Why North Korean Tensions Are To Blame For Hawaiian Holdings Stock Downgrade

Ongoing political tension and the threat of war with North Korea is reason enough for analysts at Buckingham Research Group to downgrade Hawaiian Holdings, Inc. HA. The firm's Daniel McKenzie downgrades Hawaiian Holdings' stock rating from Buy to Neutral with a price target slashed from $55 to $39.

Simply put, discretionary travel among tourists in Japan and South Korea visiting Hawaii has "plummeted" amid tensions with North Korea, McKenzie commented in his downgrade note. Specifically, bookings over the past two months between Tokyo and Honolulu International Airport are down 55 percent and bookings between Osaka and Honolulu are down 67 percent. As a whole, bookings from Japan and South Korea comprise around 16 percent of the company's total revenue. By comparison, bookings from the U.S., Australia, New Zealand and elsewhere are all flat.

While the airline did announce a "brilliant" new code-sharing with Japan Airlines starting in March, any benefits from this relationship are only longer-term in nature.

Bottom line, the near-term concerns for the airliner take precedent and the notable dip in demand from Asia is unlikely to change any time soon, the analyst suggested. In fact, these trends are likely to continue into 2018 and could add downside pressure to earnings moving forward.

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