Brad Difiore Managing Director Ailevon Pacific Aviation Consulting Brad.Difiore@Ailevonpacific.Com

#GTSHAWAII 1 Critical Access: The State of Air Service

Brad DiFiore Managing Director Ailevon Pacific Aviation Consulting [email protected]

#GTSHAWAII Estimated economic impact of new air service

An additional 785,000 seats versus 2017

$1.4 Billion in direct visitor spending

Sources: HVCB & HTA estimates for CY2018 versus CY2017 based on schedules loaded as of June 2018

3 10 years of growth across all regions

10 YEAR SEAT GROWTH BY REGION Year ending 2008 to 2018 (millions) 20.0 18.0 16.0 14.0 12.0 10.0 14.5 +2% CAGR 8.0 12.2 6.0 4.0 0.6 +9% CAGR 2.0 0.3 1.7 2.7 +4% CAGR 0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Asia Australasia North America

Source: DiioMi Schedules

4 New Service Highlight: Boston on Hawaiian in Spring 2019

BOS-HNL = 5,095 miles

• The longest US domestic market • The largest domestic unserved market

Source: Hawaiian Airlines Press Release

5 New Service Highlight: Delta to add Detroit-Honolulu

• Begins June 29, 2019 • 3-5 days per week, year-round

6 New Service Highlight: Southwest Soon

Kauai Sacramento Honolulu Oakland Maui San Jose Kona San Diego

7 New and ongoing challenges to the aviation sector

8 But where are we on the Hawai‘i Air Service Cycle?

Rising Room Rates Increased Less Lodging Budget for Demand Air

Airlines Lower Air Add Geographic diversification Demand Capacity continues to disrupt the Air Service Cycle.

A strong global economy may Increased Airlines Air Reduce Demand Capacity mask long-term challenges…but probably not.

More Fewer Budget for Visitors Air

Lower Higher Room Vacancy Rates

9 North America

10 Since we met last year, Hawai‘i has welcomed a new U.S. airline and multiple new routes

New airlines on existing routes Airline Market Start Date Other carriers Sun Country HNL-LAX May 2018 AA, AS, DL, HA, UA American HNL-ORD Dec 2018 UA Sun Country HNL-PDX Nov 2018 AS, DL, HA Alaska KOA-SFO Dec 2017 UA Delta LIH-SEA Dec 2017 AS Air Canada LIH-YVR Dec 2018 WS Hawaiian OGG-PDX Jan 2018 AS Hawaiian OGG-SAN May 2018 AS All-new routes Hawaiian BOS-HNL April 2019 - 2+ airlines Hawaiian HNL-LGB May 2018 - Alaska KOA-SMF Dec 2018 - 1 airline Delta OGG-SLC Dec 2017 -

New Airline:

Note 1: Hawai‘i – US routes that started or will start after September 2017 Source: DiioMi Schedules and Schedule Mapper

11 Traffic from mainland US continues to rise while inter-island traffic remains below the 2009 peak

MAINLAND AND INTER-ISLAND DEMAND - 10 YEAR TRENDS Year-ending Daily passengers; 2008 to 20181 19,112 Daily Passengers

14,313 Daily Passengers +34%

7,303 Daily Passengers 6,826 Daily Passengers

-7%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Mainland Inter-Island

Note 1: YE 1Q 2018 Source: DiioMi Schedules

12 Strong West Coast economies have driven visitor growth

TOP 15 STATES WITH THE HIGHEST 10 YEAR HAWAI‘I DEMAND CHANGE BY STATE PASSENGER GROWTH TO HAWAI‘I Daily Passengers Rank State 2008 20181 # Change 1 California 5,608 7,988 2,380 2 Washington 1,223 1,721 499 3 Oregon 661 955 294 4 Nevada 733 929 196 5 New York 261 457 195 6 Texas 611 805 194 7 Utah 269 419 150 8 Colorado 383 509 127 9 Alaska 140 239 99 10 Arizona 496 584 88 11 Florida 302 368 67 12 Minnesota 216 280 63 13 Massachusetts 162 223 61 14 Georgia 200 253 53 15 Idaho 52 101 49

