In the past week, premier trade organization — Airlines for America (‘A4A’) — issued an upbeat forecast for U.S. carriers. It is expected that U.S. airlines will make hay in the Labor Day holiday period (Aug 28 – Sep 3) owing to robust travel demand and affordable airfares.
Low-cost carrier Ryanair Holdings RYAAY also grabbed headlines by virtue of its announcement to close four of its bases in Spain from Jan 8, 2020. The decision has been vehemently opposed by the labor union of Spain, Unión Sindical Obrera (USO), as it will cause significant job losses. Meanwhile, Ryanair’s cabin crew in Spain will go on strike for 10 days in September (1, 2, 6, 8, 13, 15, 20, 22, 27 and 29), following the failure of mediation between Ryanair and union leaders.
United Airlines Holdings UAL was also in news courtesy of its decision to temporarily discontinue operations to two international destinations on account of inadequate demand on the routes. Meanwhile, Latin American carrier Azul AZUL provided an expansion-related update in the past week.
(Read the Last Airline Stock Roundup here).
Recap of Past Week’s Most Important Stories
1. According to the forecast put forward by A4A, approximately 17.5 million passengers will travel on U.S. airlines during the Labor Day holiday period this year compared with 16.9 million passengers during the same period last year. The forecast translates into 2.51 million fliers per day during the above-mentioned period.
Moreover, this Friday is likely to be the busiest day for U.S. carriers in the seven-day period, with 2.98 million people expected to take to the skies. In a bid to meet the surge in travel demand, U.S. carriers are increasing the number of available seats by 109,000 per day. (Read more: 3 Airline Stocks to Buy on A4A's Rosy Labor Day Projection)
2. According to USO, Ryanair’s decision to close its bases at Tenerife, Lanzarote and Gran Canaria and Girona might see multiple pilots and cabin crew lose their jobs. Delving into details, the union said that 164 jobs in Girona; 156 in Tenerife South; 110 in Las Palmas, and 82 in Lanzarote are likely to be under threat due to this latest decision.
Ryanair has cited reasons like overcapacity of pilots and cabin crew due to delays in the delivery of the grounded Boeing 737 MAX jets and Brexit-related adverse developments behind its decision to close the four bases. However, the USO did not agree with the company’s explanation. (Read more: Ryanair to Shut Down 4 Bases in Spain Next Year)
3. United Airlines will reportedly suspend flights connecting Chicago and Hong Kong from Sep 8, 2019. Additionally, it will suspend service on the Newark-Buenos Aires route, effective Oct 26. Notably, while Hong Kong is witnessing mass-scale political demonstrations that caused the closure of the Hong Kong International Airport earlier in August, Argentina is in the middle of an economic turmoil. These issues have resulted in sluggish demand for business and leisure travel to those places. (Read more: United Airlines to Suspend Two Global Services on Low Demand)
Additionally, United Airlines announced its intention to commence several new international routes apart from extending some international services from its hubs in Chicago, Denver, New York/Newark and San Francisco. For instance, the Chicago-based carrier will launch service to Curacao from New York/Newark from Dec 7, 2019. (Read more: United Airlines to Start Global Flights From Multiple Hubs)
United Airlines carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
4. In a bid to cater to rising air travel demand, Azul has announced nonstop service from Fort Lauderdale, FL to Belo Horizonte, Brazil, from Dec 16, 2019. Once the new service becomes operational, Azul will fly six times a week to the United States from the state of Minas Gerais, whose capital is Belo Horizonte. Currently, Azul operates flights connecting Belo Horizonte and Orlando.
5. According to a Reuters report, low-cost carrier Spirit Airlines’ SAVE chief executive officer and president Ted Christie stated that this ultra-low-cost carrier is looking to operate larger Boeing planes apart from Airbus A321neo jets to drive growth. Currently, the Miramar, FL- based carrier operates an all-airbus fleet. The carrier’s fleet size at the end of 2018 was 128 (31 A319, 60 A320 CEOs, 30 A321 CEOs and 7 A320 NEOs). The fleet size is expected to continue expanding in the coming days.
The following table shows the price movement of the major airline players over the past week and during the last six months.
The table above shows that all airline stocks, apart from Southwest Airlines LUV, traded in the red over the past week resulting in the NYSE ARCA Airline Index declining 3.6% to $90.77. Over the course of six months, the same appreciated 3.5%.
What's Next in the Airline Space?
Investors will look forward to August traffic reports from the likes of Ryanair in the coming days. Updates on the ongoing labor tussle at Ryanair will also be awaited.
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Southwest Airlines Co. (LUV) : Free Stock Analysis Report
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