactions that took a little longer than expected. But as Peter mentioned, we recently closed two transactions, raising approximately $114 million, to the sale lease back of two A321neos as well as announced a WTC transaction, through which we expect to raise approximately $262 million which will put us above $1 billion.

The WTC is backed by six A321neos and two A330s. And we expect the price tomorrow morning and close next week. In addition to these transactions, we have the opportunity to take advantage of the economic relief program offered through the CARES Act. Our allocation of economic relief program loan is $364 million. And we expect to make a decision about the size of our draw, by the end of the third quarter.

The combination of these aircraft financings and the CARES Act loan, provide us with access to $1.5 billion in liquidity, which puts us in a comfortable position. While we believe this amount of liquidity is sufficient to get us through the worst of this crisis, we will also have four unencumbered A321neo aircraft, valued at approximately $216 million.

Our air traffic liability at the end of the quarter was $554 million, of which $116 million is related to travel in the third quarter. We continue to process refunds, which peaked in April and then declined in each subsequent month throughout quarter. In light of our deferrals of 787 PDPs, as well as non-aircraft CapEx we now expect our CapEx in the back half of 2020 to be between $9 million and $19 million totaling between $103 million and $113 million for the full year, which includes our last A321neos that was delivered in the second quarter.

Regarding cash burn, the second quarter daily cash burn on expenditures, excluding CARES Act funding, CapEx and refunds was $3.3 million as compared to the forecast of $3.6 million that we provided on our last call. Going forward, we're modifying the way we characterize cash burn expectations.

In addition to operating cash outflows and capital expenditures, cash burn figures will include debt service and interest payments and assumes cash flows from sales and ticket refunds net to zero. It will not include any impact from CARES Act funding or any new financing. Under this definition, for the third quarter we expect to burn approximately $3.2 million in cash per day as compared to $3.6 million in the second quarter.

As we shift our attention from short-term cash conservation to medium-term planning, our focus is on determining the right size for our business. As Peter mentioned, we're in the midst of determining and offering voluntary separation and early retirement options to our workforce to mitigate the need for involuntary options, which will be necessary to better match the size of our workforce with the estimated level of operations in the future.

To further manage our spend, the environments where we are long aircraft, we're ensuring close collaboration between our operations and network scheduling teams to spool up our operations in a way to maximize cost efficiency.

We're uncertain when we will next see positive net cash generation, but it's clear that reaching a positive position will require an improvement in demand conditions. While the time line for demand recovery remains uncertain, we are focused on rightsizing our airlines to enable us to be competitive and have the flexibility to grow as demand resumes.

With our leisure business model our delivery of authentic Hawaiian hospitality and focus on the Hawaii traveler, we're confident in our ability to emerge from this crisis and succeed in the long term.

And with that, we can open the call up for questions.

Question-and-Answer Session

Operator

Thank you. We will now be conducting question-and-answer session. [Operator Instructions] Our first question comes from the line of Hunter Keay with Wolfe Research. Please proceed with your question.

Hunter Keay

Hi, everybody. Thank you. Peter, are there – what are some of the long-term consequences or even benefits that you're expecting might be unique to Hawaii opposed to other vacation spots in say the lower 48? Are there any sort of like maybe quirky or unintended consequence-type things that you guys are expecting or planning for two to three years from now based on this situation?

Peter Ingram

That's an interesting question, Hunter. I don't know that I can think of any really significant ones. I think obviously in the short-term there was a lot of economic damage here in Hawaii as so many people are employed by the tourism sector, but the physical plant is largely intact in terms of hotels and other accommodations. There's some properties that have decided to take advantage of the extended downturn to do some renovations and that may provide some additional improvement.

I would hope that over time people are -- in the community are going to realize how crucial the tourism industry is for the overall state of the economy in Hawaii. And as we begin to try and recover and recover the tax base that supports the state government, I think, people are going to have an interest in building back tourism.

