Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Hawaiian Holdings Dropped Today

By Lou Whiteman - Updated Oct 23, 2019 at 5:11PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Airline competition to the islands is getting intense.

What happened

Shares of Hawaiian Holdings (HA -1.04%) traded down 9.7% midday on Wednesday, and closed down more than 7%, following the airline's third-quarter earnings release. Hawaiian actually outperformed expectations, but investors were focused on the competitive pressures the airline expects to face in the months to come.

So what

After markets closed Tuesday, Hawaiian reported adjusted earnings of $1.72 per share, beating the consensus estimate by $0.03, on revenue that at $755 million was largely in line with estimates. Revenue was down slightly year over year, a reflection of the pricing pressure Hawaiian Airlines is facing as rivals including Southwest Airlines increase capacity to the islands.

An airplane taking off.

Image source: Getty Images.

"In the face of heightened competition, we delivered strong financial results and made significant progress toward accomplishing the strategic priorities that we established at the beginning of the year," CEO Peter Ingram said in a statement.

Investors were likely focused on Hawaiian's expectations that the competitive pressure will only increase in the quarters to come. Hawaiian said it expects 9% industry capacity growth in the current quarter, which is likely to further pressure margins. It also found out earlier this month it would not get the full revenue benefits it had hoped for from its new joint venture with Japan Airlines after the Justice Department tentatively rejected the two airlines' request for antitrust immunity.

Now what

Ingram is correct in saying that the airline performed well considering the competitive pressures, but unfortunately for the company and its investors, there is no relief in sight for those pressures. Hawaiian is a well-run company, but given the added capacity coming into its core market, the airline is likely to face more turbulence in the quarters to come.

For the time being, there are more attractive airline stocks for investors looking to buy into the industry.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Southwest Airlines. The Motley Fool recommends Hawaiian Holdings. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Hawaiian Holdings, Inc. Stock Quote
Hawaiian Holdings, Inc.
$16.11 (-1.04%) $0.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.