Hawaiian Holdings, Inc. (NASDAQ: HA) is a transportation services company. It offers charter and air transport services for cargo, mail, and passengers in the United States. Hawaiian Holdings is Hawaiian Airlines’ parent company.
It is the tenth-largest commercial airline in the US. Its main base of operation is Honolulu, Hawaii. The airline’s central hub is at the Daniel K. Inouye International Airport on Oahu, with its secondary hub at Kahului Airport on Maui.
Hawaiian Holdings Stock Performance
The company’s stock surged 192.59% at the close of trading on December 4, 2023. The surge was caused by an announcement that Alaska Airlines had agreed to buy Hawaiian Airlines for $1.9 billion.
The deal closed at $18 per share, nearly four times the Hawaiian Holdings stock price of $4.83 on Friday, December 1, 2023. However, HA stock has since appreciated to $14.22 per share as of December 5, 2023.
Hawaiian Holdings has struggled over the past year due to various factors. These include rising fuel costs, jet engine recalls, and reduced tourism due to the Maui wildfires. Before the merger was announced, HA stock had lost over half its value in 2023. The stock is now up 4.02% year-to-date.
Both companies expect to generate a minimum of $235 million in synergies in the next two years. However, the merger could face resistance from federal antitrust regulators who have expressed concerns regarding consolidation in the commercial airline sector.
The deal will lead to a combined 138 destinations for the two airlines and over 1200 via the Oneworld Alliance. It will also consolidate Alaska Airlines’ position as the fifth-largest airline in the US.
The merger will be finalized in 12-18 months. However, it must first get approval from Hawaiian Airlines’ shareholders and US regulators.
Alaska Air Group (ALK)
While Hawaiian Holdings’ stock was up 192.59% after the announcement, Alaska Air Group’s stock took a 14.22% hit. Traditionally, mergers cause the buyer to go into the trend, while the acquired company soars.
The rationale is a merger can cause the buyer to underperform. However, Alaska Air has merger experience, having successfully acquired Virgin America in 2016. Additionally, its balance sheet is quite strong. The stock is already up +0.88% in pre-market trading.
HA Stock Forecast
Stock analysts give HA stock a hold rating. It indicates they expect the stock to perform similarly to the overall stock market in the coming months. Their highest price target is $16, while the lowest is $4. The average price target for HA stock is $10, a -29.68% decline based on the closing price of $14.22.
Should You Buy Hawaiian Holdings Stock
The announced merger is undoubtedly exciting for HA stock investors. However, the deal could take a year to conclude. It could also be rejected due to opposition from US regulators. For instance, the DOJ recently took JetBlue Airways to court over its pending merger with Spirit Airlines.
Additionally, the merger will have to overcome resistance from Hawaiian lawmakers, who have traditionally been protective of the state’s airline sector. Since Hawaii is a series of islands, the state sees airlines as crucial to movement from island to island and the US mainland.
Due to the regulatory risk and an uncertain timeline for the merger, the hold rating by analysts is accurate. Investors should not rush to acquire HA stock.
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