Note 1: YE 1Q 2018 Source: DiioMi O&D summary, Mapchart.net

13 All airports have seen significant growth from mainland markets, with Kaua‘i experiencing the most growth

10 YEAR US MAINLAND CAPACITY TRENDS BY AIRPORT Year-ending 2008 to 2018; Annual seats (millions) 10.0 10 YEAR CHANGES 9.0 Annual 8.0 2.4 Total Island Growth 7.0 2.1 2.1 2.1 Growth 1.8 Rate 1.6 1.7 1.0 6.0 0.7 1.3 1.5 1.5 0.6 0.7 Kaua’i (LIH) 9% 127% 1.2 0.6 0.6 1.2 5.0 0.4 0.6 0.8 0.9 0.9 0.4 0.4 0.5 0.6 0.7 0.6 0.6 0.7 Hawai‘i 4.0 0.5 0.6 Island 7% 100% 3.0 (KOA + ITO) 4.3 4.4 4.6 4.6 4.6 4.7 2.0 4.2 3.9 4.0 3.9 4.1 Maui (OGG) 6% 86% 1.0 O’ahu (HNL) 1% 12% 0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 O'ahu (HNL) Hawai'I Island (KOA+ITO) Kaua'I (LIH) Maui (OGG)

Source: DiioMi Schedules

14 With all the recent growth, yields have been consistent…so far

HAWAI‘I TO US - SEAT VS. YIELD GROWTH 10 YEAR TRENDS1 Rolling four quarter seat capacity vs. actual yield by quarter 40,000 14.0

38,000 12.0 36,000 10.0 34,000 8.0 32,000 6.0 30,000 4.0 28,000 The market has responded well to additional capacity

26,000 as yields have been fairly constant 2.0

24,000 0.0

Q1 2010 Q1 2015 Q4 Q1 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 Daily Seats Yield ¢

Note 1: Data includes mainland and intra-island capacity Source: DiioMi Airline Performance Summary

15 Capacity growth will eventually moderate, but not quite yet

FUTURE SEAT GROWTH BETWEEN HAWAI‘I AND MAINLAND 12 month rolling average vs. % change from YE 2016 (Base) Today 800,000 16%

700,000 Southwest’s impact will be 14% 600,000 felt in 2019 12% 500,000 10%

400,000 8%

300,000 6%

200,000 4%

100,000 2%

0 0%

(100,000) -2% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 Annual Seats; YE Growth from YE 2016

Source: DiioMi Schedules

16 Continued Canadian growth has come with lower yields

HAWAI‘I TO CANADA - 10 YEAR SEAT CAPACITY AND FINANCIAL TRENDS Year-ending 600,000 0.08 +16% capacity in 5 years 0.07 500,000

ending) 0.06 - 400,000 Yield: USD$ 0.05 300,000 0.04 0.03 200,000 0.02 100,000 0.01 80% 86% 85% 86% 85% 84% 85% 83% 84% 89% 90% 0 0.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YE 1Q YE 1Q

Onboards and Seats (Year Seats and Onboards 2018 2019 Onboards Seats Future Seats Yield Load Factor

Note 1: Future seats are subject to change by each airline Sources: Diio Mi T100, Airport IS - IATA

17 Inter-Island

18 Lower fares drove higher inter-island demand in 2017-18

INTER-ISLAND DAILY PASSENGERS AND AVERAGE FARE – 10 YEAR TREND Year-ending 2008 to 20181

8,000 $90 $79 $79 $79 $78 $73 7,000 $71 $72 $72 $80 $64 $70 6,000 $57 $60 5,000 $47 $50 4,000 Expect market dynamics to $40 3,000 change if/when Southwest enters $30 2,000 $20

1,000 $10 7,303 7,466 6,519 6,393 6,339 6,322 6,403 6,287 6,520 6,830 6,826 0 $- 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Daily Passengers Average Fare

Note 1: YE 1Q 2018 Source: DiioMi O&D summary, Mapchart.net

19 But, Hawaiian now controls 96% of the the inter-island market

INTER-ISLAND MARKET SHARE - PRE ISLAND AIR EXIT By airline; YE 3Q 2017 Mokulele 4%

Island Air 11% Southwest Airlines next??

“We will start interisland service once we build up our network and have enough frequency to make it meaningful,”

Tom Nealon, President of Southwest Hawaiian Airlines (Pacific Business News) 85%

Source: DiioMi O&D Summary; www.bizjournals.com, www.swamedia.com

20 International Markets & Carriers

21 Stagnant international capacity is growing again

HAWAI‘I - INTERNATIONAL CAPACITY CHANGE - 10 YEAR TREND Rolling 12 month average vs. Seat % change from base (YE 2008) 350,000 80%

300,000 70%

60% 250,000

50% 200,000 40% 150,000 30% 100,000 This growth is coming mostly in existing markets 20% 50,000 10%

0 0%

(50,000) -10%

Jun 2017 Jun Jun 2009 Jun 2010 Jun 2011 Jun 2012 Jun 2013 Jun 2014 Jun 2015 Jun 2016 Jun 2018 Jun

Apr 2009 Apr 2010 Apr 2011 Apr 2012 Apr 2013 Apr 2014 Apr 2015 Apr 2016 Apr 2017 Apr 2018 Apr

Feb 2009 Feb 2010 Feb 2011 Feb 2012 Feb 2013 Feb 2014 Feb 2015 Feb 2016 Feb 2017 Feb 2018 Feb

Oct 2011 Oct Oct 2009 Oct 2010 Oct 2012 Oct 2013 Oct 2014 Oct 2015 Oct 2016 Oct 2017 Oct 2018 Oct

Aug 2014 Aug Aug 2009 Aug 2010 Aug 2011 Aug 2012 Aug 2013 Aug 2015 Aug 2016 Aug 2017 Aug 2018 Aug

Dec 2010 Dec Dec 2008 Dec 2009 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec

YE Seats % Change since base (YE 2008)

Source: DiioMi Schedules

22 In a matter of a decade, international demand increased by 32%

TOP 20 - HAWAI'I INTERNATIONAL MARKETS Year-ending 2008 vs. 20181 4,510

3,942 1,552 2008 6,997 daily int’l passengers 1,183

818 2018 9,247 daily int’l passengers 731

392 292 223 152 200 139 160 171 85 126 73 76

57 69 65 29 64 52 10 43 29 36 33 33 33 34 32 12 30 6 29 17 26 25

China

Japan

France

Taiwan

Mexico

Thailand

Vietnam

Australia

Canada

Germany

Indonesia

Singapore

Philippines

Switzerland

Hong Kong Hong

South Korea South

New Zealand New

Marshall Islands Marshall

United Kingdom United French Polynesia French 14% - 31% 109% 382% 417% 225% 44% -33% -55% 128% -16% 404% 46% -79% 1% -2% 155% 389% 68% 5% 2018 Daily Passengers 2008 Daily Passengers Demand Change %

Note 1: YE 2Q 2018 Source: Airport IS - IATA

23 Japan continues to see moderate growth over the last few years, with strong load factors

HAWAI‘I TO JAPAN - 10 YEAR SEAT CAPACITY AND FINANCIAL TRENDS Year-ending 2,500,000 0.25 +16% Capacity

ending) 2,000,000 0.20

- Yield: Yield: USD$ 1,500,000 0.15

1,000,000 0.10

500,000 0.05 80% 79% 84% 81% 81% 78% 82% 84% 86% 84% 84% 0 0.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YE 1Q YE 1Q Onboards and Seats (Year Seats and Onboards 2018 2019

Load Factor Onboards Seats Future Seats Yield

Note 1: Future seats are subject to change by each airline Sources: Diio Mi T100, Airport IS - IATA

24 Change is the constant for the Japan market

HAWAI‘I - JAPAN MARKET SHARE HAWAI‘I - JAPAN MARKET SHARE By airline; Year ending December 2008 By airline; Year ending 2Q 2018 China Scoot Korean Air Continential Airlines 1% Other 1% China Airlines 1% Air Asia X 2% 1% 5% 4% All Nippon United United Airways 5% 5% 6% Korean Air 5% Japan Airlines 28%

2008 All Nippon 2018 Airways 13% Northwest Japan Airlines 23% 59%

Hawaiian Delta 23% 18%

3,942 daily passengers 4,509 daily passengers 3,942 daily passengers Note 1: Combined Delta and Northwest and United and Continental Sources: Diio Mi T100, Airport IS - IATA

25 Two MAJOR developments for Japan 2019

26 Chinese demand has never caught up to capacity offered

HAWAI‘I TO CHINA - SEVEN YEAR SEAT CAPACITY AND FINANCIAL TRENDS Year-ending 180,000 0.09 160,000 0.08

ending) 140,000 0.07 -

120,000 0.06 Yield: USD$ 100,000 0.05 80,000 0.04 60,000 0.03 40,000 0.02 20,000 0.01 66% 83% 74% 61% 65% 68% 65% 65% 0 0.00 Onboards and Seats (Year Seats and Onboards 2011 2012 2013 2014 2015 2016 2017 YE 1Q 2018YE 1Q 2019 Onboards Seats Future Seats Yield Load Factor HA exits China on Note 1: Future seats are subject to change by each airline October 8 Sources: Diio Mi T100, Airport IS - IATA

27 Taiwan has been stable over the last few years

HAWAI‘I TO TAIWAN - 10 YEAR CAPACITY AND FINANCIAL TRENDS Year ending 50,000 0.12 45,000 0.10 40,000 China Airlines exited the market 35,000 0.08 30,000 in 2010 and returned in 25,000 February 2013 0.06 20,000 15,000 2x weekly 0.04 A330 10,000 0.02 5,000 0 0.00 2008 2009 2010 - - - 2013 2014 2015 2016 2017 YE 1Q YE 1Q 2018 2019 Seats Future Seats Yield

