The final week of 2014 has been a relatively quiet one for the airline industry. Most stocks in the space gained (albeit moderately) as oil prices continued to move southward. Consequently, the NYSE ARCA Airline index gained a moderate 2.9% over the past week.
Low cost carrier, Virgin America (VA), which went public last month, was one of the few companies that made it to the headlines in the otherwise news-thin week. The stock gained significantly following the initiation of coverage on the carrier by several research firms.
Moreover, during the week, the last flight under the AirTran brand name successfully completed its historic journey from Atlanta to Tampa, FL. Subsequently, the integration process following the 2011 acquisition of AirTran Airways by Southwest Airlines Co. (LUV) stands almost complete.
In addition, United Airlines, the wholly-owned subsidiary of United Continental Holdings, Inc. (UAL), and online travel company Orbitz (OWW) jointly sued an individual for starting up a travel site that promises air tickets at highly discounted prices.
(Read last to last week’s developments here: Airline Stock Roundup for Dec 24, 2014)
Recap of Most Important Stories of the Past Week
1.Shares of low-cost airline Virgin America gained significantly following initiation of coverage on the stock by several research firms and the accompanying bullish comments and favorable ratings assigned by the concerned analysts (read more: Virgin America Soars on Bullish Actions of Analysts).
2. Southwest Airlines, which purchased AirTran Airways in 2011, has nearly completed the integration process with the departure of the latter’s final flight (Flight 1) from Atlanta to Tampa, FL. The flight departed from the Hartsfield-Jackson International Airport for the Tampa Bay International airport at 10.25 p.m on Dec 28. (read more: Southwest Airlines Sees Off Last AirTran Flight, Takes Control).
3. Alaska Airlines, a subsidiary of Alaska Air Group (ALK), announced that members of its award winning frequent flier program – Alaska Airlines Mileage Plan – will henceforth be able to have one of their bags checked in for free. Subsequent to this customer friendly offer, valid for the entire month of January, the carrier plansto do away with its $25 bag fee. The carrier has further stated that in January, even non-mileage plan members can sign up for the program online (without incurring any additional cost), ahead of their trip or even at the airport prior to getting their bags checked.
4.United Airlines and travel site Orbitz have filed a lawsuit against Aktarer Zaman, the founder of travel site Skiplagged.com that helps travelers to find cheap flights by utilizing the "hidden city" ticketing strategy. United and Orbitz have claimed $75,000 as lost revenues from this 22-year old man. They believe that Zaman’s site, which searches for routes prohibited by carriers, has hurt their business by creating unfair competition.
Using the strategy, passengers can get off a plane at their desired destination during a layover at that place, and avoid the remaining portion of the otherwise longer flight. Fliers, with the help of Zaman’s site, can thus save money by purchasing tickets for longer flights with layovers that are often cheaper compared to direct flights of shorter distance. However, passengers can benefit from the system only if they are traveling without checked bags as checked luggage for flights with layovers are handed over only in the final destination. Moreover, the system is only applicable for one-way tickets. This is because in the event of passengers failing to show up for one leg of a flight, airline companies cancel the return leg. Zaman intends to fight the case and is raising funds for the purpose.
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 |
|
ALK |
1.79% |
22.50% |
|
HA |
6.62% |
87.48% |
|
JBLU |
2.58% |
44.81% |
|
AAL |
3.85% |
21.77% |
|
UAL |
1.72% |
56.29% |
|
SAVE |
0.96% |
17.95% |
|
LUV |
1.22% |
52.07% |
|
DAL |
2.45% |
22.13% |
|
CPA |
0.92% |
-28.62% |
|
GOL |
8.50% |
-0.71% |
As the above chart suggests, almost all the major airline stocks gained over the past week. GOL Linhas (GOL) emerged as the biggest gainer during the period with its shares escalating 8.50%. Meanwhile, Hawaiian Holdings (HA) witnessed the highest upside (87.48%) 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 first week of 2015.
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