Analyst Says Sell Hawaiian Airlines As United Ramps Competition

Research firm Stifel downgraded Hawaiian Holdings (HA), the owner of Hawaiian Airlines, to Sell from Hold today, citing a decision by United Continental (UAL) to increase the capacity of its Hawaii flights by 20% next year.

IMPACT: Due to United’s announcement, total available seat miles, or ASM, on flights to Hawaii will jump 14% by the first quarter of next year, wrote Stifel analyst Joseph DeNardi. The analyst noted that he had previously expected ASM to Hawaii to remain flat in 2018. The increased capacity will be “a fairly significant headwind” to Hawaiian’s North America business, which accounts for roughly 50% of its overall revenue, warned DeNardi.

ESTIMATES, TARGET: In the wake of United’s announcement, DeNardi lowered his 2018 earnings per share estimate for Hawaiian to $4.10 from $5.34, citing a more cautious outlook for unit revenues. He expects the company’s passenger revenue per available seat mile, or PRASM, to sink 6% in its North America market, leading to a 4% PRASM decline for the company overall. The analyst slashed his price target on the name to $40 from $60.

PRICE ACTION: In early trading, Hawaiian tumbled 10.5% to $48.93.