Q1 2024 Hawaiian Holdings Inc Earnings Call

Participants

Jay Schaefer; Vice President & Treasurer; Hawaiian Holdings Inc

Peter Ingram; President, Chief Executive Officer; Hawaiian Holdings Inc

Brent Overbeek; Executive Vice President & Chief Revenue Officer; Hawaiian Holdings Inc

Shannon Okinaka; Chief Financial Officer, Executive Vice President; Hawaiian Holdings Inc

Conor Cunningham; Analyst; Melius Research LLC

Michael Linenberg; Analyst; Deutsche Bank

Helane Becker; Analyst; TD Cowen

Daniel McKenzie; Analyst; Seaport Research Partners

Christopher Stathoulopoulos; Analyst; Susquehanna International Group, LLP

Presentation

Operator

Greetings and welcome to the Hawaiian Holdings Inc. First Quarter 2024 financial results call time (Operator Instructions) As a reminder, this conference is being recorded and it is now my pleasure to introduce your host, Jay Schaefer, Vice President and Treasurer. Thank you. You may begin.

Jay Schaefer

Thank you, Camilla. Hello, everyone, and welcome to Hawaiian Holdings First Quarter 2024 Results Conference Call. With me in Honolulu are Peter Ingram, President and Chief Executive Officer, Brent Overbeek, Chief Revenue Officer, and Shannon open, al-Qa Chief Financial Officer. Peter will provide an overview of our performance. Brent will discuss revenue and Shannon will discuss costs and the balance sheet. At the end of the prepared remarks, we will open the call up for questions by now everyone should have access to the press release that went out about four o'clock Eastern time today. If you have not received the release, it is available on the Investor Relations page of our website, Hawaiian Airlines.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 statement. And these include the most recent annual report filed on Form 10 K. I will now turn the call over to Peter Mahalo

Peter Ingram

Hello everyone, and thank you all for joining us today. As always, I want to thank our team for an incredible job in the first quarter in a quarter that featured some operational and commercial challenges. We made great progress on major initiatives and saw important improvement in some key operational metrics early this year, a number of very important investments, ones like StarLink, our work for Amazon and the seven eight seven that we've been talking about on these calls for some time began to come to fruition. I'll talk more about these in a moment. While I am sure the pending merger with Alaska Airlines is a topic of great interest. We don't have anything material to share today beyond what we have already publicly disclosed, we received shareholder approval for the combination in February and are working diligently to respond to the Department of Justice's second request which we received in early February. Our aim is to comply with that request as soon as possible, and we are making steady progress to that goal.
On March 27, Hawaiian and Alaska disclosed a timing agreement with the DOJ and which we agreed not to consummate the merger until 90 days after the date on which both parties have certified substantial compliance with the second requests. More information about this and other recent merger related events can be found in our SEC filings. The early part of this year has featured some major milestones in the development of our fleet. As of this month, we have two seven eight sevens in service and we flew our first seven eight seven revenue flight between Honolulu and San Francisco on April 15. Our second, A330 freighter was also delivered and has commenced revenue operation. Freighter flying is going well, and we look forward to continued expansion of the fleet and network. Over the course of the year, we've completed installing StarLink in-flight connectivity on all 18 of our Airbus A321 neos and are working toward certification for the A330 so that we can complete installations on that fleet later this year. As promised, the StarLink product sets a completely new standard for in-flight connectivity and the response from our guests has been incredibly positive.
On another positive note, we expect our full A321 neo fleet to be available for service within the next couple of weeks. Based on current engine availability, including the return of some engines from overhaul visits.
Brent will talk about our commercial performance in more detail, but I'll hit a couple of highlights overall the topping of our revenue guidance in the first quarter reflects generally strong demand for travel to Hawaii in the majority of our markets, while some core parts of our network, notably Maui and Japan have room to improve. The aggregate demand we're seeing across our portfolio of routes is encouraging. With the additions to our fleet. We are launching some new service in May and the initial customer response to our flights between Salt Lake City and Honolulu, as well as between Sacramento and both Cona and Wahoo A. has been very encouraging.
We are also seeing good demand for additional seasonal frequencies that we've added to existing routes like Austin, Boston, Las Vegas, LAX and American Samoa. We've talked previously about some of the challenges we faced with operations in 2023, mostly Bruton rooted in factors outside of our control. A key theme for us this year is ensuring that we get back to industry-leading on-time performance and baggage delivery, things that we know we excel at when not facing external headwinds. We saw some tangible results from these efforts in Q1 as reliability improved month by month through the quarter, including hitting 87% on-time arrivals in March, which should rank us near the top of the industry for the month.
We're also working on initiatives to handle disruptions, better, improve our call center experience and introduce new self-service options for guests. I'm excited about the progress we're making on this work first because it matters to our guests and second because running a smooth, reliable operation, has a positive impact on costs.
Shannon will speak more about our costs, but I want to underscore that we continue to focus on returning to profitability, the investments that we are making and the initiatives that we are pursuing play a strong foundation for financial resilience. There's a lot going on in 2024 with exciting new projects. In addition to the pending merger, my focus is on making sure that we don't lose sight of the fundamentals. Safety running a great operation and sharing a low with our guests. While we execute against a lot of initiatives, I'm grateful to my leadership team and to all of the employees of Hawaiian for keeping a daily unrelenting focus on those fundamentals, especially safety during such a busy time.
With that, I'll turn the call over to Brent to go over our commercial performance and outlook in more detail.

Brent Overbeek

Thank you, Peter. And Thank you, everyone. As Peter mentioned, demand remained strong across most of our network. In the first quarter. Total revenue was up 5.4% as we flew 2.7% more capacity versus the same period in 2023. We saw good close-in demand and strong fares driven by continued strength in our premium cabin system. Resin was up 2.6% year-over-year for the first quarter, which, as Peter mentioned, was above our guidance beginning and our first quarter performance by geography, North America continues to perform well and the overall healthy demand was augmented by two factors. First, accommodating other airlines passengers impacted by the MAX nine grounding, and second by the timing of Easter, which on a year-over-year basis push more traffic into the first quarter.
Turning to Japan, after seeing demand ramp up through the third quarter of 2023, we have seen the Japan point of sale demand recovery flat, driven by the challenges of a weekend compounded by high lodging rates in Hawaii. Somewhat offsetting that weakness, we've been pleased with US point-of-sale demand, which has backfilled some of the gap in Japan originating demand. We expect that US point-of-sale strength to remain robust while the exchange rate environment persists. The rest of our international markets are seeing similarly strong US point-of-sale demand. However, international resume is down year over year as lower yields offset improved load factors compared to a very strong first quarter of 2023. Neighbor Island saw strong close-in demand and improving yields, which are driving unit revenue improvements. We are seeing the strongest unit revenue improvement since the second quarter of 2022 when the state of Hawaii reopened travel without COVID-19 restrictions, we continue to perform exceptionally well against the competition with a 28 point load factor differential. And I presume that was roughly twice that of our competitor in the fourth quarter of 2023.
Looking at our ancillary revenue performance, revenue generated from our Extra Comfort and preferred seat products remained strong and was up 16% year over year, driven by strong demand and price optimization. We continue to make good progress on our NDC distribution initiative and are now processing roughly 60% of eligible US indirect transactions through NDC. Overall, the feedback from our distribution partners who have implemented this more modern distribution technology is positive, and we are pleased with the pace at which we are able to bring on new partners and expand NDC adoption.
Looking forward, we anticipate our NDC penetration will continue to grow as we begin to offer NDC content through the Sabre GDS and the back half of this year.
Looking forward to the second quarter in North America, we're seeing a little bit of year-over-year revenue pressure in the front part of the quarter. Mostly attributable to the Easter shift and our expectations for the summer peak remains strong. As Peter mentioned, our new markets, including Salt Lake City and Sacramento, the Colonnade in the way of building well into the summer. Specifically from Ally, we are seeing continued improvement in advanced bookings, narrowing the demand gap relative to Honolulu and building off positive year-over-year pricing improvement in the first quarter, we expect continued improvement in the neighbor in Neighbor Island performance.
We have a lot to look forward to in the second quarter with the recent introduction of the 787 into revenue service, the return to service of our entire A321 fleet and further rollout of StarLink and strong performance on our new routes. All of that combined with our US, our authentic Hawaiian hospitality, and we continue to give travelers to Hawaii lots of compelling reasons to choose us over the competition.
For the second quarter, we expect resin to be about flat year over year on capacity growth of about 5%. Looking out over the full year, ASMs are now expected to be up about 6% as the full impact of our previously announced Japan scheduled reductions are incorporated into the forecast.
With that, I'll turn the call over to Shannon.

