Hawaiian Holdings: Remain Invested Despite Impressive Gains

Hawaiian Holdings (HA) has been in recovery mode for the past six months. After a precipitous drop at the end of January, Hawaiian shares have recovered over 26% in the last six months. This is not surprising as demand for air travel and cargo is rising in North America, and Hawaiian is making the right moves to tap the growth as evident from the steady growth in its metrics.

For instance, Hawaiian’s value-added product revenue per passenger increased to $19.72 in 2014 as compared to $14.82 during fiscal year 2011. More importantly, when cargo revenue as a percentage of total revenue for other major airlines such as United and Delta and American has declined on a year-over-year basis, Hawaiian has illustrated continued year-over-year growth in cargo revenue as a percentage of total revenue, signifying the superior growth strategy of the company.

As a result of its impressive growth, I think that Hawaiian will continue growing strongly in the long run due to the moves that it is adopting.

Lower capital expenditures and a stronger fleet are positives

Hawaiian’s capital expenditure is expected to decline on a year-over-year basis going forward as the company completes its A330 deliveries this year, and also the fact that there are no planned deliveries during 2016.
A321NEOs deliveries are estimated to get completed during 2017. In addition, 4 units of 767 aircraft are estimated to be returned or retired during the fiscal years 2015 to 2016. Also, only a total of over 2 aircrafts are estimated to be delivered during the fiscal year 2017.

Therefore, Hawaiian is seen to be keen on optimizing its balance sheet by expanding its liquidity position while minimizing total costs through controlled capital spending and reducing the number of operational aircrafts. This key growth strategy is believed to benefit the airliner over a long-term and deliver sustainable shareholder returns.

Hawaiian recently declared its plans to expand the cargo service with the strategic purchase of three ATR 72 aircrafts for Ohana by Hawaiian Interisland network. These new suite of services are estimated to enable a single-point solution for transporting cargo shipments from Hawaiian’s mainland and international flights beyond the adjacent islands.


Along with all the positives mentioned above, Hawaiian also has an attractive valuation that indicates that the stock is a good buy for the long run. It trades at 14 times last year’s earnings, and the multiple comes down to 8.8 on a forward P/E basis. It also has a PEG ratio of just 0.31, signifying that Hawaiian is undervalued at current levels despite its strong run this year.

So, in spite of the fact that Hawaiian is trading near the higher end of its 52-week range, I think investors should continue holding the stock despite its recent run.
Published on Sep 20, 2015
By Vinay Singh

Copyrighted 2020. Content published with author's permission.

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