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Southwest a Step Closer to Hawaii: Hawaiian Holdings Slides

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Shares of Hawaiian Holdings, Inc. , the parent company of Hawaiian Airlines, declined 6.5% on May 3 to $38.25 due to fears of intensifying competition in Hawaii as Southwest Airlines Co. (LUV - Free Report) unveiled a detailed plan to offer flights connecting Hawaii and California. Subsequently, Southwest Airlines intends to offer inter-island flights. These flights will be offered by Southwest at much lower prices than those currently operated by Hawaiian Airlines.

As Hawaiian Holdings derives a bulk of its revenues from inter-island flights, it is natural that the stock price of this Honolulu County, HI based company was hurt significantly by fears of a decline in the company’s market share.

Plan in Detail

Southwest had initially announced its plans last year to fly to Hawaii. The Dallas-based low-cost carrier provided more details on May 3. The carrier said that it will at first offer non-stop flights connecting Hawaii to four California cities — San Jose, San Diego, Sacramento and Oakland. The service will commence following authorization by the Federal Aviation Administration. Tickets are expected to be sold later this year.

Southwest intends to initially operate flights connecting Chicago to the following airports in the island — Honolulu, Lihue Airport, Kona International Airport and Kahului Airport. The inter-island flights will take to the skies after the Chicago-Hawaii operations “ramp up.”  

Apart from Southwest, American Airlines Group Inc. (AAL - Free Report) had recently stated that it intends to offer flights connecting Chicago and Honolulu in winter. American Airlines’ entry into Hawaii, a popular tourist destination, is likely to intensify competition for Hawaiian Holdings. No wonder, the stock is feeling the heat.

Investors would keenly await further updates on this burning issue.

Zacks Rank & Stock to Consider

Hawaiian Holdings carries a Zacks Rank #3 (Hold), while Southwest is a Zacks Rank #5 (Strong Sell) stock. A better-ranked stock in the airline space is SkyWest, Inc. (SKYW - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of SkyWest have rallied more than 59% in a year.

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