Fitch Ratings has upgraded Hawaiian Airlines and its parent company, Hawaiian Holdings, to BB- from B+. The Rating Outlook is Stable. Fitch has also affirmed Hawaiian’s 2013-1 class A certificates at A- and upgraded its 2013-1 class B certificates to BBB- from BB+.
The upgrade is supported by continued solid financial performance since Fitch’s last review. Hawaiian produced healthy revenue growth and solid operating margins in 2017 despite absorbing higher labour costs and increased jet fuel prices. As a result, total adjusted debt/EBITDAR sits at 2.8x as of March 31, 2018, down from the mid-5x range as recently as 2013. Fitch expects Hawaiian’s credit metrics to deteriorate moderately in 2018 due to higher fuel costs and increased competition but to remain supportive of the BB- rating.
Fitch’s primary rating concerns revolve around increasing competitive capacity to the Hawaiian Islands from other US air carriers and higher fuel costs. 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.