The past week saw quite a few updates from Atlanta, GA-based Delta Air Lines DAL. The carrier’s entry into Scotland, strengthening of ties with Virgin Atlantic and additional employment to meet the anticipated rush at airports during summer dominated headlines.
Moreover, the crisis in Venezuela has hit Deutsche Lufthansa Aktiengesellschaft DLAKY and LATAM Airlines Group S.A. LFL as well. The carriers announced their decisions to suspend flights to the country for now. Meanwhile, United Continental Holdings, Inc. UAL recently announced its decision to terminated operations to Nigeria from July, mainly due to foreign exchange headwinds. Moreover, the monthly data released by the International Air Transport Association (IATA) points at a 4.6% year-over-year increase in air travel demand across the globe in Apr 2016. With oil prices moving north and terror attacks continuing to hurt air travel, the IATA warned of a slowdown in air traffic going ahead.
On the price front, the NYSE ARCA Airline index declined 1.1% to $83.79 over the past week, which was a day short of trading owing to the Memorial day holiday on May 30.
Read the last Airline Stock Roundup for May 25, 2016.
Recap of the Past Week’s Most Important Stories
1 In a customer-friendly move, Delta announced that it is investing up to $4 million to boost its workforce for better management of 32 select airports in the country this summer. In view of the anticipated surge in demand, Delta has stepped up its staff count to ensure that fliers do not face undue harassments in some of the busiest airports in the country (read more: Delta Air Lines Adds Staff to Manage Rush & Ensure Security). In another customer-friendly move, Delta strengthened its ties with Virgin Atlantic. The carriers altered their respective schedules for the summer of 2017 to facilitate travel between the U.S. and the U.K. The introduction of four weekly flights connecting Portland and London from May 26, 2017, was the highlight of the program.
Furthermore, Delta launched non-stop flights between New York and Edinburgh in tune with its plans to expand operations. The first flight (DL 409) of the year-round service from the John F Kennedy airport landed at Edinburgh on May 27 (read more: Delta Air Lines Forays into New Skies, Adds Flight to Scotland).
2. According to media reports, Chicago, IL-based United Continental Holdings has decided to cancel flights to Africa, starting July this year. Apparently, weak energy markets have been denting profits for the carrier, compelling it to consider the cancellation of its sole flight to Africa, connecting Houston and Lagos (read more: United Continental to Call Off Nigeria Flight, Exit Africa).
3. The ongoing economic crisis in Venezuela has compelled many carriers to trim capacity/suspend operations in the country. The list lengthened with LATAM Airlines Group and Lufthansa announcing their decisions to suspend operations in the nation. We note that American Airlines Group AAL had reinstated flights connecting Caracas and New York in Dec 2015, only to scrap it three months later, citing low demand (read more: Lufthansa, LATAM Airlines to Exit Venezuela, More to Follow?).
4. Global traffic in April increased at the slowest pace of 4.6% since Jan 2015 with the Brussels attacks hurting European travel. Excluding the impact of the attacks, demand growth would have been approximately 5%. IATA said that capacity (measured in available seat kilometers) grew 4.9%. The greater increase in capacity compared with air traffic resulted in the load factor (percentage of seats filled with passengers) declining 30 basis points (bps) to 79.1% in Apr 2016. According to the report, domestic travel demand climbed 4.1% on a 3.8% capacity expansion. Domestic traffic growth in India (21.8%) and China (9.5%) boosted results.
International traffic growth of 4.8% was the least during the past two years. The slowdown was mainly due to European passenger demand growth sliding to 1.8% in April from 6% observed in Mar 2016. The slowdown was expected as the Brussels airport was closed for almost 2 weeks following the attacks in late March. Furthermore, North American carriers continued to disappoint with international traffic inching up 1.1%.
5. With Europe likely to attract a plethora of tourists during the summer season, the U.S. State Department issued a global travel alert to U.S. citizens citing the possibility of more terrorist attacks like the ones in Paris and Brussels. The two events most vulnerable to such attacks are the Catholic Church's World Youth Day in Poland and the European Soccer Championship in France. While the Polish event will be held in late July, the football extravaganza will held from Jun 10 to Jul 10. The alert, issued on May 31, 2016, is valid through Aug 31, 2016. Although the department does not advise citizens against traveling, the advisory does ask them to be more vigilant, especially in crowded places or while using any mode of transportation. The alert cautions traveling U.S. citizens to take certain precautionary measures like following instructions provided by local authorities, staying in touch with family members and registering with the department’s Smart Traveler Enrollment Program.
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 |
-2.48% |
10.16% |
|
UAL |
0.74% |
-20.88% |
|
GOL |
-15.70% |
-21.46% |
|
DAL |
0.14% |
-8.83% |
|
JBLU |
0.16% |
-29.80% |
|
AAL |
0.25% |
-26.24% |
|
SAVE |
1.94% |
13.20% |
|
LUV |
-0.56% |
-9.69% |
|
VA |
0.50% |
48.84% |
|
ALK |
0.17% |
-18.20% |
The table shows that majority of the airline stocks traded in the green over the past week. However, the gains were mostly marginal in nature. Shares of low-cost carrier Spirit Airlines SAVE appreciated the most (1.94%) with GOL Linhas emerging as the biggest laggard (15.70%).
Over the past six months, most airline stocks traded in the red leading to the NYSE ARCA Airline index declining 7.41%%. Shares of Virgin America appreciated the most (48.84%) during the period while JetBlue Airways Corporation emerged as the biggest laggard (29.80%).
What's Next in the Airline Space?
Updates on the 72nd Annual General Meeting of the IATA and World Air Transport Summit are keenly awaited. Moreover, traffic updates for the month of May from the likes of Delta and Alaska Air Group ALK are also expected over the next few days.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment