Fitch Ratings has upgraded Hawaiian Airlines and its parent company Hawaiian Holdings, Inc. to 'B+' from 'B'. The Rating Outlook is Stable.
The rating upgrade is supported by material improvement in HA's credit profile over the past two years as lower capital spending, maturing international routes, and low fuel prices have led to improved operating margins and allowed the company to pay down debt. For 2016, Fitch expects further credit improvement driven by low fuel, a more moderate competitive environment in HA's domestic markets, and sustained demand for tourism to the islands of Hawaii. Another year of solid financial performance in 2016 should allow the company to pay down incremental debt and build its base of unencumbered assets, putting HA in a better position to weather future downturns.
Fitch's primary concerns revolve around potential cost pressures looming in the next couple of years, particularly related to labor, as the majority of HA's unionized workers are currently working under amendable contracts. The ratings also remain constrained by Hawaiian's geographic concentration, and its reliance on demand for travel to Hawaii from a relatively small number of markets. The company's small size compared to its much larger U.S. peers also remains a limiting factor.