But I think a lot of people are really focused near-term right now on health consequences. And surprisingly a little bit to me have not understood some of the real long-term negative effects from both the health and social issue as well as an economic issue of an extended period of significant unemployment.

Hunter Keay

Okay. And then when PSP came around whenever it was March, April, obviously, it was just take the money and we'll figure this out later. It was such a dark time. And now we kind of know what this is now. We kind of know what this virus is. We don't know when it's going to get better but we kind of know what it is. So there's been some chatter of around two on PSP. Is it a little bit more complicated now as you think about potentially taking that money if there's say like service requirements attached to it and things like that?

I know you guys are largely exempt from a lot of that. But would the calculus be something like, hey, we can get another $300 million to maintain payroll for six months, but it might cost us $375 million because it's just going to impede our ability to take fixed costs out. So therefore stat as it may be it might not be the right decision. I know it's a little bit early to have this conversation potentially. But is that a fair way of thinking about it that the calculus to actually taking this money you've offered might be a little bit more complicated now than it was last time?

Peter Ingram

Yes. Hunter on that one, I think, our view is very closely aligned with what you've probably heard from the A4A and some of the other carriers that have made comments on this that it is -- I think it would be very difficult for us to turn down something that would prevent us or delay at least the need for us to pursue involuntary reductions for our workforce who I'd remind everyone has done absolutely nothing wrong. They didn't cause this crisis they're victims of it as our investors are victims of it.

So I do think we have to continue to think about making the long-term changes because as you said we do know more now than we did back in March and April. I think it's a lot more clear that this is going to take longer to build out of back in March. And the early part of April there was a lot of talk about V-shaped recoveries. I haven't heard anyone talking about a V-shaped recovery. If it is, this is the flattest pointy part of the V that I have ever seen.

And I think we're all keen to get moving forward. But in a world where the restrictions on a CARES 2.0 were no different from what we saw in the first version of CARES, I think it is pretty clear that the number of involuntary job losses in the industry would be a lot lower in -- at the end of March than they are likely to be at the end of September.

Hunter Keay

Thank you.

Operator

Thank you. Our next question comes from the line of Catherine O'Brien with Goldman Sachs. Please proceed with your question.

Catherine O'Brien

Hey, good afternoon everyone. Thanks very much for the time.

Peter Ingram

Sure.

Catherine O'Brien

Shannon, I just got a question on the unencumbered asset balance. I think you said as long as I heard correctly you'd have $216 million in unencumbered aircraft after the WTC transaction announced today. And I was just wondering are there other loyalty or other intangible assets that are not included in that balance?

And the reason I'm asking is really just to get some insight into the level of and what collateral you're looking to post if you do participate in the CARES loan program and what you're thinking of doing there? Thanks.

Shannon Okinaka

Hi Caty thanks for the question. For the CARES Act loan, we've been working with the U.S. Treasury on non-aircraft collateral, so specifically the loyalty program and so that -- while that wasn't included in my number for unencumbered assets, we are looking at that for financing with the treasury.

Other than the four A321neos that I mentioned, we do have other unencumbered assets, but I think those would be a little harder to finance. We have 14 717s as well as our ATR fleet. But I think for the most part right now from a market perspective, we're really focused on the 321neos and then like in the WTC the A330s.

Catherine O'Brien

Got it. And I guess in your preliminary conversations with the Treasury, I'm assuming that whatever valuation you've got on the loyalty would that be sufficient to take the entire allotment under that program?

Shannon Okinaka

Yes. We believe so -- I'm sorry I didn't answer another part of your question with other intangible assets. We have not yet looked to things like our brand for valuation or financing. But for the CARES loans specifically, where we stand today, we believe that the loyalty program is sufficient.

Catherine O'Brien

Great. And if I could ask one quick one on cost. Given the fixed cost nature of this business not surprising that you're calling out operating costs will not decline in line with capacity in the third quarter. But could you give any color on how operating costs decline relative to capacity in the third quarter will compare your performance in 2Q?

