With the Iraq turmoil on the verge and crude oil prices showing signs of volatility, most of the airline stocks tumbled over the last five trading days. However, the current bearish trend in the airline industry does not come as a surprise element given the perpetual inversely proportionate relation between crude prices and airline stocks.
The past week’s events mostly involved the release of traffic results of some of the major airlines. Further, JetBlue Airways Corp.’s (JBLU) divesture of LiveTV also remained in the limelight.
Recap of Last Week’s Most Important Stories
1. United Continental Holdings Inc. (UAL) reported May 2014 traffic (measured in revenue passenger miles or RPMs) results, which increased 1.2% year over year to 18.16 billion. Growth in Latin American traffic offset the decline in the regional division.Consolidated capacity (or available seat miles/ASMs) for the month was 21.29 billion, up a mere 0.2% from May 2013. (Read More:United Continental Slips on Nominal May Traffic Rise )
2. Southwest Airlines Co. (LUV) posted a nominal rise in traffic for May 2014. The month’s traffic – measured in revenue passenger miles (RPMs) – came in at 9.40 billion, up 0.6% from 9.35 billion recorded in the comparable period a year ago. (Read More: Southwest Airlines Posts Slight Rise in May Traffic)
3. JetBlue Airwaysannounced the divesture of its in-flight entertainment subsidiary LiveTV to French defence electronics company, Thales Group for a cash consideration of $399 million. LiveTV was an integral part of JetBlue’s popular on-board experience as it allowed passengers to watch television 30,000 feet above the ground. (Read More : JetBlue Divests LiveTV Unit to Thales Group)
In the same week, JetBlue also reported strong traffic growth in the month of May. The carrier reported airline traffic of 3.20 million, up 7.0% year over year.
4. Last week, GOL LinhasAereas SA (GOL) posted solid traffic results for May 2014. Revenue passenger kilometers or RPK – implying revenue generated per kilometer per passenger – for the month increased 6.4% from the year-ago month to 2,913.6 million. Both domestic and international RPK showed an improvement of 4.6% and 23.1%, respectively. (Read More: GOL Impresses with Traffic Rise of 6.4% in May)
5. Another impressive traffic report from the past week was that of Copa Holdings, S.A. (CPA). The company’s traffic for the month of May increased 12.6% year over year while capacity increased 8.9%. Load factor also remained positive at 77.9%, representing a growth of 260 basis points.
Performance
The following table shows the price movement of the major Airline players over the past 5 trading days and during the last 6 months:
|
Company |
Last 5 Days |
Last 6 Months |
|
AAL |
-0.99% |
60.42% |
|
ALK |
-1.96% |
35.09% |
|
CPA |
0.48% |
-9.56% |
|
DAL |
-3.00% |
47.13% |
|
GOL |
-7.00% |
39.19% |
|
HA |
-7.37% |
59.34% |
|
JBLU |
0.96% |
24.03% |
|
LUV |
-1.15% |
45.92% |
|
SAVE |
1.55% |
45.41% |
|
UAL |
-2.96% |
17.72% |
Over the trailing 5 trading sessions, most of the airline stocks exhibited price decline.
Biggest losers over the period were Hawaiian Holdings, Inc (HA), GOL Linhas and Delta Air Lines with stock prices declining 7.4%, 7% and 3%, respectively. However, few of the stocks that showed marginal gains include Spirit Airlines, Inc. (SAVE) and JetBlue Airways,which were up 1.6% and 1%, respectively.
In terms of performance over the past 6 months, most of the stocks have fared reasonably well with the exception of Copa Holdings, which has dropped 9.6% over the period. The biggest gainers in the 6-month span were American Airlines Group Inc. and Hawaiian Holdings, sporting growth of 60% and 59%, respectively.
What’s Next in the Airline Biz?
As crude oil heads $107, it is more likely we would see further price volatility in airline stocks. In addition, intensifying violence in Iraq and attack on its largest refinery, Beiji, is only making it more difficult for the U.S. market to adjust supplies with the dwindling energy infrastructure in one of the major oil producing countries of the world.
The current week would also record some major events such as the Fed data and information on U.S.supplies, which are likely to determine the price trends in the coming days.
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