Hawaiian Holdings, Inc. Is Ready for a Great Year

Hawaiian Holdings, Inc. stock made big gains in 2013 despite declining earnings, but 2014 should be a better year for the company -- here's why.

Feb 3, 2014 at 12:59PM

Hawaiian Holdings' (NASDAQ:HA) stock had a great run in 2013 and has nearly doubled in the last 12 months. Interestingly enough, that strong performance came despite the fact that the company posted lower earnings in 2013 than in 2012.

HA Chart

Hawaiian Holdings One-Year Stock Chart, data by YCharts.

In 2014, Hawaiian Airlines is likely to return to strong earnings growth, as the maturation of its route network and new revenue initiatives help drive unit revenue improvement. If this earnings improvement materializes, it will justify further share price appreciation for Hawaiian Holdings stock.

Overcoming revenue pressures
In the first half of 2013, Hawaiian Airlines experienced significant unit revenue declines, which weighed heavily on the company's earnings. First, the carrier was hit hard by the devaluation of the yen in late 2012 and early 2013, which reduced the dollar value of Hawaiian's ticket sales in Japan. The yen has recently represented 15%-20% of the company's total sales, giving Hawaiian far more exposure to the yen than any other U.S. airline.

US Dollar to Japanese Yen Exchange Rate Chart

U.S. Dollar to Japanese Yen Exchange Rate data by YCharts.

Additionally, Hawaiian had to cope with overcapacity on some routes between the U.S. West Coast and Hawaii in the first half of the year. The net result was that PRASM -- a key measure of airline unit revenue -- declined 9.9% for the first half of 2013.

A slide in the Australian dollar exchange rate that began in mid-2013 has recently added to Hawaiian Holdings' foreign exchange problems. Nevertheless, the company returned to unit revenue growth in the second half of 2013, culminating in a 3.7% PRASM increase last quarter.

Currency fluctuations continue to be a major headwind. For Hawaiian's international business, PRASM was down 17.7% in Q3 and 10.6% in Q4, with currency effects accounting for well more than half of the decline in each case. However, these declines have been offset by double-digit unit revenue growth in the other two parts of Hawaiian's business -- interisland flying and flights to the U.S. mainland.

Turning the corner
With the North American business now on track, Hawaiian Holdings is set for strong earnings growth this year. The company is projecting a 4%-7% PRASM increase for Q1, which indicates that currency headwinds are dying down.

Assuming that the yen and Australian dollar exchange rates remain near recent levels, Hawaiian should be able to regain some of the revenue it lost in 2013 by increasing local currency prices in Japan and Australia. More generally, most of Hawaiian Airlines' international markets are still maturing. As brand recognition improves and Hawaiian Airlines learns more of the nuances to competing in each market, unit revenue gains should follow.


Hawaiian Airlines is now selling "Extra Comfort" seats with more legroom for an additional $60-$100 each way. Photo: Hawaiian Airlines.

Lastly, Hawaiian Airlines' new non-ticket revenue initiatives will start to bear fruit in 2014. The company's new branded credit card agreement went into effect last month, providing much better mileage sale terms for Hawaiian. Most importantly, Hawaiian's new premium economy seating (dubbed "Extra Comfort") just went on sale for flights beginning in August. This should become a valuable source of incremental revenue.

Foolish conclusion
Hawaiian Holdings returned to earnings growth last quarter, and its Q1 outlook suggests that the trend will continue in 2014. After breakneck growth in the last few years, Hawaiian is adding only one new city to its network this year: Beijing.

The slower pace of expansion should allow the company to focus on improving results in many of its new international markets. As Hawaiian starts to offset the impact of currency fluctuations with fare increases and higher load factors, margins should widen dramatically. This will ultimately pay off in the form of even greater share price appreciation for investors.

Secure your portfolio with dividend stocks
While Hawaiian Holdings has huge potential, airline stocks remain risky investments. Dividend stocks tend to be less volatile, and they have also been shown to outperform the market in the long run! With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

Adam Levine-Weinberg owns shares of Hawaiian Holdings. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers