Asked why a Korean vacationer would choose to fly Hawaiian, Dunkerley said the carrier enables an early start to a vacation. "It's our business to bring people from their homes into Hawaii," he said. "We have built a brand around the authentic Hawaiian experience, and people want to experience the brand."

Also in June, Hawaiian flew its first Airbus A330, assigning the airplane to the Honolulu-Los Angeles route. It expects to take delivery of 20 more A330s by the end of the decade, and will take six A350XWBs starting in 2017.

In May, Hawaiian was awarded one of four routes to Tokyo's Haneda airport, reopened to U.S. carriers for the first time since 1978. The Haneda flight will begin Oct. 31, pending opening of a fourth Haneda runway.

"The Japan-Hawaii market has declined since its heyday two decades ago, but it is nevertheless a vast market," Dunkerley said. Various carriers operate a dozen flights a day between Narita and Honolulu, but Haneda is the preferred airport for many passengers. The decision to award Hawaiian the route meant that neither United ( UAUA) nor Continental ( CAL) received Haneda authorities, since only four routes could be awarded.

On June 15, Hawaiian reduced its guidance for second-quarter passenger revenue per available seat mile to between 6.5% and 8.5%, down from between 8% and 11%. The next day, shares fell 8%. In a report, McAdoo wrote that the shortfall "is being driven partially by increased competition on West Coast to Hawaii routes," adding, "we assume that this increased competition persists for the foreseeable future." Both Alaska ( ALK) and Continental have added Hawaii flights.

McAdoo downgraded the shares to market perform from market outperform, reduced his second quarter estimate to 20 cents from 36 cents, and cut his price target to $8 from $14, saying the airline will likely be "solidly profitable" in 2010, but not profitable enough at a multiple of ten times forward earnings. Analysts surveyed by Thomson Reuters estimate earnings of 20 cents for the second quarter and 70 cents for the year.

"It's always disappointing to see a downgrade," Dunkerley said. But he noted that the carrier continues to be profitable and that its bookings provide no indication the economy is slowing. As for increased competition, he said, "competition is something we deal with all the time -- we have a very competitive product."

In early afternoon trading on Friday, shares of Hawaiian were trading down about 0.57% to $5.23.

-- Written by Ted Reed in Charlotte, N.C.

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