Shannon Okinaka

Thanks, Brent. Hello, everyone, and thank you for joining us today. We ended the first quarter of the year with an adjusted EBITDA loss of $116 million, equating to an adjusted loss of $2.77 per share, which includes the impact of $0.32 per share due to a change in our effective tax rate that I'll discuss in a moment.
Our CASMex results for the first quarter were better than our expectations, even considering the slight reduction in ASMs, primarily due to the shift in timing of heavy maintenance events, which will be incurred later this year. As we mentioned on our last call, our year-over-year accounting change reflects the preparation for and ramp up of our capacity throughout the year. Thus, the year over year change in cabin starts off larger in the first quarter and improves throughout the year.
Pilot training and other fleet induction costs are being incurred now but will be offset by the capacity and revenue generated as we begin operating the new additions to our fleet significantly affecting our first quarter results and likely the remainder of 2024 is a reduction in our effective tax rate from 21% to 10% since 2020. We have generated significant federal and state net operating losses, which will be used to reduce future cash tax obligations our analysis of the net operating losses under GAAP required us to increase the valuation allowance, lowering the effective tax rate and decreasing our book tax benefit for the quarter for the second quarter, we expect our unit costs, excluding fuel and special items to be about 6.5% higher than the same period in 2023, about 3 points due to the timing of heavy maintenance events and about 1 point related to Amazon operations and another 1 point related to increased labor cost. For the full year, we expect our unit costs excluding fuel and special items to be up about 2.5%, the change from our prior guidance of up 1.5%. It's primarily due to the lowering of our capacity forecast.
Turning to the balance sheet, Peter mentioned that we took delivery of our first two 787, both of which we have financed one in the first quarter and one in April. We continue to receive competitive offers from financing companies for our future 787 deliveries as well. And we will make a decision whether and how best to finance them closer to their deliveries.
We're also evaluating the best path forward for our 2026 loyalty program bond maturity. While the closing of the merger with Alaska Airlines may render this moot, we're building a solid plan for our balance sheet. While we are not satisfied with our current financial performance, we believe that we are taking the right actions and are starting to see some of the major investments we put in motion several years ago start to materialize. I want to reiterate our gratitude to all of the employees of Hawaiian who have persevered as we work our way back to sustainable profitability. And with that, we can open up the call for questions.

Question and Answer Session

Operator

Thank you. (Operator Instructions) Conor Cunningham, Melius Research

Conor Cunningham

Thank you. And just I wanted to see if you could unpack the resin forecast a little bit. Just trying to understand how the competitive landscape is changing in the inter-island market and off the West Coast and then I know you mentioned that the issues with Japan. Just curious on how that how the international entities kind of playing out. Right. Thank you.

Peter Ingram

I'm sure. Thanks, Conor. I think as we look at kind of sequentially coming out of 1Q into 2Q, you have a little more international capacity coming online, which, as we talked about with Japan, in particular, puts a little bit more of a challenging environment, some more difficult comps in 2Q from a North America perspective, if you look out kind of over the whole period and adjust for the Easter shift. I think we feel and for the benefit we had in 1Q of Max, we feel at a pretty kind of similar trend rate as we come out of 1Q and into 2Q and the good progress that we saw in Neighbor Island in 1Q. We continue to see that into the second quarter and maybe even improving a little bit as we get to the back half of the quarter.

