What happened
Hawaiian Holdings (HA -0.33%) isn't sure when a key international market will relax its travel restrictions. That uncertainty weighed on Hawaiian shares this week, with the stock down more than 10% for the week as of Thursday afternoon.
So what
Hawaiian is a niche carrier, serving a very important role in connecting its home state to the U.S. mainland but vulnerable to competition from larger airlines with more robust route networks. In normal times Hawaiian is able to offset some of that domestic competition with a substantial international transpacific operation, but the pandemic has limited where Hawaiian can fly internationally.
Image source: Hawaiian Holdings.
Hawaiian this week posted better-than-expected first-quarter results, but suspended full-year guidance due to uncertainty about when it would be able to resume normal operations to Asia. Hawaiian said second-quarter capacity would be down 11.5% to 14.5% compared to the same three months of 2019, prior to the pandemic, mostly because Japan has not yet eased pandemic-related travel restrictions.
Japan accounted for about 70% of Hawaiian's pre-pandemic international business, and CEO Peter Ingram remains confident that once travel is allowed there will be substantial opportunities for Hawaiian.
"Strong demand for leisure travel to Hawai'i is poised to propel our domestic revenue to record levels as the effects of the pandemic are more muted now than at any point in the past two years," Ingram said. "Based on these trends, we anticipate a resurgence of international demand as restrictive travel policies continue to loosen."
Now what
Hawaiian is a well-run airline facing a difficult operating environment. Demand from the U.S. to Hawaii is strong, but due to international restrictions elsewhere a lot of U.S. carriers have boosted their capacity to the islands in hopes of capturing more of that demand.
Hawaiian has the balance sheet to survive until conditions normalize, but is unlikely to be able to do much to spark growth until we see the world return to pre-pandemic business as usual. Given the uncertainty about when that will happen, and the constant threat of a new uptick in COVID-19 cases, investors aren't seeing much reason to buy in despite what was a solid quarter for the airline.
