Over the past five trading days, headlines were dominated by the impressive October traffic data revealed by Latin American carrier, Gol Linhas Aéreas Inteligentes S.A. (GOL). However, the news on another Latin American company, Copa Holdings SA (CPA) was not so promising. The company delivered soft revenues in the third quarter though earnings came above expectations.
JetBlue Airways Corporation’s (JBLU) decision to charge its customers for checked baggage and squeeze seats in order to boost profit was another highlight of the period under consideration. Delta Airlines (DAL) was also in the news when it placed a $14 billion order to the Airbus Group for 50 widebody jets.
Major companies in the airline space such as American Airlines Group (AAL) and Delta Airlines have waived rebooking charges for customers booked on their flights for travel today (one of the busiest travel days historically) in anticipation of a storm targeting the East Coast. The storm, if it materializes will result in heavy snowfall in the area, spoiling travel plans on the eve of the Thanksgiving Day.
Overall, it was a mixed week for major airline stocks, with quite a few of them suffering losses over the last 5 trading days. However, the losses incurred were not half as drastic as the ones suffered by airline stocks throughout September and early October due to Ebola related worries.
In fact, airline stocks have rebounded nicely from the lean period aided by healthy earnings reports and weak oil prices (Read last to last week’s developments here: Airline Stock Roundup for Nov 19, 2014).
Recap of Most Important Stories of the Last Five Trading Days
1. Latin American company Copa Holdings delivered mixed results in the third quarter of 2014. While earnings (on an adjusted basis) surpassed the Zacks Consensus Estimate, revenues missed expectations. The top line was hurt by lower passenger revenue yields. Capacity reductions in Venezuela also weighed on the results (read more: Copa Holdings Q3 Earnings Top, Revenues Lag; Shares Slide).
2. Another Latin American carrier Gol Linhas Aéreas Inteligentes S.A. was also in the news in the period under consideration when it reported impressive traffic statistics for the month of October on the back of strong demand. Revenue passenger kilometers increased 8% from the comparable year-ago period (read more: GOL Impresses with Strong Oct 2014 Traffic Numbers).
3. JetBlue Airways has announced that it will add bag fees and squeeze seats. The decision, which is believed to have been taken in a bid to bolster revenues going forward, was announced at the company’s Investor Day. Post-JetBlue’s decision, Southwest Airlines (LUV) is the only U.S.-based carrier to allow free check-in of a bag for all passengers (read more: JetBlue to Add Bag Fees, More Seats on Flights; Stock Rallies).
4. Delta Airlines has placed an order worth $14 billion to the Airbus Group for 50 widebody jets. Delta’s order comprises of 25 Airbus A350-900 aircraft and 25 advanced Airbus A330-900neo aircraft. The first A350 is expected to be delivered to Delta in the second quarter of 2017. A330neos will arrive in 2019 (read more: Delta Air Lines to Add Airbus A350-900 & A330-900neo).
5. In order to enhance its in-flight entertainment offerings, United Airlines – the wholly owned subsidiary of United Continental Holdings Inc. (UAL) – has introduced a new application called United app. The offering allows fliers to access a wide range of movies and television shows through Wi-Fi-enabled mobile devices and laptops (read more: United Airlines App to Better In-Flight Entertainment Quotient).
6. American Airlines – the wholly-owned subsidiary of the American Airlines Group– will launch its a new daytime daily flight from Philadelphia International Airport to London Heathrow Airport on May 29, 2015. The new service, aimed to boost trans-Atlantic travel, is the second American Airlines flight in the route. Delta Airlines has also announced its plans to launch a new Philadelphia-London service on Apr 7 next year (read more:American Airlines to Start Second Philadelphia-London Flight).
Performance
The following table shows the price movements of the major airline players over the past 5 trading days and during the last 6 months:
|
Company |
Last 5 days |
Last 6 months |
|
GOL |
11.18% |
-10.93% |
|
JBLU |
5.04% |
47.41% |
|
HA |
4.31% |
30.06% |
|
ALK |
0.67% |
13.85% |
|
UAL |
-3.05% |
29.34% |
|
AAL |
-2.04% |
12.2% |
|
DAL |
-1.74% |
11.71% |
|
LUV |
-2.73% |
48.86% |
|
SAVE |
-1.35% |
30.84% |
|
CPA |
-7.13% |
-19.9% |
As the chart above suggests, the share prices of quite a few major airline stocks were down over the past five trading sessions. Gol Linhas emerged as the biggest gainer among the major players in the airline industry, thanks to its strong October traffic data, with its share price rising 11.18%. Southwest Airlines witnessed the highest upside (48.86%) over the last six months compared to its peers.
Copa Holdings, which fell 7.13% during the 5-day period, was the biggest loser hurt by below-par third quarter results. The company also experienced the highest drop in share price (19.9%) over the last 6 months.
What’s Next in the Airline Biz?
Focus will remain on whether inclement weather will affect the lofty projections for the Thanksgiving holiday season. According to media reports, flight cancellations are on their way up due to the anticipated storm (Cato) in the northeastern states of the country.
With bad weather expected to play spoilsport as far as travel on the eve of the Thanksgiving Day is concerned, it would be interesting to see weather the forecast of trade organization, Airlines for America, holds true or not. The organization predicted that U.S. airlines will carry 1.5% more passengers in the Nov 21–Dec 2 period this year compared to last year.
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