The past week saw quite a few updates from stocks in the airline space. However, all that was overshadowed by the devastating terror attacks in Paris last Friday which claimed over 125 lives, leaving several others injured. Naturally, tourism- centered stocks, which include airline players, lost value in the aftermath.
However, most market watchers believe the impact will be short-termed in nature. This is in keeping with the trend that market weakness resulting from such horrific incidents is usually short-lived, especially when their numbers are on the rise.
Other prominent developments over the past five trading days include GOL Linhas’ GOL below-par performance in the third quarter of 2015 and impressive October traffic numbers unveiled by American Airlines Group Inc. AAL.
On the price front, the NYSE ARCA Airline index declined 2.3% to $88.64 over the past week mainly due to airline stocks taking a backseat in the face of the terror attacks in the City of Light.
(Read the last Airline Stock Roundup for Nov 10, 2015).
Recap of the Past Week’s Most Important Stories
1. In what has been termed as the worst terrorist attack in Europe in more than a decade, serial attacks on bars, restaurants, a concert hall and a stadium in Paris on Nov 13 killed and injured people in multitudes. Airline stocks tend to be vulnerable to such assaults due to the resultant disruption in flight services.
Delta Air Lines DAL suffered a huge blow because of its collaboration with the Air France-KLM Group and Alitalia for transatlantic operations. The company has stated that it will continue to run flights to Paris. However, there could be cancellations or significant delays for which it will duly compensate passengers (read more: US Airlines Dip as Terror Strikes City of Light).
2. GOL Linhas reported lackluster results in the third quarter of 2015, hit by a weak economy and currency headwind. The Latin-American carrier reported net loss of R$2,133.6 million (approximately $608 million), significantly wider than the year-ago loss of R$245.1 million (about $108 million) (read more: GOL Linhas' Q3 Loss Widens Y/Y, Operating Margin View Cut).
3. Low-cost carrier JetBlue Airways Corp. JBLU witnessed a significant improvement in air traffic in the month of October, this year. Traffic – measured in revenue passenger miles (RPMs) – came in at 3.4 billion, up 11.8%. On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) increased 11.1% to 4 billion (read more: JetBlue's October Traffic Gains on Promising Factors).
4. In a bid to expand its operations and attract more fliers, American Airlines Group announced its intention to operate direct flights daily connecting Los Angeles and Auckland in New Zealand. The decision to fly to Auckland is a smart one, given that it is a popular tourist destination. This apart, the carrier also unveiled impressive Oct 2015 traffic data (read more: American Airlines Adds Kiwi Destination; October Traffic Rises).
In a separate development, American Airlines announced that it is modifying its frequent flier program. The Fort Worth, TX-based carrier stated that from the second half of 2016, it will reward fliers (i.e. they can earn miles) on the basis of the fares paid by them rather than the distance flown. The modification, which resembles changes made by rivals like United Continental Holdings UAL, primarily intends to benefit the elite members of American Airlines’ AAdvantage program as they are the ones who spend the most on flying with the carrier.
5. Copa Holdings CPA delivered disappointing results in the third quarter of 2015 reporting lower-than-expected earnings as well as revenues. The carrier’s earnings (on an adjusted basis) of 85 cents per share fell short of the Zacks Consensus Estimate of 89 cents. Earnings declined over 62% on a year-over-year basis. Quarterly revenues of $547 million also missed the Zacks Consensus Estimate and declined 17.5% from the year-ago quarter. A weak demand scenario negatively impacted the performance. Foreign exchange movements also hurt results.
Yield per passenger mile declined 20.1% to 12.7 cents while operating revenue per available seat mile decreased 19.1% to 10.1 cents. Load factor disappointed as well, declining to 76.3% as capacity expansion outweighed the growth in passenger traffic.
Performance
The following table shows the price movement of the major airline players over the past week and during the last 6 months.
|
Company |
Past Week |
Last 6 months |
|
HA |
-3.81% |
39.66% |
|
UAL |
-4.38% |
-7.82% |
|
GOL |
-3.47% |
-67.75% |
|
DAL |
-5.31% |
0.84% |
|
JBLU |
-6.24% |
14.27% |
|
AAL |
-5.47% |
-13.67% |
|
SAVE |
2.07% |
-48.27% |
|
LUV |
-1.44% |
8.99% |
|
CPA |
-5.98% |
-46.83% |
|
ALK |
-1.02% |
14.74% |
As the chart above indicates, all major airline stocks barring Spirit Airlines SAVE traded in the red over the past five trading days. The Paris attacks were primarily responsible for the downward movement. The price movement exhibited a mixed trend over the past six months. While Hawaiian Holdings gained the most, GOL Linhas was the biggest loser in the period.
What's Next in the Airline Biz?
With nothing specific lined up, stay tuned for regular news updates. It will be interesting to see if any new facts emerge in the coming days from the recently filed lawsuit by the U.S. Department of Justice to block United Continental from acquiring 24 takeoff and landing spots at the Newark Liberty International Airport in New Jersey.
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