Conor Cunningham

I got a couple and then But last call, you talked a little bit about slowing hiring, but I think you just mentioned that you're still hiring and training a fair bit of folks. Curious on where the hiring needs kind of stand today? Or do you need to hire more to fill the fill the capacity planner? Or do you have enough people on campus at this point to kind of tick up get through 2024 and so on? Thank you.

Brent Overbeek

Yes, thanks for that, Conor, I'll take that one. We are we are continuing to hire, but it is at a slower pace than we've seen over the last 18 months to two years. We have we've got more aircraft coming in over the course of the year, another 787 delivery, a few more freighters should be online before the end of the year. We've done some of the hiring for that, but we'll be doing pilot hiring again at a reduced pace from where we were over 2022 and 2023 as we set up into to next year.
Frankly, we are I'm always hiring for airports operation. That's an area where we see a fair bit of natural turnover. But our staffing is in good shape today, thankfully, and we're not dealing with some of the deficits we were in other areas. We've been doing some hiring on maintenance, but that's another area where we've made good progress. So I would characterize that as a more normalized environment, an environment of ramping up staffing for a little bit of growth going forward as well as dealing with more normalized attrition and not the sort of hyper kinetic and the hiring environment that we had coming out of COVID.

Conor Cunningham

Appreciate the thoughts. Thank you.

Peter Ingram

Thanks, Conor.

Operator

Mike Linenberg with Deutsche Bank.

Michael Linenberg

Good morning, everyone. On I guess two questions here for Shannon on when we think about unit costs and how you portray it. Are you treating the freighter operation rent to now where we know by year end? And it obviously pilot costs and dispatch costs and aircraft costs associated with those airplanes, but no ASMs? Or are you going to carve that out? Or is that going to be in the queue?

Shannon Okinaka

Yes. Thanks, Mike. And yes, I think part of your question, I think was about how many will have by the end of the year. And I think right now the current plan is to have seven.
On the freighters flying by the end of the year. So right now, we just put it all together into chasm is still pretty small from a system perspective relative to the system on to breakout. I think as it gets a little larger, we'll probably verbally break it out. Just to give you a sense of how much of the I call them is due to the Amazon costs. And for this year, just in general, the Amazon operation and financial results, which are pretty still still pretty much immaterial parts of the Company. So we don't plan to do segment reporting on this year based on the outlook. And so I think the best we'd be able to do is split out some of the direct cost I think right now to the costs are pretty hard to filter out because a lot of it's pilot training, and that's just intermingled with our regular passenger business. But when the direct cost become a little larger. We can break that out for you.

Michael Linenberg

Okay.

Brent Overbeek

Cory And Mike, I guess I'll just add a little bit to what Shannon, a little more color to what Shannon said on the Amazon fleet is the the number of aircraft and the pace of deliveries has been moving around a little bit driven by some the pace at which Amazon has been able to get airplanes delivered from the vendor that is working on reconfiguring the aircraft from passenger configuration to freighter configuration that we had at one point expected fewer than the seven by the end of this year. Then Shannon said a couple of those have now moved up. So we think we're getting more stability on that. I would caution that they may not all be flying by the end of the year because during the peak period, our partner doesn't necessarily want and introduce new lines of flying into the operation. So So will that number could move around a little bit, but sooner, but we do have a fair amount of ramp coming over the course of this year and that that business will become more significant as we go quarter to quarter through this year.

Michael Linenberg

Okay, great. And then just follow-up, Peter, either you or and or Brent, the 787 Can you can you talk about the difference of that premium product versus A3a30, your ability to monetize that? It does seem like it is while the A330 product is a good one. It does feel like that this is a nice step up and there's a nice opportunity to generate a lot more premium revenue with the new airplane Thanks for taking my question.

