The past week saw an array of news updates in the airline space. Atlanta, GA-based Delta Air Lines DAL grabbed much of the attention, with it firing on all cylinders. The carrier’s row with Southwest Airlines LUV over gates at the Dallas Love Field airport reached a settlement, albeit temporarily, with the latter agreeing to let Delta operate out of the airport for the time being.
Further, Delta was chosen by the renowned Chelsea Football Club as its official airline sponsor. The carrier also made to the headlines with its decision to enhance its existing transcontinental service from New York's John F. Kennedy (JFK) International Airport.
Other important updates include United Continental Holdings’ UAL subsidiary, United Airlines, investing an impressive $30 million in biofuel producer Fulcrum BioEnergy. The Chicago-based carrier also inked a deal with Latin American carrier Azul Brazilian Airlines. Furthermore, low-cost carrier JetBlue Airways Corporation JBLU also featured in the headlines due to its bag fee related news.
On the price front, the NYSE ARCA Airline index declined 3.8% over the past week as concerns over Greece’s debt crisis continued to weigh on investor sentiments.
(Read the last Airline Stock Roundup for June 24, 2015)
Recap of the Past Week’s Most Important Stories
1. Delta Air Lines inked a three-year sponsorship deal with U.K.-based Chelsea Football Club. However, financial terms of the transaction have not been revealed. Chelsea’s choice of a premiere U.S. airline as its official sponsor is aimed at promoting its activities in the States (read more: Delta Selected as Official Airline Sponsor by Chelsea FC).
In a move aimed at improving customer satisfaction, Delta has decided to upgrade its coast-to-coast operations between New York's JFK airport and prime destinations on the West Coast viz. Los Angeles and San Francisco (read more: Delta Air Lines to Revamp Transcontinental Service from JFK).
2. United Airlines announced an equity investment of $30 million in California-based biofuel producer, Fulcrum BioEnergy. United Airlines’ move marks the biggest single investment in alternative fuels by an American carrier so far. United Airlines’ decision to invest in a leading alternative fuels developer will not only make the carrier less vulnerable to oil-price fluctuations but also put a lid on carbon emissions from planes.
Apart from the $30 million investment, the companies have also inked a ten-year deal to consider the joint development of up to five biofuel plants situated near hubs of the Chicago-based carrier. The long-term deal has the potential to produce up to 180 million gallons of fuel on an annual basis.
Moreover, United Airlines has decided to buy a 5% stake in Azul Brazilian Airlines for nearly $100 million. The deal will help United Airlines gain a position in Azul's board apart from allowing both the carriers to expand their network through a codeshare partnership (read more: United Airlines to Buy 5% Stake in Azul Brazilian Airlines).
3. In a bid to expand its operations, JetBlue Airways has decided to operate flights between New York’s JFK Airport and Antigua's V.C. Bird International Airport. The addition of Antigua to its portfolio marks JetBlue’s 35th destination in the Latin American and Caribbean region (read more: JetBlue Plans to Initiate Service to Antigua Starting November).
JetBlue also announced its plans to start charging checked bag fees for its lowest-fare customers in order to boost its revenue stream. The carrier stated that travelers who book the lowest “Blue” fare will now be required to check in a bag on a one-way trip for $20 online, or for $25 at the airport ticket counter (read more: JetBlue Begins Adding Checked Bag Fees).
4. Southwest Airlines’ dispute with Delta over gates at the Dallas Love Field airport reached a temporary solution when the Dallas-based low-cost carrier agreed to let Delta operate out of the airport for the time being. However, a long-term solution to the problem is awaited.
Additionally, Southwest Airlines signed a new multi-year partnership marketing deal with Avis Budget Group, expanding their existing alliance (read more: Avis Budget Boards Southwest Airlines to Reach Consumers).
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 |
-2.86% |
-6.02% |
|
UAL |
-1.70% |
-20.09% |
|
GOL |
-4.0% |
-56.59% |
|
DAL |
-2.84% |
-15.17% |
|
JBLU |
0.62% |
33.95% |
|
AAL |
-3.71% |
-24.63% |
|
SAVE |
-1.25% |
-14.83% |
|
LUV |
-1.77% |
-20.68% |
|
CPA |
-1.24% |
-18.74% |
|
ALK |
-4.64% |
8.43% |
As seen in the chart above, all stocks apart from JetBlue Airways traded in the red over the past week. Furthermore, most of the stocks have shed value over the last six months. Shares of Latin-American carrier GOL Linhas GOL depreciated the most (56.59%) during this period. GOL Linhas, like other Latin American carriers, has been undergoing troubled times mainly due to the depreciation of the local currency against the U.S. dollar.
What’s Next in the Airline Biz?
We expect traffic updates from carriers like Delta and Alaska Air Group ALK in the coming days. Even though the possibility of the flight attendants at Deutsche Lufthansa Aktiengesellschaft DLAKY going on strike over pay and retirement-related issues has been pushed back until mid-July following negotiations, further trouble on the labor front cannot be ruled out. Meanwhile, focus will also remain on the impact of the Greek debt crisis on airline stocks.
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