Should we be expecting to see a relatively smaller gap between operating costs and capacity declines in third quarter versus the second quarter as you ramp cost cutting measures or any other puts and takes there? Thanks so much for the time.

Shannon Okinaka

All right. We haven't done a lot of analysis comparing the second quarter to the third quarter in the way that you're asking the question. We've been focused on -- as we ramp up some of our flying, as we pulled out some of our flying, how to do it in the most cost-efficient way, so our analysis has been pretty different than what we've done before. Normally when we look at cost and how to control costs a big calculus -- a big factor in that calculus is aircraft ownership costs. And at this point, when we look at spooling back our operations, aircraft ownership is for the most part a sub-cost.

So when we -- answering your question is a little difficult, because I don't know how much capacity we'll have in the third quarter. But what I can tell you is that, we are looking at our cost in a different way in that, when we bring back our flying, we're focused on the cost efficiency of that flying, which is more around labor and maintenance versus aircraft utilization, which like I said, played a big factor prior in our cost calculus.

Catherine O'Brien

Understood. Thanks for the time, Shannon.

Shannon Okinaka

Thanks.

Operator

Thank you. Our next question comes from the line of Michael Linenberg with Deutsche Bank. Please proceed with your question.

Michael Linenberg

Hey. Good morning everyone. Two here. Shannon, the cash burn of $3.2 million for the quarter, underlying that forecast or guide, is that the quarantine is lifted on September 1, presumably? And if it were not to be lifted, how does that -- do you have a sense of how that would actually change? I mean, I'm just not sure how much would actually book up in the month of September and beyond actually.

Shannon Okinaka

Yes. Thanks, Mike. Actually, because we were a little hesitant to try and guess when the quarantine would be lifted, for that cash burn number what we did was, we just assumed that for the quarter the cash flows from sales net out with the refund. So we had just assumed a net zero there. Because you're absolutely right that, the level of cash inflows from revenues really does depend on when that quarantine is lifted, or if there's some exception with testing and improving negative results. So I guess it's at zero.

Michael Linenberg

Okay. And then on that note, was it zero in the June quarter, or was it in negative territory?

Shannon Okinaka

It was in negative territory in the June quarter, the second quarter.

Peter Ingram

Okay, great. And then just, Mike, I may just chime in on that as well and I think Brent alluded to this in his remarks. When we were originally looking at the August 1 date, we had a pretty sizable ramp-up in our schedule anticipating the demand, some of which we began to book early on, but which faded a little bit. As we go into September, with the opening, you're moving into a seasonally weaker time of year, we've now essentially lost the entire summer bar, potentially one long weekend.

And, I think, given the sort of progress of the virus on the mainland and the uptick in cases and you see in markets that are far away from Hawaii and its quarantine that booking trends have slowed down, we're a little bit more tempered on our expectations for what we think September is, relative to what we thought August might be back six or seven weeks ago.

Michael Linenberg

That's very helpful Peter. And then just maybe one quick one to you. The two new Board members are you increasing the size of your Board? Are they replacements? And if you are increasing the Board why at this juncture? Why now?

A – Peter Ingram

We have -- the two new Board members will be increasing the size of our Board. We did have one Board member leave the board for personal reasons last year, so we had gone down one, now we're going up with two. The reason for adding those Board members is we think they're going to be terrific assets to the Board overall. They bring a lot of expertise both in the airline industry in the case of Jayne Hrdlicka and expertise in terms of technology and a consumer-focused industry like Mike McNamara and we think they're both welcome additions and look forward to having them on Board.

Michael Linenberg

Great. Thanks. Thanks, everyone.

Operator

Thank you. Our next question comes from the line of Joseph DeNardi with Stifel. Please proceed with your question.

Q – Joseph DeNardi

Hi, good evening. Peter can you just talk about I think you mentioned that from a planning standpoint you're thinking about capacity summer of next year being maybe 20% less than pre-COVID. Can you just talk about maybe why that's the right number how much rigor went into that? I mean it's generally in the ballpark of what some of your peers are talking about, but if there's anything more specific that gives you visibility into that? And is there a line at which you kind of can't get below in terms of your size where it just becomes too economically expensive to shrink below a certain level? Thank you.

