What happened

The parent of Hawaiian Airlines is joining forces with Amazon (AMZN 1.80%) Prime Air cargo operations, and investors are excited about the opportunity. Shares of Hawaiian Holdings (HA -0.16%) traded up as much as 14% on Friday after the agreement was announced.

So what

Over the past few years, Amazon has been slowly building a formidable cargo air operation by partnering with, and often investing in, airline operators who are willing to fly planes under its branding. Hawaiian joined the team on Friday, announcing a deal to operate and maintain an initial fleet of 10 Airbus A330 freighters beginning in the fall of 2023.

There is language in the agreement that could lead to closer ties between the two companies, including the ability to expand the fleet in the future based on Amazon's needs. Hawaiian is also issuing Amazon warrants to acquire up to 15% of its common shares.

"We are excited to help serve Amazon customers by providing additional air cargo capacity and logistics support," Hawaiian CEO Peter Ingram said in a statement. "This relationship provides a catalyst to grow our business and the unique opportunity to diversify our revenue sources while capitalizing on our established strengths."

In preparation for operating the service, Hawaiian said it intends to establish a pilot base on the continental United States and boost hiring of pilots, mechanics, and other employees to support this new cargo operation.

Now what

Airlines have been hit hard over the past few years due to the pandemic, and few faced more challenges than Hawaiian. With international tourist destinations closed due to COVID, Hawaiian's rivals have focused growth on Hawaii instead. In normal times, Hawaiian's robust trans-Pacific network helps offset domestic competition, but key markets like Japan are only just beginning to come back online.

The cargo operation offers the potential for new forms of revenue that can help Hawaiian better battle competitors in years to come. Amazon is a large and growing cargo operator with no shortage of demand for flights, and the equity stake should help align the interests of the two partners.

The deal will take time to show results, but it appears to be a real positive for the long-term health of Hawaiian.