What happened

Hawaiian Holdings (NASDAQ:HA) -- parent company of Hawaiian Airlines -- reported its second-quarter 2018 earnings last night. This morning, its stock popped 12% in response. While it's retraced a bit since, Hawaiian Holdings stock is still up a healthy 9.2% as of 1:10 p.m. EDT.

Earnings per share of $1.56 ($1.44 "adjusted" for one-time items) easily topped analyst expectations for profits of $1.26. This was despite sales falling just short of expectations for $717.8 million.

A Hawaiian Airlines plane on the tarmac at an airport.

Rapidly rising fuel and labor costs fail to ground Hawaiian Holdings stock. Image source: Hawaiian Airlines.

So what

Hawaiian Holdings reported sales of $715.4 million for the quarter, up 7% from last year's Q2. Operating profits declined due to large rises in costs for labor (up 11%), maintenance (up 16%), and fuel (up 49%).

However, a big decrease in taxes thanks to tax reform helped to offset these rising costs, lifting net income 9%. And overall, as CEO Peter Ingram pointed out, Hawaiian "generated more revenue and carried more guests than in any second quarter in our history by executing our plan and running a safe and reliable airline." 

Now what

Looking ahead to Q3, Hawaiian advised that it plans to grow "available seat miles" (ASM -- or in other words, capacity) 7.5% to 9.5%, and says revenue per ASM is likely to remain roughly stable, perhaps up or down by 1.5% in comparison to last year's Q3. Costs are expected to rise even faster, though, between 0.5% and 3.5%, excluding fuel costs. Fuel costs will rise between 5% and 7%, which could make further earnings gains difficult -- and not just in Q3.

For the whole year, Hawaiian is looking for a 5.5% to 7.5% increase in ASM, with costs rising between 1% and 3% per ASM, excluding fuel, and with fuel costs alone rising 4% to 6% relative to last year.

Whether Hawaiian will be able to hold onto today's gains as investors fully digest this less optimistic news remains to be seen.