Note 1: Did not include T-100 as there was a filling error with China Air in 2017 Note 2: Future seats are subject to change by each airline Sources: Diio Schedules, Airport IS - IATA

28 Korean capacity has been somewhat erratic

HAWAI‘I TO SOUTH KOREA - 10 YEAR CAPACITY AND FINANCIAL TRENDS Year ending Jin Air 400,000 enters ICN 0.12 Hawaiian & Asiana 350,000 enter ICN 0.10 300,000 0.08 250,000 Only Korean Air in ICN 200,000 0.06 150,000 0.04 100,000 0.02 50,000 0 0.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YE 1Q YE 1Q 2018 2019 Seats Future Seats Yield

Note 1: Did not include T-100 as there was a filling error with Jin Air Note 2: Future seats are subject to change by each airline Sources: Diio Schedules, Airport IS - IATA

29 Australia has performed well on steady capacity

HAWAI‘I TO AUSTRALIA - 10 YEAR SEAT CAPACITY AND FINANCIAL TRENDS Year-ending 450,000 Jetstar exits BNE- 0.10 HNL: Oct 2016

400,000 0.09 ending) - 350,000 0.08

300,000 0.07 Yield: USD$ 0.06 250,000 0.05 200,000 0.04 150,000 0.03 100,000 0.02 50,000 0.01 73% 75% 77% 76% 84% 86% 83% 78% 79% 75% 76% 0 0.00

Onboards and Seats (Year Seats and Onboards 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YE 1Q YE 1Q 2018 2019 Load Factor Onboards Seats Future Seats Yield

Sources: Diio Mi T100, Airport IS - IATA

30 Both Air New Zealand and Hawaiian have added 1-3 weekly flights to AKL starting from 2Q 2018

HAWAI‘I TO NEW ZEALAND - 10 YEAR SEAT CAPACITY AND FINANCIAL TRENDS Year-ending

180,000 0.10 +3 weekly

160,000 flights 0.09 ending) - 140,000 0.08 120,000 0.07 Yield: USD$ 0.06 100,000 0.05 80,000 0.04 60,000 0.03 40,000 0.02 20,000 0.01 56% 80% 84% 87% 87% 74% 75% 74% 73% 78% 79% 0 0.00

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YE 1Q YE 1Q Onboards and Seats (Year Seats and Onboards 2018 2019 Onboards Seats Future Seats Yield Load Factor

Sources: Diio Mi T100, Airport IS - IATA

31 Changing Dynamics/ Changing Opportunities

32 Accommodation inventory drives airline capacity

• Airline capacity is very flexible and responds quickly to market conditions.

Airport capacity will also impact airline growth

33 Fewer opportunities for new international routes in the near future

HAWAII'S TOP 30 UNSERVED INTERNATIONAL MARKETS By region; Year ending 2Q 2018 Additional capacity in 71 66 65 Hong Kong and London remain top unserved Japan 55 strategic priorities, but are challenging markets is a potential benefit of JAL/HA JV 47 42 42 41 40 36 36 32 32 28 28 28 27 25 23 23 23 22 22 22 21 19 19

16 16 16

Bali

Paris

Perth

Zurich

Busan

Osaka

Laoag

Sendai

Regina

London

Victoria

Ottawa

Frankfurt

Bangkok

Komatsu

Kelowna

Montreal

Okinawa

Adelaide

Winnipeg

Hiroshima

Singapore

Saskatoon

Wellington

Hong KongHong

GoldCoast

Amsterdam

Guangzhou

Christchurch Ho Chi Ho Minh YUL YYJ HKG LHR LAO BKK YLW FRA OKA PUS YWG ADL SIN SDJ PER ITM YXE CHC HIJ CDG AMS YOW KMQ SGN ZRH DPS YQR WLG OOL CAN North America Europe Asia Australasia

Sources: Airport IS - IATA

34 Trends still holds true … New technology means new opportunities

• Carriers with B787s and A350s on order offer Hawai‘i with interesting international growth opportunities

• A320NEO and B737MAX offer shorter-haul options

B787, A330, A350, A380 B737 MAX & A320 NEO Long-Haul Markets Mainland and South Pacific Markets

35 Ultimately, Aircraft Performance Still Drives Route Options

• Economic factors, along with aircraft capability, limit the markets airlines will choose to deploy aircraft in

Europe is a major challenge

6,000sm • ETOPS Restrictions • Crew Time 7,500sm 767 A330 • Fuel Price 747 • Aircraft Configuration 777 • Aircraft Value vs. Opportunity 787 A350

36 2019 will be a “shake things up” kind of year Southwest entry ANA A380 JAL/HA Joint Venture More A321neos for Hawaiian

Accommodation inventory drives airline capacity

37 Mahalo!

Brad DiFiore Managing Director [email protected]