A – Peter Ingram

Yes. Thanks Joe. Let me take both parts of that and then I may see if Brent has any thoughts to add after I opine. I would say we've looked at it a couple of ways. We don't have -- there is so little information we have that is specifically gives us insight into demand particularly with the quarantine order being in place for the past four months now, four-plus months. So we had to look at this a couple of ways. Part of it was top down just looking at general macro expectations and understanding that there is some economic that has been damaged. Another one is a little bit more bottom-up and thinking about what -- how routes performed before and what has changed and what our expectations for some of them would be and so that does raise some questions about some things that were maybe marginal performers before, maybe they're not going to be able to manage marginal anymore and that route may not be there or in the case of some of the international markets the perspective of those nations and how they're dealing with the crisis tempers our view about when things -- the timing of when things will come back. So it's a little bit more art than science at this point, I think -- but I think we have tried to be thoughtful about our art.

As to the second part of your question, I think you are right that there is a pace at which -- a place at which it's too much to really think about shrinking that far and being able to manage down. And I've read some of the commentary after other carriers have reported this quarter about can you bring your cost structure down and be able to operate at a similar per ASM cost structure when you're operating smaller, it's counter to the thinking but it means you really got to go and think about getting some of your real fixed costs out and getting your infrastructure costs out.

In this environment that is a little bit more doable than when we're thinking just in normal times. And we always try and do things bottom-up, but it's hard to shape the instinct that sometimes when you're doing budgets about rolling things forward and just thinking about the changes.

So I think we can do more of that, but there is a point, at which we've built an infrastructure that it is -- it really supports a revenue base that can't go down too much more and that was part of our thinking about what we need to do in terms of planning for the long term.

And just the last point on that, we refer to it as a planning assumption as opposed to a forecast. And that is a specific choice of words that mean something to us, which means we really don't have level of precision that we would use for something that we would internally refer to as a forecast. So we use it as a planning assumption and it's something against we will measure change going forward.

Brent Overbeek

Yeah, just to…

Joseph DeNardi

Go ahead.

Brent Overbeek

I don't have a whole lot to add other than I think Peter has been listening to what we've been saying to him over the last several months.

Joseph DeNardi

Got it. Yeah. No that's helpful, Peter. Just in the context of American's partnership with JetBlue, is there -- are there any opportunities, or ways that you can do something similar to that and leverage your Neighbor Island network if there's going to be a period over the next few years, or maybe there's too much capacity on the long-haul side of your business? Thank you.

Peter Ingram

Sure. We -- as you probably know we carry the code of -- in normal times at least, we carry the code of multiple airlines on the Neighbor Island, part of our network including international airlines but also including each of American, Delta and United and they utilize that code to different extents but that is -- it's always been for us a really valuable network asset and we would continue to look for ways to take advantage of that in the future.

Joseph DeNardi

Thank you.

Peter Ingram

Thanks Joe.

Operator

Thank you. Our next question comes from the line of Helane Becker with Cowen. Please proceed with your question.

Helane Becker

Thanks very much operator. Hi everybody, and thank you very much for the time this afternoon. So Peter one of the big issues that you were just addressing was the fact that there's a lot of damage being done to the economy in Hawaii, and you're one of the state's largest employers. When you meet with the governor, if you do meet with the governor, what doesn't he understand about keeping the state closed for extended periods of time and not trying to -- I don't know deal with the virus in maybe a different way than keeping everybody out of the state?

Peter Ingram

Yeah. So I have -- in the last four, five months, I've spent a lot more time with the governor than I ever did before this. I will tell you, I -- the governor is in fairness to him he is very thoughtful about the challenges that the state is facing. I think he does understand the economic damages and the impact that this is going to have not only on businesses like ours, but the hotels restaurants and it even goes beyond things that you would think of. The biggest demand market for the agriculture business in the state is the hotels. If the hotels aren't getting that fresh produce from local Hawaii agriculture, then that local agriculture is really not economically set up to compete in export markets. It really needs that demand. So it is really a comprehensive impact.

