Why Hawaiian Holdings Shares Were Grounded

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of regional airline Hawaiian Holdings (NASDAQ: HA  ) descended rapidly from high altitudes, losing as much as 14% on the day, following its fourth-quarter earnings results.

So what: For the quarter, Hawaiian Holdings reported revenue of $493 million, and a loss of $3.4 million, or $0.07. Both figures broadly missed the consensus estimates on Wall Street of $503 million in revenue, and $0.11 in profits. Hawaiian's CEO, Mark Dunkerley, blamed the results on a weaker yen, excess capacity in key markets, and multiple one-time losses, including a $9 million loss of fuel derivatives. The year-over-year comparisons demonstrates a 220-basis point drop in passenger load factor, to 81.8%, and a huge 12% decline in operating revenue per available seat mile.

Now what: Imagine the surprise on my face when I read about another airline that's losing money because of fuel hedging and capacity issues. That sarcasm sandwich points out just how capital intensive and low margin the airline business really is. Although regional airlines are better suited to take on national carriers because of their route flexibility, these figures are too poor to ignore, and I'd suggest steering clear of Hawaiian Holdings in the meantime.

Craving more input? Start by adding Hawaiian Holdings to your free and personalized Watchlist, so you can keep up on the latest news with the company.

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