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Airline Stock Roundup: A4A's Bullish Thanksgiving View, AAL's Expansion Update & More

Maharathi Basu

In the past week, Airlines for America (A4A), the trade organization for leading U.S. airlines, predicted strong demand for air travel during the Thanksgiving holiday. Per A4A, 3.7% more passengers will be flying to various destinations in the 12-day travel period (Nov 22-Dec 3) this year compared to 2018.

Meanwhile, American Airlines AAL grabbed headlines by virtue of its decision to launch 20 seasonal routes for next year’s summer. As the summer season is historically a busy one for airlines, the addition of new routes is expected to attract substantial traffic, and in turn, bolster American Airlines’ top line.

The past week also saw European low-cost carrier Ryanair RYAAY ink a seven-year technology partnership with Vodafone Business, which is part of the Vodafone Group. Additionally, JetBlue Airways JBLU entered into an accelerated share repurchase (ASR) deal with Morgan Stanley to buy back $160 million worth of its stock. JetBlue aims to fund the repurchases with its available cash balance.

(Read the last Airline Stock Roundup here)

Recap of the Past Week’s Most Important Stories

1. According to the forecast put forward by the Washington-based trade group, approximately 31.6 million passengers will travel on U.S. airlines during the Thanksgiving holiday period this year. The forecast implies that 2.63 million people will take to the skies per day compared with 2.55 million fliers per day in the same period last year. Moreover, Dec 1 is likely to be the busiest day for carriers ever, with 3.1 million people expected to take to the skies on that day.

To meet the surge in travel demand, U.S. carriers are increasing the number of available seats by 108,000 per day. In fact, they will be operating 859 more flights a day during the period compared to 2018. (Read more: 3 Airline Stocks to Buy on A4A's Rosy Thanksgiving Forecast)

2. As part of its decision to introduce additional routes for the summer of 2020, American Airlines intends to launch eight additional domestic routes. These routes will include flights connecting Dallas-Fort Worth International Airport and Portland, Maine using an Airbus 319 aircraft. Flights on the route will operate on Saturdays from Jun 4 to Oct 3 next year. Other domestic route additions include flights connecting its East Coast hub — Philadelphia to Nantucket, Massachusetts, Martha’s Vineyard, Massachusetts and Traverse City, Michigan. All three seasonal flights will be using an Embraer 175 on Saturdays from June, 2020. (Read more: American Airlines to Add Routes for Bolstering Summer Service)

American Airlines carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

3. JetBlue has decided to accelerate some repurchases as part of its $800 million share buyback program announced in September, 2019. Per the terms of ASR agreement with Morgan Stanley, the carrier will shell out $160 million and receive roughly 6.9 million shares initially, based on its Nov 21 closing price. The total number of shares to be received by the carrier will be determined by the volume-weighted average prices of the JetBlue stock during the term of the ASR agreement. After settlement of the transaction, the carrier will have $640 million of its share buyback authorization remaining.

4.  Strengthening their partnership further, Ryanair chose Vodafone Business as its partner in the field of technology communications in Europe. Per the new agreement, Vodafone Business will transform Ryanair’s information and communication technology infrastructure by applying its cloud, unified communications, software-defined wide area network (SD-WAN), Internet of Things (IoT) and security services. The UK mobile company will manage services like online booking, passenger boarding and in-flight transactions for the Irish carrier in Europe. Per the deal, Vodafone Business will support 300 Ryanair sites and roughly 153 million passengers across 40 countries. The deal should encourage a faster turnaround of planes apart from offering other facilities, which in turn, might boost Ryanair’s profitability.

5. In a bid to boost the travel experience of its passengers, Allegiant Travel Company ALGT has collaborated with Twentieth Century Fox and Blue Sky Studios to celebrate an animated spy comedy adventure — Spies in Disguise — slated to release on Dec 25, 2019. To this end, Allegiant aims to launch a newly-designed aircraft with a Spies in Disguise-themed livery wrapping the exterior. The plane, based at Cincinnati/Northern Kentucky International Airport, will feature larger-than-life images of the film's lead characters. From Thanksgiving through January, Allegiant’s passengers will have opportunities to win prizes and participate in contests.

Performance

The following table shows the price movement of the major airline players over the past week and during the past six months.

The table above shows that majority of the airline stocks traded in the red over the past week. However, the losses incurred were marginal. Consequently, the NYSE ARCA Airline Index decreased slightly to $108.88 in the period. Over the course of six months, the index appreciated 10.6%.

What's Next in the Airline Space?

Investors will look forward to updates from Copa Holdings’ CPA Investor Day on Dec 3. November traffic reports from the likes of Delta Air Lines DAL are also expected in the coming days.

 

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JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report
 
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
Copa Holdings, S.A. (CPA) : Free Stock Analysis Report
 
Allegiant Travel Company (ALGT) : Free Stock Analysis Report
 
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