What happened

Shares of Hawaiian Holdings (NASDAQ:HA) plunged 10% on Wednesday morning on a miserable day for the markets, especially stocks affected by the coronavirus pandemic. Hawaiian reported predictably dismal quarterly earnings on Tuesday night, further pressuring the airline stock.

So what

Airlines have been among the hardest hit sectors since the pandemic began, with travel demand falling substantially due to virus concerns. Hawaiian is particularly ill-suited to deal with a pandemic given its reliance on long trans-Pacific flights.

After markets closed Tuesday, Hawaiian reported an adjusted third-quarter loss of $3.76 per share on revenue of just $75.98 million, worse than Wall Street's consensus of $3.48 per share in losses on $97 million in revenue. That's no surprise, given that for most of the quarter, Hawaii imposed a 14-day quarantine on anyone arriving at the state.

A Hawaiian Airlines jet over Diamond Head.

Image source: Hawaiian Holdings.

CEO Peter Ingram said the pandemic and quarantines "continued to have a dramatic effect on our business" during the quarter, but said the airline is doing what it can to survive the crisis.

"We have taken action to reduce expenses, preserve cash, bolster our liquidity and care for our guests, positioning us to begin the recovery process in earnest with the introduction of the State of Hawaii's pre-travel testing regime in the fourth quarter," Ingram said in a statement accompanying the earnings release.

Unfortunately, things look to be getting worse when it comes to the coronavirus. Broader markets were weak on Wednesday due in part to COVID-19 hospitalizations rising rapidly across the U.S., signaling a potential second wave of the pandemic.

Now what

As Ingram notes, Hawaii has recently loosened its quarantine, making it easier for vacationers. The airline has seen booking trends improve with the easing of restrictions, but it remains to be seen if that will hold if new cases are indeed on the rise.

Hawaiian expects systemwide capacity to be down about 70% in the fourth quarter, with the airline forecasting a net cash burn of $2.2 million per day in the final months of 2020. The airline does have $979 million in liquidity to ride out the storm, and thanks to deferrals of new aircraft deliveries, it has limited big-ticket expenses heading into 2021.

Hawaiian should survive, but the airline is not likely to thrive in even the most optimistic travel scenarios for 2021. International borders seem likely to remain closed well after domestic travel restrictions are lifted, limiting a lucrative source of revenue for Hawaiian. And with the pandemic threatening another round of closures, demand for luxury vacations remains iffy even once we get a vaccine.

There isn't a lot of reason to get excited about Hawaiian shares right now.