I would say, it is buffered a little bit. I think our business has obviously been hit dramatically. Small businesses that operate restaurants or retailers that are associated for tourism had been affected dramatically. I think for the average working person in a lot of these businesses, the impact has been buffeted a little bit by the fact that the unemployment insurance has been there although it hasn't always been as reliably delivered, but at least it is available including the $600 supplement from the federal government that is expiring.

So, I'm not sure the workers that all those businesses have felt it as much as the owners of those businesses, but I do think that the governor understands all that. I think he also knows that this is a -- this is a fragile place in some ways in terms of health care capability. It is a -- there are a lot of multigenerational families living together. There is a closeness.

And I think islands and isolated places sometimes have different responses to how you deal with a disease like this just based on the nature of the way people live and that is not that is not to say that it's right or wrong I think these are very difficult decisions. I do think and certainly share my views with the governor that the economic consequences are not something that will be passing there something that are very long term. And some of this is going to be difficult for the state to recover from over the next several years. And I think that's something that Governor Ige and other local leaders are going to have to think about as they craft their decisions going forward.

Helane Becker

Thank you, very much. I really appreciate that. And then I have just one for Shannon. Do you -- I don't think you said anything about upcoming maturities and I think you might have one aside from the 364-day loan coming up in the early part of 2022. I'm just wondering if you could mention that for lack of a better word.

Shannon Okinaka

Yes. Thanks Helane. So for 2020, our total debt service is about $75 million. And for 2021, it's just a little over $100 million and that's everything. It's all of our debt.

Peter Ingram

Helane, we didn't take out one of the 364-day loans, so we don't have to worry about refinancing that like you've seen from some of the other carriers.

Helane Becker

Right. Okay.

Shannon Okinaka

Maybe you're thinking about revolver? We drew down on our revolver and that right now contractually expires in 2022.

Helane Becker

Okay. And then just real quickly, I don't think you said how many WARN notices were going out. Do you have that number?

Peter Ingram

We have -- we're -- what we said about the WARN notices is that we'll be releasing them in the coming days. We haven't given a number yet. And I haven't shared a number with our team yet, so I wouldn't feel comfortable sharing that number first on this call.

Helane Becker

Okay. Well, that makes sense. Thank you. Thanks everybody for your time.

Peter Ingram

Thank you. Helane.

Operator

Thank you. Our next question is a follow-up from Joseph DeNardi with Stifel. Please proceed with your question.

Joseph DeNardi

Thanks. Shannon, can you just maybe quantify on the sale leaseback what the lease terms are relative to maybe where the market was pre-COVID? Thank you.

Shannon Okinaka

Hi, Joe. I don't have the specifics in front of me, but obviously, what I can say is that unfortunately the terms now are not near where we were last year with below 1% yen financing. So, unfortunately, the terms are not quite not good. I just don't have…

Peter Ingram

Yes. But Joe the overall financing on that I think -- and Jay I'm looking at Jay Shafer as I say this right now, I think the way Jay and our treasury team characterized these two sale leasebacks is, the terms we got were something that would have been in the consideration set a year ago.

So it really wasn't as onerous as we feared and that's why we initially started with -- the reason those two transactions were done on a bit of a serial basis is as we started working through initially an idea of doing one of those financings we were -- we went back and did a second deal with the same lessor and we thought that would be a good source of capital for us at this moment.

Joseph DeNardi

Got it. Thanks, Peter.

Peter Ingram

Thanks, Joe.

Operator

Thank you. We have reached the end of our question-and-answer session. I'd like to turn the call back over to Mr. Ingram for any closing remarks.

Peter Ingram

Mahalo again to everyone for joining us today. We appreciate your continued interest. Aloha.

Operator

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.