Hawaiian Air Remains Imperial's Best Idea In Airliners

Imperial Capital’s Michael Derchin believes Hawaiian Holdings, Inc. HA “is likely to be the only U.S. carrier with positive unit revenue growth in 4Q16 and FY16.”

Derchin maintained an Outperform rating on the company, while raising the price target from $66 to $70.

Best Idea

Listing the stock as Imperial Capital’s Best Idea in the Small-Cap, the analyst mentioned that Hawaiian Holdings has raised its Q4 2016 RASM forecast from growth of 0.5-3.5 percent to 3-6 percent, largely driven by stronger than anticipated results from the West Coast and higher than expected cargo revenues.

Derchin now estimates that the company’s RASM would increase 4.5 percent in Q4 2016 and 1.6 percent in FY 2016, although the rest of the industry is expected to see unit revenue declines over the same periods.

“At HA’s Investor Day on 12/5/16, management laid out its 2017 business plan, which is focused on its core business being more profitable than in 2016, and new initiatives for future growth,” the analyst stated.

Expected To Outperform

Hawaiian Holdings’ unit revenues are expected to again outperform in FY 2017, driven by continuing robust results from the West Coast, along with new Japan routes maturing rapidly and increased focus on peak flying in the Neighbor Island network.

Derchin estimates that the Mainland U.S. RASM would increase 5.4 percent, as compared to the earlier estimate of 2.2 percent, with the company having “a clear pathway to strong unit revenue growth in FY17.”

The EPS estimates for FY 2016, FY 2017 and FY 2018 have been raised to reflect higher unit revenues.