The performance of airline stocks has been trending downward over the past 5 trading sessions. Rise in crude oil prices and subdued market fundamentals have deterred any upswing over the period.
Major events from last week include Delta Air Lines Inc.’s (DAL) traffic results for the month of June and Southwest Airlines Co. (LUV) foray into international markets. In addition, American Airlines Group Inc.’s (AAL) deal with CFM International and GOL Linhas A’s (GOL) financing deal were also in the headlines.
A Recap of Last Week’s Most Important Stories
1. Delta Air Lines faced investors’ apprehensions after it reported lower-than-expected growth in traffic for June 2014. The company’s airline traffic grew moderately by 3.0% year over year. The carrier also warned that a slowdown in certain international markets due to excess capacity could push fares lower than expected. (Read More: Delta Slides on Lower than Expected Traffic Numbers)
2. After operating for several decades within the U.S. domestic market, Southwest Airlines is finally flying into international territory, with flights to the Caribbean. Last week, Southwest Airlines inaugurated services from Atlanta, Baltimore and Orlando to Oranjestad, Aruba and Montego Bay, Jamaica. Another flight will fly from the Baltimore-Washington D.C. area to Nassau and Paradise Island, thus extending the carrier’s international service to the Bahamas. (Read More: Southwest Airlines Debuts in International Skies)
3. As reported last week, American Airlines is advancing on a $2.6 billion deal with CFM International for purchasing 200 Leap-1A engines. Nothing has been officially announced as yet but going by the report, the new engines are to equip 100 A320neo jetliners that American Airlines had earlier announced of buying in 2011.
4. Last week, Latin American airline GOL Linhas closed a financing deal with Credit Agricole Corporate and Investment Bank. The carrier will avail a $68 million funding from the agency guaranteeing 12 spare CFM56-7B engines. Reportedly, the deal – spread across a seven-year period – aims to maintain the company’s liquidity position as well as lower interest expenses.
5. Last week, Alaska Air Group, Inc. (ALK) released its June 2014 traffic results. The carrier reported a 5.3% year over year increase in traffic given 5.5% increase in capacity. Load factor decreased 20 basis points to 86.9% in the month.
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 |
-8.21% |
45.71% |
|
ALK |
-0.81% |
28.42% |
|
CPA |
-0.02% |
-7.83% |
|
DAL |
-9.60% |
22.73% |
|
GOL |
-7.09% |
21.29% |
|
HA |
-3.53% |
30.70% |
|
JBLU |
-4.46% |
16.56% |
|
LUV |
-3.71% |
32.84% |
|
SAVE |
-3.66% |
33.64% |
|
UAL |
-6.44% |
-3.61% |
Over the trailing 5 sessions, all the airline stocks listed above continued to trade in the red. The biggest losers were Delta Air Lines, American Airlines and GOL Linhas with around 10%, 8% and 7% decline in stock prices, respectively.
Over the past 6 months, however, most of the stocks have fared reasonably well with the exception of Copa Holdings SA and United Continental Holdings, Inc. (UAL) that dropped 7.8% and 3.6%, respectively. The biggest gainers in the 6-month span were American Airlines and Spirit Airlines, Inc. (SAVE), sporting growth of 45.7% and 33.6%, respectively.
What’s Next in the Airline Biz?
In the current week, we foresee no significant recovery in the global as well as the U.S. market that can uplift the price potential of airline stocks. As a result, we continue to expect sluggish trading for the remainder of this week.
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