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Airline Stock Roundup: UAL's Expansion Plans,LUV's 737 MAX Update & More

Maharathi Basu

In the past week, United Continental Holdings changed its name to United Airlines Holdings UAL with immediate effect. Additionally, United Airlines disclosed its intention to launch a second daily nonstop flight between San Francisco and Hong Kong from Oct 26, 2019.  Expansion-related updates were also available from the likes of JetBlue Airways JBLU and Alaska Air Group’s ALK subsidiary — Alaska Airlines.

Southwest Airlines LUV too dominated headlines in the past week, courtesy of its updates on Boeing 737 MAX jets. This Dallas-based carrier initially said that the disputed jets in its fleet would remain grounded until Oct 1. However, on Jul 1, the low-cost carrier’s CEO reportedly stated that the 737 MAX jets in its fleet are not anticipated not operate even beyond that date owing to a new glitch detected by the Federal Aviation Administration (FAA). Additionally, European low-cost carrier, Ryanair Holdings RYAAY, amended its buyback program in the past week.

(Read the last Airline Stock Roundup here)

Recap of Past Week’s Most Important Stories

1. United Airlines’ decision to launch additional flights to Hong Kong highlights its efforts to expand in Asia as the market offers significant commercial potential.Notably, the carrier will operate twice daily on this route using a Boeing 777-200ER aircraft. With the commencement of the new services, United Airlines will cover a total of 29 international destinations from San Francisco, serving eight cities across Europe, India and the Middle East, seven in North America, and 14 in Asia and Oceania. We remind investors that another airline heavyweight — Delta Airlines DAL —  too recently announced its intention to expand in Asia by virtue its decision to invest in Hanjin Kal Corp.— the largest shareholder of Korean Air Lines.

United Airlines carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2. Southwest Airlines has the largest exposure to Boeing 737 MAX jets among U.S. carriers.  With 34 such jets in its fleet, the company had to cancel 115 flights on daily basis due to the groundings. The number may go up further as the jets are not expected to resume service in the next couple of months. The decision followed the FAA’s finding of another potential safety issue with the jets. The problem reportedly involves a microprocessor. The failure of the microprocessor during a flight can push the airplane's nose down. This comes as a major disappointment, with Boeing working on software upgrades for months following the crash of 737 Max 8 jets in Ethiopia and Indonesia, which resulted in the grounding of this model this March.

3. JetBlue has plans to expand further across the Caribbean with a nonstop winter service between New York’s John F. Kennedy International Airport and Guadeloupe’s Pointe-à-Pitre International Airport. Besides the Caribbean expansion, the new service will help JetBlue boost its New York focus city strategy. The thrice-weekly flight will begin operation in February 2020. In the meantime, passengers can start booking seats from the next few weeks onward. (Read more: JetBlue to Start New York-Guadeloupe Service in 2020)

4.  In line with its objective to limit the number of British shareholders, Ryanair amended the terms of a €700-million stock repurchase program. The €700-million buyback program commenced on May 21, 2019, and is expected to run for the next 9-12 months. Per the amended agreement, the airline will allow shares to be repurchased via block trades from EU shareholders. (Read more: Ryanair Amends Buyback Program to Cut Back UK Shareholding)

Meanwhile, June traffic (including 0.6 million from its LaudaMotion unit) rose 13% year over year to 14.2 million, courtesy of upbeat demand for air travel. However, Ryanair’s passenger growth, excluding traffic from LaudaMotion unit, was only 8% in June. Consolidated load factor (% of seats filled by passengers) in the month was 97%. The carrier operated nearly 78,000 flights (scheduled) in June.

5. In a bid to attract traffic during winter, Alaska Airlines has decided to operate additional flights to popular tourist destinations. As part of the carrier’s efforts to increase service to Florida, Alaska Airlines has decided to operate a second daily flight between Seattle and Tampa from Dec 19 and a second daily flight connecting Seattle and Fort Lauderdale from Nov 5. The carrier will also operate a second peak day flight connecting Portland and Orlando from Jan 7, 2020, apart from a third flight connecting Seattle and Orlando flight starting on peak days from Jan 7. Once the new flights are operational, the carrier will operate eight daily flights to Florida. Alaska Airlines will offer services on the new routes through its Boeing 737-900ER jets.

Performance

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

The table above shows that all airline stocks traded in the green in the past week leading to a 2.7% gain in the NYSE ARCA Airline Index. However, over the course of the past six months, the NYSE ARCA Airline Index declined 5.5% despite a double-digit increase in shares of GOL Linhas GOL.

What's Next in the Airline Space?

Investors will keenly await June traffic reports from the likes of Delta over the course of the next five trading days.


 

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JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report
 
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
 
Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
 
Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
Southwest Airlines Co. (LUV) : Free Stock Analysis Report
 
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