Most of the major players in the airline space gained traction over the last 5 trading sessions aided yet again by falling oil prices. The NYSE ARCA Airline index gained 3.4% over the last 5 trading days.
Overall, the airline industry is going through happy times. Stocks in the space have rebounded nicely from the battering received in the September to mid-October period due to Ebola-related fears. Falling oil prices and healthy earnings reports have helped them stage this turnaround.
Over the last 5 trading days, headlines were dominated by the joint labor contract between the flight attendants at American Airlines Group Inc. (AAL) and the company after multiple negotiations. Alaska Airlines, the wholly owned subsidiary of Alaska Air Group (ALK) also received favorable news on the labor front with the flight attendants of the carrier approving a 5-year labor contract.
United Airlines – the wholly owned subsidiary of United Continental Holdings Inc. (UAL) – was also in the news due to its efforts to expand. The carrier intends to operate non-stop flights between Chicago and Rome in the summer of 2015. JetBlue Airways Corp. (JBLU) also caught the eye with its launch of additional routes from the Ronald Reagan National Airport (DCA).
Furthermore, President Obama’s announcement last week to restore diplomatic ties with Cuba after more than 5 decades and the debate regarding the impact of the move on airline stocks also remained in focus.
(Read last to last week’s developments here: Airline Stock Roundup for Dec 17, 2014)
Recap of Most Important Stories of the Last Five Trading Days
1. After negotiations between the Association of Professional Flight Attendants – the union representing 24,000 flight attendants at the American Airlines Group – and the management failed, an arbitration panel imposed the contract on the flight attendants. The contract covers the flight attendants of American Airlines and U.S. Airways, which had merged in 2013.
The finalization of the joint contract has removed a major obstacle in the integration process. The news impacted the shares of the company positively (read more: American Airlines Finalizes Labor Deal, Shares Edge Up).
In a more recent development, media reports suggested that CEO Doug Parker, through a letter to the employees of the company, has announced that flight attendants will get a further 4% pay raise in addition to the amount awarded by the arbitration panel. The move was driven by the company’s healthy profitability.
The 4% pay raise is applicable for those represented by unions who have agreed to a contract covering employees of U.S. Airways and American Airlines. Meanwhile, the contract with pilots has moved to an arbitration panel, according to the reports.
2. Alaska Airlines was also in the news due to the approval of a 5-year labor contract by its flight attendants. The contract has been ratified following 3 years of negotiations between the company’s flight attendants and management (read more: Alaska Airlines Crew Approve 5-Year Labor Contract).
3. In a bid to expand further and improve customer convenience, JetBlue Airways launched three additional routes from the Ronald Reagan Washington National Airport to Florida. So far, in 2014, JetBlue has significantly enhanced its Washington, D.C. operations by adding six new routes and also increasing flights to existing destinations (read more: JetBlue Adds Flights from Ronald Reagan National Airport).
4. In line with its expansion plans, United Airlines announced that it intends to operate non-stop flights between Chicago and Rome in the summer of 2015, subject to approval from the government. United Airlines will fly The Boeing Co.’s (BA) 777 wide-bodied jets on the route (read more: United Airlines to Connect Chicago-Rome for Summer 2015).
5. President Obama’s announcement last week to restore diplomatic ties with Cuba after more than 5 decades invited considerable attention. Even though travel restrictions to the island have been eased, we note that U.S. citizens will be able to travel to the destination only for purposes related to family visits, business, research and humanitarian work. Tourism-related travel to the island would still need approval from the Congress (read more: Will Restoration of US-Cuba Ties Benefit Airline Stocks?).
Performance
The following table shows the price movement of the major airline players over the last 5 trading days and during the last 6 months.
|
Company |
Last 5 trading days |
Last 6 months |
|
HA |
4.82% |
72.78% |
|
UAL |
-6.47% |
49.51% |
|
GOL |
11.8% |
-6.14% |
|
DAL |
3.04% |
22.19% |
|
JBLU |
5.67% |
46.88% |
|
AAL |
2.9% |
16.28% |
|
SAVE |
3.27% |
18.62% |
|
LUV |
3.83% |
53.83% |
|
CPA |
7.31% |
-28.7% |
|
ALK |
1.28% |
21.27% |
As the above chart suggests, almost all the major airline stocks gained over the last 5 trading days. GOL Linhas (GOL) emerged as the biggest gainer during the period with its shares escalating 11.8%. Meanwhile, Hawaiian Holdings (HA) witnessed the highest upside (72.78%) over the last six months.
What’s Next in the Airline Biz?
With nothing major lined up for the next 5 trading days, stay tuned for the usual news releases. We expect airline stocks to continue gaining in the last week of 2014.
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