It's great to have a competitor fold, even better to have two fold. And that is where

Hawaiian Airlines

finds itself.

"We have been waiting for a moment like this," said CEO Mark Dunkerley in an interview. "It is a generational opportunity."

The moment's importance has not evaded investors, who have pushed the shares of

Hawaiian Holdings

(HA) - Get Report

, the airline's parent company, up more than 25% in less than two weeks. Hawaiian traded Wednesday at $6.99, after closing at $5.22 on March 28. The last time the stock saw $7 was March 2005.

Aloha Airlines sought bankruptcy protection on March 20 and shut down March 31, while ATA closed down April 3. Aloha operated between Hawaii and six West Coast destinations and on intra-island routes, while ATA served Hawaii from four western sites. Hawaiian flies to nine West Coast airports and also among the islands.

Hawaiian has been busy since the shutdowns. To start, it has announced plans to serve Oakland, Calif., which had both Aloha and ATA service, starting next month. Also, it has operated several flights to carry stranded passengers, and it's speaking to lessors about acquiring more aircraft -- the market remains tight. Additionally, it expects to hire some Aloha employees.

The carrier is well-positioned to reach out to Aloha customers. "This is a community where loyalties run deep, and people flew them to the last day," Dunkerley says. "We are making an effort to remind people that now only one airline is truly Hawaiian."

Tough Competition

To be sure, other than offering the ability to operate on time at uncongested airports (Aloha and Hawaiian have long been industry leaders in on-time performance), there is nothing easy about Hawaii's skies.

Trans-Pacific flights to the mainland generally serve leisure passengers. These routes are subject to intense fare competition and are often used by mainland carriers to reward frequent fliers. "Hawaii is worse than Florida," says aviation consultant Mike Boyd. Because major carriers "operate high density aircraft to eat up frequent flier miles, it's very low yield," he says.

Meanwhile, the market among the islands has been the scene of a fierce ticket-price war since

Mesa Air

(MESA) - Get Report

entered it in 2006 with rock-bottom fares.

Aloha and Hawaiian both suffered from Mesa's arrival, although Hawaiian managed to report net income of $7.1 million for 2007 and $3.3 million for the fourth quarter.

Even with Aloha grounded, the skirmish continues. Last year, a Honolulu bankruptcy court judge ordered Mesa to pay Hawaiian $80 million for misusing confidential information obtained as a potential acquirer of its rival. Mesa is appealing that decision. Aloha has a suit against Mesa that will be heard in October.

Last Low-Cost Carrier Standing

On the trans-Pacific routes, the departures of Aloha and ATA reduced capacity by about 15%. Still, mainline carriers have increased service over the last few years.

"I wouldn't describe the market as

lacking capacity," Dunkerley says. "In the last few years, we've had excess capacity." Recently,

Alaska Air

(ALK) - Get Report

said it would add Seattle to Maui routes in July, matching a Hawaiian route.

The biggest player is

UAL's

( UAUA) United, with about 25% of the market. Hawaiian is second with around 22%. Hawaiian flies widebody Boeing 767s, whereas Aloha and ATA flew narrow-bodies. "This should demonstrate that smaller aircraft, no matter how modern, have higher unit costs than widebodies," Dunkerley says.

In a recent report, Avondale Partners analyst Bob McAdoo said Hawaiian has opportunities in both areas. He said Hawaiian and Aloha provided 90% of intra-island capacity, so Hawaiian, which operates fuel-efficient Boeing 717s on the routes, is positioned to pick up much of Aloha's traffic.

Meanwhile, "with the demise of both Aloha and ATA, Hawaiian is the last low-cost carrier offering meaningful numbers of primarily affordable seats to leisure passengers from the mainland," wrote McAdoo, who has initiated coverage with a target price of $11.