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Hawaiian Holdings (HA) Unit's May Traffic Up, Q2 View Bleak

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Hawaiian Holdings, Inc.’s (HA - Free Report) wholly owned subsidiary, Hawaiian Airlines, reported traffic figures for May. Traffic (measured in Revenue Passenger Miles or RPMs) increased 5.6% to around 1.45 billion.

Available Seat Miles (ASMs) also climbed 6.5% to 1.68 billion in the month. Load factor (percentage of seats filled by passengers) contracted 80 basis points (bps) to 85.9% as traffic growth was outpaced by capacity expansion.

In the first five months of the year, Hawaiian Airlines witnessed a 6.2% rise in RPMs to 6.86 billion. Also, ASMs rose 5.5% to 8.04 billion. As a result, load factor inched up 50 bps to 85.3%. Additionally, passenger count rose 6.3% to 4.86 billion.

Simultaneously, the company revised guidance for some of its metrics pertaining to the second quarter of 2018. It has also updated its fuel costs view for the full year.

Bearish Q2 Outlook

For the second quarter, the carrier anticipates operating revenue per available seat mile (RASM) in the range of down 0.5% to up 1.5% (change on a year-over-year basis). Earlier guidance had called for a rise of 0-3% in the metric. This lowered outlook is due to softness in bookings on account of an increase in volcanic activity on the Big Island region.

Non-fuel unit costs are now expected to increase between 5% and 7% (previous view was a rise in the 4-7% range). This downside has been driven by an unscheduled maintenance event of one of its A330-200 aircraft as well as a one-time expense related to the purchase of Boeing 787-9 aircraft.

Not surprisingly, the company has also raised its outlook for gallons of jet fuel consumed and economic fuel cost per gallon in the quarter. With oil prices trending up lately, the carrier now estimates a rise of 6-7% in the gallons of jet fuel consumed (prior forecast had called for an increase of 5-7%). While economic fuel cost per gallon is projected between $2.05 and $2.10. Past forecast was in the $2-$2.10 band.

Dismal 2018 Fuel Cost View

The company has raised its outlook for fuel costs per gallon in 2018. It now predicts the metric in the $2.05-$2.15 range, higher than the earlier projection of $1.97-$2.07. However, its anticipation for non-fuel unit costs in the current year remains unaltered. It continues to expect the metric to be up 0.5-3.5% in 2018.

Zacks Rank & Key Picks

Hawaiian Holdings carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are GATX Corporation (GATX - Free Report) , SkyWest, Inc. (SKYW - Free Report) and Expeditors International of Washington, Inc. (EXPD - Free Report) . While GATX and SkyWest carry a Zacks Rank #2 (Buy), Expeditors sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of GATX, SkyWest and Expeditors have rallied more than 10%, 51% and 37%, respectively, in a year.

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