In the past week, United Continental Holdings, Inc. UAL joined JetBlue Airways Corporation JBLU in increasing fees for checked bags. Apart from the update on baggage fees, United Continental was also in news as a result of the decision to expand its transatlantic network next year.
Southwest Airlines Co. LUV also grabbed headlines during the week by virtue of its announcement that it will launch additional routes during spring next year to meet the surge in demand. Alaska Airlines, the wholly owned subsidiary of Alaska Air Group, Inc. ALK, also came up with an expansion-related update in the past week, which was a day short of trading due to the Sep 3, Labor Day holiday.
(Read the last Airline Stock Roundup for Aug 29, 2018)
Recap of the Past Week’s Most Important Stories
1. United Continental is now charging $30 and $40 for checking the first and second bags, respectively. The earlier charges were $25 for the first bag and $35 for the second. The elevated fee structure, which took effect from Aug 31, is applicable on flights operating on the North American, Caribbean and Central American routes (read more: United Continental Increases Bag Fees, Follows JetBlue).
In a separate development, United Continental has decided to introduce three new routes connecting United States and Europe. The routes connect San Francisco-Amsterdam, New York/Newark-Naples and New York/Newark-Prague. The year-round flights connecting San Francisco and Amsterdam will operate from Mar 30, marking the carrier’s fifth nonstop service to the Netherlands from the United States (read more: United Continental to Expand Transatlantic Network).
United Continental carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
2. Alaska Airlines will launch daily non-stop service between Seattle-Tacoma International Airport and John Glenn Columbus International Airport in Ohio from Mar 7, 2019. Notably, this non-stop service would be the only one operating between the Pacific Northwest and Central Ohio. Alaska Airlines’ A320 aircraft will operate on the said route (read more: Alaska Air Unit to Add Seattle-Columbus Service in 2019).
3. In a customer-friendly move, Southwest Airlines will operate new domestic and internal flights for the spring of 2019. Under its expansion plan, this Dallas-based carrier intends to start a non-stop seasonal service between Cleveland and Tampa as well as between Cincinnati and Orlando from Mar 9. The carrier has also decided to revive seasonal service on some routes (read more: Southwest to Offer Additional Flight Services in Spring 2019).
4. Despite operations being hit by multiple labor strikes in August, Irish carrier Ryanair Holdings plc RYAAY reported a 9% increase in traffic. However, excluding traffic from its LaudaMotion unit, passenger growth was only 5% at the European low-cost carrier, which had to call off almost 550 flights during the month due to labor unrest, thereby affecting more than 100,000 passengers. Load factor (percentage of seats filled by passengers) at Ryanair was flat at 97%.
5. The monthly data released by the International Air Transport Association (“IATA”) revealed a 6.2% year-over-year increase in global traffic (measured in revenue passenger kilometers) for the month of July, highlighting strong demand for air travel. Load factor came in at 85.2%, up 60 basis points on a year-over-year basis as traffic growth outpaced capacity expansion (5.5%). In fact, the load factor for July 2018 hit a record for the month.
Price Performance
The following table shows the price movement of the major airline players over the past week and during the past six months.
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The table above shows that most airline stocks traded in the green over the last week even though the gains were muted in nature. The NYSE ARCA Airline Index declined marginally over the past week with Copa Holdings, S.A. CPA emerging as the biggest laggard. Over the course of six months, the sector tracker has increased 5.2% on the back of impressive gains at GOL Linhas.
What's Next in the Airline Space?
Investors will look forward to presentations from carriers at the Cowen and Company 11th Annual Global Transportation Conference. August traffic reports from the likes of Allegiant Travel Company ALGT are also expected in the coming days.
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