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Airline Stock Roundup: American Airlines, Southwest Trim Q1 Unit Revenue Views; Stella Wreaks Havoc

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The past week saw airline heavyweights like American Airlines Group AAL and Southwest Airlines LUV trimming their respective projections with respect to unit revenues for the first quarter of 2017.

The bearish views, unveiled by the companies while disclosing their respective February traffic reports, hurt the entire sector. As if this was not bad enough, Winter Storm Stella has caused a further setback.

As a result of the negative developments, the NYSE ARCA Airline Index declined almost 2% to $105.11 over the last five trading days. Apart from American Airlines and Southwest, the past week also saw the likes of United Continental Holdings UAL, Alaska Air Group ALK and JetBlue Airways JBLU come out with their respective February traffic numbers.

Transportation - Airline Industry 5YR % Return


Transportation - Airline Industry 5YR % Return

 (Read the last Airline Stock Roundup for Mar 08, 2017).

Recap of the Past Week’s Most Important Stories

1. Winter Storm Stella has crippled normal life, hurting airline stocks significantly.  Airlines cancelled multiple flights as travel plans were thrown haywire by the storm. To compensate for the harassment of passengers, who had planned to travel in the affected period, most carriers are offering rebooking facilities without incurring any additional cost (Read more: Winter Storm Stella Grounds Airline Stocks: More Pain Ahead?).

2. United Continental, the parent company of United Airlines, reported disappointing traffic numbers for the month of February. The company recorded a decrease in load factor (percentage of seats filled by passengers) as the traffic decline was more than the capacity contraction (Read more: United Continental's Traffic & Load Factor Falls in February).

3. At American Airlines, consolidated traffic, measured in revenue passenger miles (RPMs), declined 3.3% on a year-over-year basis to $15.2 billion. Consolidated capacity (available seat miles/ASMs) inched down 3.7% to 19.6 billion in the month. However, load factor or the percentage of seats filled by passengers increased 30 basis points (bps) to 77.3% in Feb 2017. This was primarily because capacity contracted more than traffic.

The carrier now expects first quarter total revenue per available seat miles (TRASM) to increase approximately in the band of 1.5 % to 3.5% on a year-over-year basis. This compares unfavorably to the previous view that the metric would increase in the range of 2.5% to 4.5%. The unfavorable guidance, due to a higher completion factor (mainline) in February, hurt the stock. Pre-tax margin excluding special items is still expected in the band of 3% to 5%. American Airlines carries a Zacks Rank # 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

4. Southwest Airlines recorded a modest 1.1% improvement in revenue passenger miles on a year-over-year basis to 8.7 billion. Available seat miles or ASMs (a measure of capacity) expanded 1.2% to 11 billion in February 2016. Another important metric – load factor (percentage of seats filled by passengers) – was flat at 79.2%. The low-cost carrier expects operating revenue per ASM (RASM) in the first quarter to decline in the band of 2% to 3%. Previously, the metric was expected to be flat to down 1% in the first quarter of 2017 on a year-over-year basis.

5. The Long Island City, NY-based carrier, JetBlue Airways posted a modest rise in air traffic for the month of Feb 2017. RPMs came in at 3.45 billion, up 0.1% year over year. On a year-over-year basis, ASMs expanded 0.7% to 4.2 billion. Load factor or percentage of seats filled by passengers decreased 50 basis points to 82.6% in the month. The carrier expects RASM in the first quarter to decrease in the band of 4% and 5% on a year over year basis (Read more: Here's Why JetBlue Stock Gained Today).

6. Alaska Air Group witnessed a 1.7% rise in traffic in the month of February from a year ago. RPMs came in at 3.5 billion, up from 3.4 billion recorded in Feb 2016. On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) rose 1.2% to 4.4 billion. Meanwhile, the load factor increased to 80.4% from 80.1% recorded in Feb 2016 as traffic growth exceeded capacity expansion (Read more: Alaska Air Group February Traffic and Capacity Increase).

7. Spirit Airlines SAVE saw a 10.6% rise in to approximately 1.74 billion in February 2017. ASMs increased 14.9% to 2.15 billion from 1.87 billion recorded in Feb 2016. Load factor (the percentage of seats filled by passengers) decreased 310 basis points (bps) to 80.7% in February 2017 as capacity expansion outpaced traffic growth (Read more: Spirit Airlines February Traffic Rises, Load Factor Falls).


The following table shows the price movement of the major airline players over the past week and during the last 6 months. 


Past Week

Last 6 months

















































The table above shows that most airline stocks traded in the red over the past week, primarily due to the above mentioned negative developments. Shares of United Continental depreciated the most (9.84%) in the period.

Over the course of six months, the NYSE ARCA Airline index appreciated 20%. Shares of GOL Linhas GOL appreciated the most (47%) in the period.

What's Next in the Airline Space?

Stay tuned for usual news updates in the space. Investors will keenly await further updates on the impact of Winter Storm Stella on the airline space.


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Southwest Airlines Company (LUV): Free Stock Analysis Report
JetBlue Airways Corporation (JBLU): Free Stock Analysis Report
Gol Linhas Aereas Inteligentes S.A. (GOL): Free Stock Analysis Report
Alaska Air Group, Inc. (ALK): Free Stock Analysis Report
United Continental Holdings, Inc. (UAL): Free Stock Analysis Report
Spirit Airlines, Inc. (SAVE): Free Stock Analysis Report
American Airlines Group, Inc. (AAL): Free Stock Analysis Report
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