It was a relatively quiet week for the airlines industry on the news front. Alaska Airlines, the wholly owned subsidiary of Alaska Air Group ALK, continued its expansion initiatives with its announcement of a new flight between Boise and Spokane from Aug 24, 2015.
Somber news flew in from France this week. As per media reports, a plane operated by Germanwings, the low-cost arm of Deutsche Lufthansa AG DLAKY has crashed in the southern part of France. It is feared that all passengers on board have been killed in the crash. Lufthansa was also in the news with its pilots resorting to a four-day strike pertaining to the ongoing dispute over retirement benefits and the carriers’ expansion plans.
According to data released by the Bureau of Labor Statistics, average airfares in the U.S. for the month of February increased 1.9% over Jan 2015. The February figure was, however, down 3% on a year-over-year basis.
With not much happening on the news front over the last 5 trading days, the price movement of stocks in the airline space also remained subdued. Consequently, the NYSE ARCA Airline index gained a mere 0.6% over the last 5 trading days.
(Read the last Airline Stock Roundup for Mar 18, 2015).
Recap of the Most Important Stories Over the Past Week
1. In a bid to expand and improve customer convenience, Alaska Airlines said that it will introduce a new flight between Boise, ID and Spokane, WA from Aug 24, 2015. The introductory one-way fare for the new daily non-stop service has been kept reasonably low at $69 (read more: Alaska Airlines to Connect Boise-Spokane, Fares Begin at $69).
2. According to media reports, a plane (Airbus A320) carrying approximately 150 people has crashed in the southern part of France. The plane, operated by Deutsche Lufthansa‘s Germanwings, was Düsseldorf-bound from Barcelona, when it hit the French Alps and disintegrated on impact. There is little hope for any survivors. Media reports also suggested that although the cockpit voice recorder for the ill-fated flight has been found, the rescue team has yet to locate the second black box. The stock price of Deutsche Lufthansa declined on the reported news of the crash.
Moreover, the labor dispute at Deutsche Lufthansa seems a never-ending affair with its pilots going on a four-day strike following the failure of talks with management over early retirement benefits. Furthermore, the German carrier’s plan to expand low-cost offerings has also come under attack from the pilots. The latest strike is the 14th such move by the pilots of the German carrier since last April. The ongoing dispute has resulted in massive flight cancellations and loss of profit for the carrier.
3. Data released by the Bureau of Labor Statistics suggest that average airfares in the U.S. for February increased 1.9% over Jan 2015. We believe that the moderate month-over-month increase was primarily due to the slight upward movement of fuel prices during the period. The February number was, however, down 3% on a year-over-year basis reflecting weak oil prices.
4. United Airlines, the wholly owned subsidiary of United Continental Holdings UAL, renewed its partnership with the National Association of Hispanic Journalists (NAHJ). Following the renewal, the company will be the official carrier of the organization's special events this year. The Chicago-based carrier has been lending its support to NAHJ since 2006. The renewal of the partnership with NAHJ is aimed at boosting the carrier’s goodwill among the Hispanic segment of the society.
5. According to a filing with the U.S. Securities and Exchange Commission, Hawaiian Holdings HA, the parent company of Hawaiian Airlines, revised its guidance for the first quarter of 2015 from the outlook provided in January this year. The carrier now projects economic fuel cost (including taxes and hedges) in the range of $2.19 to $2.24 per gallon (old guidance: $2.05 to $2.15). Operating revenue per available seat mile (ASM) is projected to decline in the range of 1.5% to 3.5% (old guidance: down 3.5% to 6.5%).
Cost per ASM (excluding fuel) for the first quarter is now expected to be down 1.5% to a gain of 0.5%. The new projection is lower than the previous guidance which estimated the metric to be up 1.5% to 4.5%. The carrier still expects a 3.5% to 5.5% jump in its ASMs and a 2% to 4% increase in its fuel consumption for the first quarter of 2015.
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 |
8.10% |
58.83% |
|
UAL |
-1.92% |
40.31% |
|
GOL |
10.70% |
-46.73% |
|
DAL |
-0.69% |
22.23% |
|
JBLU |
2.41% |
83.85% |
|
AAL |
0.78% |
49.31% |
|
SAVE |
-2.86% |
11.05% |
|
LUV |
-2.73% |
30.85% |
|
CPA |
1.58% |
-2.50% |
|
ALK |
-2.27% |
49.38% |
As the chart above suggests, the price performance of the stocks was mixed in nature over the past week. The biggest gainer over the past 5 trading days was the Latin American carrier – GOL Linhas Aereas Inteligentes GOL, whose shares appreciated 10.70% over the said period. Most of the stocks have gained over the last six months, with JetBlue Airways JBLU witnessing the highest upside (83.85%) over the period.
What’s Next in the Airline Biz?
Investors will be looking forward to the fourth-quarter 2014 earnings release of GOL Linhas on Mar 30, after market close. Apart from the earnings release, focus will also be on the price movements of airline stocks in view of the recent volatility in oil prices.
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