Despite the earnings season on in full swing, airline stocks remained lackluster over the past one week. Improved quarterly results posted by most of the carriers made no significant impact on the industry overall, leading to most of the stocks trading in the red through the week.
Some of the major highlights from the past week include earnings announcements by U.S. and European carriers. In addition, initiation of Virgin America’s IPO launch and hefty fines imposed on Southwest Airlines Co. (LUV) for non-compliance of maintenance regulations also made headlines last week.
A Recap of Last Week’s Most Important Stories
1. Airline giant Air France-KLM SA (AFLYY) reported first-half 2014 adjusted loss of €1.16 per share ($1.59), narrower than the loss of €2.32 ($3.05) incurred in the first half of 2013. Total operating revenue in the first half of 2014 came in at €12.01 billion ($16.50 billion), which declined 1.78% from the comparable period last year. Foreign exchange affected results to the tune of €287 million ($394.7 million) (read more: Air France-KLM (AFLYY) 1H14 Loss Narrows, Revenues Drop Y/Y).
2. Another carrier, Spirit Airlines Co. (SAVE) reported second-quarter 2014 earnings of 91 cents per share, beating the Zacks Consensus Estimate by a penny. Earnings, however, surged 44.4% from 63 cents reported in the prior-year quarter (read more: Spirit Airlines Beats Q2 Earnings, Revenues on Higher Demand).
3. Europe’s leading low fare airline Ryanair Holdings plc (RYAAY) reported first-quarter fiscal 2015 adjusted earnings of €196.8 million ($270.0 million), up by a whopping 152% owing to rise in average fares and strong load factor, partially offset by higher operating expenses (read more: Ryanair Q1 Earnings and Revenues Rise, Profit Guidance Up).
4. Low-cost U.S. airline Virgin America has finally filed a registration with the U.S. Securities and Exchange Commission (SEC) to launch its Initial Public offering (IPO). The California-based carrier has well timed its IPO given a recovering U.S. aviation market (read more: Virgin America Files for IPO amid High US Airline Earnings).
5. Southwest Airlines may end up paying one of the heftiest fines ever charged by the Federal Aviation Administration (FAA). The regulator has alleged the carrier for non-compliance of maintenance regulations in some of its 737 jetliners. The Dallas-based carrier has a months’ time to respond to the proposed charges (read more: Faulty Jet Repairs to Cost Southwest Airlines $12 Million).
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 |
-5.75% |
10.29% |
|
ALK |
-4.90% |
14.41% |
|
CPA |
-1.33% |
19.22% |
|
DAL |
-4.25% |
21.13% |
|
GOL |
-4.66% |
49.52% |
|
HA |
-6.18% |
40.39% |
|
JBLU |
-2.71% |
25.20% |
|
LUV |
-2.46% |
37.02% |
|
SAVE |
-3.81% |
44.24% |
|
UAL |
-6.45% |
0.76% |
Over the trailing 5 sessions, all the airline stocks listed above exhibited bearish trends. The biggest losers were United Continental Holdings, Inc. (UAL), Hawaiian Holdings Inc. (HA) and American Airlines Group Inc. (AAL), which dropped 6.5%, 6.2% and 5.8%, respectively.
However, over the past 6 months, most of the stocks have fared reasonably well. The biggest gainers in the 6-month span were GOL Linhas A and Spirit Airlines sporting growth of 49.5% and 44.2%, 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 possibly uplift the price potential of the airline stocks. As a result, we continue to expect sluggish trading for the remainder of this week as well.
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