Peter Ingram

Yes, thanks, Michael. I'll start on that and see if Brent does anything additional that we're incredibly proud of the product our team has put together on that aircraft. It's our lay Hoku suites are probably by far and away a leading business class product for any airline in North America, but but certainly easily the best product flying between the US mainland and Hawaii on any of the of the aircraft that come out this direction. So we do think as people start flying it and the word of mouth starts to travel, we're going to get a really positive response. So that the other important thing to note is that there's a lot more of those seats on those airplanes as well with 34 in the front cabin compared to 18 on our A330s. So the success of our premium revenue over the last few years has inspired us to allocate more of the real estate on the cabin to that. And that's going to be very helpful, especially in some of our premium rich markets, especially as we we sort of move away from the initial deployments on the West Coast and start flying it even longer haul and some of the real premium deep markets where we're incredibly encouraged about what the prospects are.

Brent Overbeek

Yes. I would say that word of mouth that Peter mentioned already out there. We're seeing really strong demand in both Phoenix and Los Angeles, which are initial deployments. I was reviewing just last week with the team, despite nearly doubling the capacity on those trips. Demand is and load factors are in line, if not a little bit up as we look into the summer and average fares remain really strong. So people are clearly searching out the product in addition to the great physical product that the teams designed all the benefits of the seven eight seven in terms of lower humidity or more humidity and lower cabin pressure. I think people have people really interested in flying the product. And as Peter mentioned, we're really looking forward to being able to extend the missions beyond just some West Coast operations. And when we take Airplane number three, we'll be able to do that. So overall, great start really encouraged with where we're going and the both the customer and employee reception of the products has been fantastic so far.

Michael Linenberg

Great, great. Thanks.
Thanks, guys.

Brent Overbeek

Thanks, Mike.

Operator

Helane Becker, TD Cowen.

Helane Becker

Thanks very much, operator. Hi, team. I just have a couple of questions and when you talk about strong close-in demand, can you like define that a little better or maybe refine that?

Brent Overbeek

But yes, I think, Helane, what we've seen post pandemic and really kind of it's a continuation is our people's decision making about Hawaii vacations continues to move closer in. Traditionally, our booking curve was highly correlated with stage length. So in our East Coast services and international services had a longer booking curve on our West Coast services. I think we're seeing broadly across the board, both domestic international and some of that is just continuing to move closer to departure. And in a while, while we would have a really good idea, 30, 45 days out on some of our leisure markets, we still do, but we're seeing kind of more people make those decisions and more people to choose to fly Hawaiian kind of within that last month, month and a half prior to departure and pay.

Helane Becker

That's helpful. But has that caused you to make different pricing decisions?

Brent Overbeek

No, I don't I don't think so. I think it's probably more of a how is the revenue management system accommodating that and then discrete pricing decisions. And so it's something that as we've implemented more willingness to pay solutions with our revenue management solution provider, it's something the team keeps a keen eye on. But I wouldn't I wouldn't say there's a tangible one to one view of how that's changed the pricing behavior.

Helane Becker

Okay. That's really helpful. Thank you. And then just for my follow-up question, maybe for Shannon. Do you have any goals on what you want your liquidity to be and where you know you feel it's not enough for where it would I don't think it would ever be to match that.
And, you know, you mentioned that the loyalty program has to be refinanced in 1Q '26. I think that how should we think about your goals for liquidity, however, you want to measure that?

Shannon Okinaka

Yes. Thanks, Lane and Jay and I would agree with you. There's probably never too much liquidity kind of windfall for a couple of things. So our Yes, our loyalty program bond becomes due in January 2026. And so we're starting to take a look at our at that as well as our full balance sheet with all of the 77 deliveries coming up.
So pre-pandemic, I think we've talked a lot about our cash target of $500 million. And while we haven't done redone the full analysis of that, we know that our cash target at this point is higher than $500 million, just based on what happened during the pandemic. And we are around a number like [$750 million], but there's not a full analysis behind that. And so right now, we're focused on probably the next two years.
Looking at CapEx and our debt maturities, we don't have anything to announce today, but this is partially why you hear us talking about financing of the 787s ominous, all kind of in preparation for what we're going to do with the loyalty program on which really is probably something we're looking at doing mirror near term, not necessarily waiting until '25 or '26. And so I think maybe by this summer, we'll have more to talk about we're right in the middle of looking at our balance sheet plans and really strategizing on what we do there.

