Hawaiian Airlines could finance more of its Airbus A321neo deliveries with Japanese yen-denominated loans, says chief executive Peter Ingram.
The Honolulu-based carrier closed two yen-denominated fixed-rate debt equal to $86.5 million in the second quarter, creating what Ingram calls a "natural hedge" against fluctuations in the exchange rate between the yen and US dollar, speaking on the sidelines of the Airlines for America (A4A) Summit in Washington DC today.
Japan is the largest source of foreign currency revenues for Hawaiian. In the first half, these revenues totalled $360 million, or just over a quarter of operating revenues.
The airline has fewer yen-denominated expenses, including payments on the two loans, than its revenues in the currency, says Ingram. He declines to specify how much revenue it generates in Japan.
These excess yen revenues creates an opportunity for additional aircraft transactions in the market, he says.
The airline operates eight A321neos, with two financed by the yen loans (MSNs 7917 and 7959) and two leased (MSNs 8186 and 8237), Flight Fleets Analyzer shows. It is scheduled to take three more aircraft this year and six in 2019.
"By and large, we love the economics," says Ingram on the yen loans, which have 12-year tenors and interest rates of 1.01% and 1.05%.
One downside to foreign currency debt is the potential for quarterly mark-to-market fluctuations that could make Hawaiian's obligations look more significant than they are, he says. However, Ingram emphasises that he is "happy to explain the accounting" as long as the economics make sense.
The Development Bank of Japan and NTT Finance provided the debt. Burnham Sterling was its financial adviser and placement agent.
Long-term debt and capital lease obligations at Hawaiian increased 15.8% to $578 million during the three months ending in June, the securities filing shows. This followed a prolonged period of declining debt at the carrier.
Source: Cirium Dashboard