Hawaiian Holdings Is Holding Up Well Despite Headwinds

Southwest Airlines' (NYSE: LUV) late-2017 decision to enter the Hawaii market -- along with growth on West Coast-Hawaii routes by other airlines -- has subjected Hawaiian Holdings (NASDAQ: HA) to extreme pressure over the past two years, and particularly in 2019. As a result, Hawaiian Airlines' adjusted pre-tax margin fell to 9.2% in the first half of 2019, down from 12.4% in the prior-year period and 16.2% in the first half of 2017.

However, Hawaiian Airlines is stepping up its game to handle the new competition. Its third-quarter results and plans for the next year suggest that the carrier has a good chance to stabilize its profitability during 2020 despite continued growth in Hawaii by Southwest Airlines.

Entering the third quarter, Hawaiian Airlines projected that revenue per available seat mile (RASM) would decline 1.5% to 4.5% during the quarter, in line with its 3.4% RASM decline for the first half of the year. Making matters worse, Hawaiian's management said that adjusted nonfuel unit costs would spike 3.5% to 6.5% year over year because of the timing of expenses, leading to severe margin pressure.

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Source Fool.com