Helane Becker

Okay. I think, Shannon, that's a huge swing, Paul.

Operator

Dan McKenzie, Seaport Global.

Daniel McKenzie

Hi. Thanks, guys. And going back to the script, the full A321 fleet in the next couple of weeks, including engines from overhaul visits, that's that's kind of a surprise. Does that mean the GTF issues are in the rearview mirror for you guys? And I think it was just a couple of aircraft. Tom, can you help us size the earnings impact from those being announced?

Peter Ingram

Yes, hey, Dan. So I would hesitate to use the term in the rearview mirror because clearly, there still is a global shortage of engines I think what you are seeing reflected in our fleet as a number of our aircraft had gone into the overhaul shop over the course of the last couple of years and in fact, we bore the brunt of a lack of A321 spare engine availability earlier in 2023, even before the powder metal problems of forced a lot of inspections in the summer of last year. And so having taken some of that pain in 2023, we're now seeing engines returning from the overhaul shop. And that has left us at Hawaiian in a relatively more enviable position than some other carriers that are have dealt with the aftermath of engines that have had to go in for inspections, a little bit later.
I will caution it's a at a fluid situation. Some, you know, some of the removals we can we anticipate and we do anticipate and we have planned engine replacements for those. We know we've got some more engines coming back from the overhaul shop over the course of this year. But there is always the risk of an unexpected engine renewable something that's not in our plans that we have to have to account for as well. So we'll continue to monitor that going forward.
In terms of the impact on our business. I mean, candidly, and it has been challenging to deal with. We've had A330s deployed and on routes that we would prefer to fly in A321 based on the level of underlying demand and that has you produced a higher level of cost on those routes that is not offset by the commensurate revenue you would expect because the market's just not deep enough to absorb that. We have under utilized some of our crew as we've had available crew to be able to fly 18 A321 and have time as I've been flying, you know, 14 or 15 or 16 depending on what was available. So I think all of that accrues to to a benefit for us going forward, if we can keep the full fleet operational.

Daniel McKenzie

I see. Okay. I guess where I'm going with that is just the path back to normalized margins and the returns that you're targeting this next cycle. And I guess you just look at the key sources of revenue. So ramping up the 10 aircraft with Amazon 2025 ancillary upsell from NDC that network adjustments, Starlink, are those enough to offset the weaknesses from inter-island, Japan and Maui, I guess? And if not, can you just help us think about what has to happen to get back to the path to profitability, just going back to the script and the confidence that you guys, we are taking the right steps to get there.

Peter Ingram

Yes. I mean, I I'm confident we are taking the right steps. I think you're getting past the investment phase on some of the big initiatives we've had like the seven eight seven as we're now getting into flying the aircraft and generating revenue from it like and the freighter operation, where we are beginning to get the aircraft in that drive the revenue drive the flying that that will make us more productive with the pilots that we have trained and the investments that we have made preparing for that, all of those things are going to help us out that we do certainly need and some some help from the operating environment. But even there we've got some things that are moving in a positive direction.
Brent talked at this quarter and last quarter about some of the improvements in the neighbor island revenue environment. We've consistently been winning competitively, but now we're winning competitively in an improving revenue environment. I wouldn't say it's it's where we expect it to be for the long term, but it certainly has moved in the right direction. I would say the one environmental factor that is probably even a bigger wildcard right now is is Japan, where we're disappointed where how the revenue performance has has flattened out a little bit in that market. And I really think we're well beyond the point where the Japanese travelers weren't willing to venture out internationally. I think it is more a case of pure economics right now where the yen at something between JPY154 and JPY155 to the dollar today is just really depreciated against the dollar and it makes it more expensive for visitors originating in Japan to travel to the United States. But I'm confident we're moving in the right direction. I really think a lot of those things are starting to pay off. I don't have a specific forecast. I'm not going to try and look into the crystal ball and tell you what the timing is of returning to profitability. But I'm I'm really confident that we are moving a lot of things in the right direction. And some of the investments and initiatives we have made over the last couple of years are starting to take hold.

