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Hawaiian Holdings: Very Tough Road Ahead

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  • Excluding the CARES Act tax benefit, Hawaiian lost over $140 million in Q1.
  • Q2 projections are ugly which has put liquidity under pressure. The firm has responded through a range of actions.
  • With the dividend having been scrapped, $12 a share still looks a bit pricey.
  • If we tested the lows in the near term, we may dip our toes here in the water once more.
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Despite the rally we have seen in Hawaiian Holdings (NASDAQ:HA), CEO Peter Ingram did not give any strong indication that this recent rally in the share price will be sustained. In fact, if we look at the technical chart, we can see that buying volume over the past 7 weeks has not been able to keep up with the rise in the share price. This brings worrying consequences to the table with respect to the sustainability of this recent rally. The trajectory of the share price acts as a discounting system which means that it is essentially pricing in the eventual upturn in this market. However, the first quarter earnings call did not give much room for encouragement as to when this upturn will occur. In fact, management was very clear in relaying the message that a quick return to pre-pandemic numbers is not viable in the short term.

There are so many trends against the airline industry at present. First, there have been suggestions that in order to comply with social distancing, every second seat should be empty. This is just not feasible, in our opinion, as airlines such as Hawaiian will prefer to keep flights grounded in order to save costs. Another suggestion surrounds the whole area of testing passengers who come from other countries. Ingram though eluded to the fact that this also is not feasible due to the testing capabilities simply not being there at present. Suffice it to say, Hawaiian seems to be caught in a major bind at present.

Hawaiian's whole pretence at the moment is to preserve liquidity to try and ride out this downturn as best as it can. This means protecting its cash reserves as much as possible so the firm can be basically ready for the upturn (however that will look like) when


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Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (6)

Don't short the Hawaiin state economy, most would be surprised to learn that the tourism sector is 1/3, not all of our economy.
What is the unemployment rate in Hawaii?
Their burn rate is over 8 million a day! We have no idea when passenger levels will return to normal or what 'normal' will be and the stock goes up 7% on Friday?? The only way to save the company will be to file BK as the fixed costs are eating them alive. Anyone telling you to buy HA with their massive debt is selling a house of cards. Wake up folks!
OlafDanielson profile picture
I agree, but....(big but), not sure enough if Fed is going to let them so even at 11 bucks don't think I have enough cajones to short it. HA does have a moat, assuming they survive, Southwest is going to have to restructure routes and would assume HI will be disposed of......If we don't have tourist traffic for say 2-5 years, Hawaiian Islands economies are going to be in bad bad shape so even the inter island moat will not be much.....get some old SAABs out of storage to fly the few governmental figures from island to island......problem is what are a bunch of used 717s worth? I'm not an expert but I see in the end government take over, consolidating all the airlines into two, operating them for a few years and then slowly selling off the equity, maybe Alaska and HA get offered to the two states but since HI the state will be in such bad shape, probably be attached to one of the two GSE, but that is how I see it. I have no position in any airlines, leasing companies, or BE at moment. I even sold my SFO airport bonds

Good luck
Yes at $8 in the beginning there was some value owning HA shares.
Times have changed and with hardly any revenues to speak of it would not be prudent to stay in this company since the cash generating capabilities, the life blood of any company have practically vanished. This is not the fault of management nor their wonderful employees. As an investor the protection of your money must always be a first step. As Keynes stated when the facts change, you must also change. Wishing HA a better future.
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