Hawaiian Holdings Inc. Gains Altitude As a Key Rival Leaves for the Mainland

Mesa Airlines to shutter Go!, leaving the islands to Hawaiian and two tiny competitors.

Mar 18, 2014 at 5:41PM

Go Airlines

Come April 1, Hawaiian Holdings will lose one of its key competitors for inter-island service. Source: go! Airlines.

Shares of Hawaiian Holdings (NASDAQ:HA) moved more than 4% higher in intraday trading after Mesa Air Group announced plans to shutter its Hawaiian operations on April 1.

The plan specifically eliminates go!, a Mesa subsidiary that's flown some 5 million passengers along inter-island routes since 2006, and leaves Mokulele Airlines and Island Air as Hawaiian Airlines' remaining competition for inter-island travel. (The airline operates more than 165 inter-island flights daily via an extensive fleet of Boeing 717 aircraft.)

Paradise, lost
Why the change? Mesa cited plans to support regional flights for United Continental (NYSE:UAL) and American Airlines' (NASDAQ:AAL) US Airways brand across the mainland.

"While this was an extremely difficult decision to reach, we believe it is in the best interest of Mesa's long term strategic objectives," said Jonathan Ornstein, Chairman and Chief Executive Officer, in a press release. "Mesa will be placing into service 30 Embraer 175 aircraft with United beginning in June 2014, and is adding 4 CRJ-900 aircraft with US Airways in 2014, having added 9 CRJ-900s in 2013."

Travelers who've booked tickets for flights departing after April 1 but before June 30 will be rebooked on Hawaiian. Those who can't be rebooked, or who have reservations for travel after June 30, can expect a refund.

The irony? Aloha Airlines -- a carrier that had been doing business in Hawaii since 1946 -- opted for liquidation, shuttering operations in 2008 after a costly fare war with none other than go! amid rising fuel prices.

Images

Aloha Airlines was once a fierce competitor in the Hawaii travel market. Source: Wikimedia Commons.

A short course in awful economics
Mesa didn't announce specific layoffs, but there are sure to be plenty. Hawaiian, meanwhile, gets room to raise fares, which explains why the stock is rallying today. Yet investors needn't rush in. Hawaiian is in the midst of a restructuring of its own.

Just recently, the airline decided to end service between Honolulu and Fukuoka, Japan, by the end of June. Earlier, the airline abandoned service to Manila and Taipei in favor of concentrating on serving traffic to and from the U.S. mainland.

There's good reason for this. North America accounted for 47% of passenger revenue in the fourth quarter. Total passenger revenue per available seat mile (PRASM) for the region rose 13%, all while flying with fewer travelers on board. (Load factor dipped 1.5%.)

Whether we can expect inter-island changes based on go! leaving is unclear at this point, but investors aren't wrong to sense a catalyst. In Q4, Hawaiian's "Neighbor Island" routes accounted for 23% of PRASM, which improved 12.7% on a slight increase in load factor. (Up 0.5%, according to the report.)

Flying at reasonable (if risky) heights
So, is the stock a buy? Over the long term, perhaps, especially if it can find a profitable mix of mainland, inter-island, and long-haul international flights without bumping wings with the major legacy carriers. And yet, trading at nearly twice the long-term earnings growth rate analysts expect and no dividends for investors to cash, it's probably still fair to call Hawaiian a risky bet at present levels.

This stock is ready to soar!
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. Find everything you need to know in the special report, "The Motley Fool's Top Stock for 2014." Don't worry, it's free -- just click here to claim your copy and discover the name of this under-the-radar company.

Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool recommends Embraer-Empresa Brasileira. 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