Daniel McKenzie

Okay, good. Thanks for the time, guys.

Peter Ingram

Thanks, Ed.

Operator

Christopher Stathoulopoulos, Susquehanna International Group.

Christopher Stathoulopoulos

Thanks, for taking my questions. So Peter, appreciate all the color around your thoughts on getting back to sustained profitability. But if we could dig into the revenue environment here, put a finer point or tie, you know, what is four or five sort of outlook. So on the US piece, I think you said point of sales strong. If you could speak to perhaps how much of summer is booked at this point and how that fares versus typical seasonality? And then color on your other international POS markets, New Zealand, Australia, South Korea, and then the premium contribution from the 787. Should we think of that as more of a 2025 benefit or kind of a late 2024 benefit? Thank you.

Peter Ingram

Yes, let me let Brent touched on.

Brent Overbeek

Those are right out trying to hit all those Chris takes in terms of advance book for the summer. I think we're comfortable with where we're at and relative to kind of pre-pandemic levels where we're in a pretty good shape. We're a little bit lower on more capacity in North America overall, as we look into the summer. But given some of the later build I mentioned earlier, I'm pretty happy with where we sit and where average fares sit there from international point of sale on international markets in 2023 was a pretty strong, particularly first half of the year in many of those markets, particularly Australia and New Zealand, South Korea. We are off some of those highs. And so we do have a little bit of a headwind there.
But again, we're pretty comfortable with how strong US point of sale outbound demand is, unfortunately for us it's a relative. It historically was a relatively small portion of our network, but has but it has grown to be a fairly significant now and most in many cases now is approaching half of the aircraft relative to where we previously had been, and 787, done premium cabin there. I think I would characterize that as good early results right now, we've got we've got 2 planes in the schedule as we take more of those and are able to use the airplane to fly longer missions where we get the benefits greater benefits from both from both a cost perspective on fuel burn and revenue-generating capabilities. It's probably a little bit more of a 25 story. We'll we'll take what we can get in 24, but it certainly as the fleet builds up and we have a greater greater deployment in long-haul and 25, the benefits will accrue a bit more there.

Christopher Stathoulopoulos

Okay. And as a follow-up, can you just remind us of the cadence of the 787 deliveries? There were some news earlier this week around potentially slower production rates and deliveries for that aircraft from Boeing? Thank you.

Peter Ingram

Yes. So so we've got the two aircraft delivered now with one line of flying. And then next month, we go to two lines of flying with those aircraft. We expect to get a third airplane before the end of this year. And I have my expectation right now is that we'll have five by the end of next year.
But it is there is some risk there. I would say that. But we do know that some of the 787 and deliveries could slide a little bit based on the reports that you've probably seen over the last couple of days of some supply chain challenges. So I think we're going to really have to take a closer look at what our expectation is for 2025 over the course of the next several weeks as we firm that up with Boeing, I think we've got some flexibility, which is a good thing with A330s that are coming as to the end of their lease terms over the next few years. So as we ramp up to 12, 787 between the two we have now and into 2027. We've got about So would not quite half of our A330 fleet that comes up for a forward lease decisions at some point in that period. And I think that gives us flexibility to manage what has been a sort of dynamic aircraft delivery environment.

Christopher Stathoulopoulos

Okay. Thank you.

Operator

Thank you. There are no further questions at this time. I would like to turn the floor back over to Mr. Peter Ingram for any closing comments.

Peter Ingram

Thank you, Camilla mahalo to everyone for joining us today. Amidst a dynamic environment, our team content continues to deliver meaningful accomplishments that position us well for the future while continuing to take care of our guests with the unparalleled hospitality for which we are known. We appreciate your interest and look forward to updating you on our progress in the months ahead.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.