Key Points
- An EPS loss of $1.30 exceeded analyst expectations of a $1.34 loss.
- Total revenue of $731.9 million fell short of the analyst estimate of $745.7 million.
- Strategic partnerships, notably with Amazon, are boosting revenue diversification.
Hawaiian Holdings (HA), the airline operator known for its comprehensive routes within Hawai'i and the U.S. mainland, reported second-quarter earnings on Tuesday that fell short of analyst consensus estimates on both the top and bottom lines.
The quarter was marked by a mixed performance with improvements in strategic partnerships and fleet expansion, despite facing high operating costs and fuel price volatility.
| Metric | Q2 2024 | Analysts' Estimate | Q2 2023 | Change (YOY) |
|---|---|---|---|---|
| Diluted EPS | ($1.30) | ($1.34) | ($0.24) | N/A |
| Total revenue | $731.9 million | $745.7 million | $706.9 million | 3.5% |
| Net loss | $67.6 million | N/A | $12.3 million | N/A |
| EBITDA | ($17.9 million) | N/A | $26.1 million | N/A |
| Operating cost per ASM | 15.05 cents | N/A | 14.29 cents | 5.3% |
| Operating revenue per ASM | 13.99 cents | N/A | 14.10 cents | (0.8%) |
Source: Hawaiian Holdings. Note: Analyst consensus estimates from FactSet. YOY = Year over year. ASM = Available seat mile. EBITDA = earnings before interest, taxes, depreciation, and amortization.
About Hawaiian Holdings
Hawaiian Holdings is the parent company of Hawaiian Airlines, a long-standing carrier offering more flights between the U.S. mainland and Hawai'i than any other airline. It operates an extensive network of flights within the islands and to various international destinations. The company's focus lately has been on improving its fleet and establishing strategic partnerships. Key success factors include managing fuel costs, maintaining a competitive edge, and expanding through strategic alliances.
The company's efforts include the re-initiation of a fuel derivative program to manage fuel price volatility. Additionally, Hawaiian Airlines entered into an Air Transportation Services Agreement with Amazon (AMZN 1.86%) to operate A330-300 freighter aircraft, enhancing its cargo revenue stream.
Second-Quarter Highlights
In Q2, Hawaiian Holdings made significant progress in fleet enhancement and strategic partnerships.
Fuel prices remain a major concern, with the economic fuel price per gallon at $2.65 (up 3.9% year over year) and fuel costs accounting for 22.8% of total operating expenses. The company consumed 68.4 million gallons of fuel, a 3.1% increase, pushing total fuel costs to $179.2 million, up 7.7% year over year.
There were notable improvements in revenue diversification through strategic partnerships. For example, other revenue, which includes cargo, increased by 6.4% year over year, largely due to its Amazon partnership.
Competition continues to be intense, but Hawaiian Airlines has maintained a strong position in routes from U.S. gateway cities to Hawai'i. Despite competition, the load factor was strong at 86.5%, though slightly down year over year. Passenger revenue showed a 3.3% year-over-year increase, although yield per Revenue Passenger Mile (RPM) decreased by 0.5%.
A notable event in the quarter was the extended merger review period with Alaska Air Group (ALK -2.15%). This development could significantly impact Hawaiian Holdings' future market positioning and operational efficiencies. Merger-related costs, including $15 million in special items for H1 2024, were also highlighted.
Looking Ahead
For the third quarter of 2024, available seat mile (ASM) growth is expected to be between 5.5% and 8.5% year over year. However, revenue per ASM is expected to decline between 4.5% and 1.5%. The company aims to stabilize the cost per ASM (excluding fuel and non-recurring items), with expectations ranging between a 1.5% decrease and a 1.5% increase.
Management has also revised its full-year 2024 guidance. ASM growth is expected to increase between 4% and 7%. Cost per ASM is forecasted to rise marginally by 0.4% to 2.7%. Investors should note updated fuel price projections, with an average price per gallon of $2.68 anticipated for the year.
The impending merger with Alaska Air remains a critical development, with the potential to alter the company's market dynamics and operational efficiencies.
