Airline Stock Roundup: Busy Labor Day in the Cards? JetBlue's July Load Factor Falls
The past week saw premier trade organization Airlines for America revealing a bright forecast for U.S. carriers. It is expected that U.S. airlines will make hay in the upcoming Labor Day holiday period (Sep 2 – Sep 8) owing to increased travel demand.
Furthermore, the dispute between U.S. carriers and their Gulf counterparts saw a fresh twist with Delta Air Lines DAL, United Continental Holdings UAL and American Airlines Group AAL calling for a State Department investigation into the impact of foreign government subsidies on the airline market.
Meanwhile, load factor declined at low cost airlines JetBlue Airways JBLU for the month of July as capacity growth outpaced the rise in air traffic. Southwest Airlines Co. LUV also grabbed headlines during the week, albeit for the wrong reasons, when the Federal Aviation Administration proposed a hefty fine ($325,000) on the carrier citing maintenance issues. On the earnings front, Latin-American carriers Copa Holdings CPA and GOL Linhas Aereas Inteligentes S.A. revealed disappointing numbers for the second quarter of 2015, hurt by currency issues.
On the price front, the NYSE ARCA Airline index declined 1.6% over the past week.
(Read the last Airline Stock Roundup for Aug 12, 2015)
Recap of the Past Week’s Most Important Stories
1. According to a forecast made by Airlines for America approximately 14.2 million passengers are expected to be transported through U.S. airlines during the Labor Day holiday period this year, compared with 13.8 million people who chose to travel by air in the same period last year. The forecast translates into 2 million fliers per day during the period (read more: U.S. Carriers to Fly High Over Labor Day?).
2. Traffic at JetBlue Airways climbed 8.9% in Jul 2015 from the comparable month a year ago. On a year-over-year basis, consolidated capacity increased 10.4%. Meanwhile, load factor declined 130 basis points to 87% (read more: JetBlue's July Traffic Rises).
3. The Federal Aviation Administration may levy a $325,000 fine on low-cost U.S. carrier Southwest Airlines for operating a Boeing 737 plane which was not serviced even after it had crossed the 24,000-flight limit set by the regulators (read more: Southwest Airlines Flouts Maintenance Norms: Fine in Cards?).
4. Delta has requested a halt on flights out of the U.S. by Middle East carriers while the State Department investigates. The carrier fears that it will have to cut out routes from smaller markets in order to make up for lost revenue from otherwise lucrative international travel. United Continental and American Airlines are also in favor of cracking the whip on their Middle East counterparts (read more: U.S. Airlines Square Off Against Middle East Carriers).
5. Copa Holdings delivered disappointing results in the second quarter of 2015 reporting lower-than-expected earnings as well as revenues. The carrier’s earnings (on an adjusted basis) of 93 cents per share fell short of the Zacks Consensus Estimate of $1.10. Earnings declined over 64% on a year-over-year basis. Quarterly revenues of $538 million talso missed the Zacks Consensus Estimate by a wide margin. A weak demand scenario negatively impacted the performance. Foreign exchange movements also hurt results.
Yield per passenger mile declined 20.4% to 13.2 cents while operating revenue per available seat mile (RASM) decreased 24.4% to 10 cents. Load factor disappointed as well, declining to 72.9% as capacity expanded and passenger traffic decreased.
Following the weaker-than-expected results, the company slashed key aspects of its guidance for 2015. For instance, capacity growth is now projected in the range of plus or minus 5% (old guidance: plus or minus 6%). RASM is projected at plus or minus 10.5 cents (previous guidance: plus or minus 11.4 cents).
Performance
The following table shows the price movement of the major airline players over the past week and during the last 6 months.
Company | Past Week | Last 6 months |
HA | 1.78% | 41.63% |
UAL | 2.09% | -11.47% |
GOL | -14.24% | -64.10% |
DAL | 1.26% | 3.14% |
JBLU | 2.83% | 41.25% |
AAL | 3.38% | -12.35% |
SAVE | 2.66% | -23.86% |
LUV | 4.93% | -8.16% |
CPA | -18.13% | -47.72% |
ALK | 1.94% | 29.50% |
As seen in the chart above, carriers apart from the Latin-American ones traded in the green over the past week as oil prices remained low. Meanwhile, majority of the stocks have shed value over the last six months. Shares of Hawaiian Holdings HA appreciated the most (41.63%) during the six-month period.
What’s Next in the Airline Biz?
With the earnings season over, stay tuned for the usual news updates. Focus will also remain on news regarding the ongoing probes and the dispute between U.S. carriers and their Middle East counterparts.
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SOUTHWEST AIR (LUV): Free Stock Analysis Report
JETBLUE AIRWAYS (JBLU): Free Stock Analysis Report
DELTA AIR LINES (DAL): Free Stock Analysis Report
UNITED CONT HLD (UAL): Free Stock Analysis Report
COPA HLDGS SA-A (CPA): Free Stock Analysis Report
HAWAIIAN HLDGS (HA): Free Stock Analysis Report
AMER AIRLINES (AAL): Free Stock Analysis Report
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