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After a temporary lull, airline stocks are now back in form with a gradual recovery over the past 5 trading sessions, owing to the optimism surrounding the upcoming second-quarter results. 

The major highlights from the past week include Air France-KLM’s somber forecast of 2014 financial results, which are expected to remain subdued due to lower profit expectations.  Further, GOL Linhas Aereas Inteligentes S.A.’s (GOL - Analyst Report) code sharing agreement and June 2014 traffic results released by some of the major airlines were also in the limelight.

A Recap of Last Week’s Most Important Stories

1.    United Continental Holdings Inc. (UAL - Analyst Report) reported June 2014 airline traffic, which remained flat year over year at 19.12 billion. Growth in Latin American traffic offset the decline in the Atlantic and regional division. (Read More: United Continental Rallies despite Flat June Traffic).

2.    Another airline company, JetBlue Airways Corporation (JBLU - Analyst Report), reported June traffic results. The carrier reported airline traffic of 3.26 million, up 4.0% year over year, representing the fifth consecutive month of high traffic post a dip in numbers in Jan 2014. (Read More: JetBlue Airways’ June Traffic Grows, Trend Likely to Stay)

3.    Further, Southwest Airlines Co. (LUV) posted a rise in traffic for June 2014. The month’s traffic came in at 10.01 billion, up 2.2% from 9.85 billion recorded in the comparable period a year ago.  (Read More: Southwest Airlines’ June Traffic Improves)

4.    Franco-Dutch airline group, Air France-KLM, followed close on the heels of its German counterpart Lufthansa in issuing a profit warning for 2014. This word of caution dragged most airline stocks down on Jul 1. The airline behemoth blamed overcapacity on transatlantic routes, weak cargo demand and a currency dispute in Venezuela for the cautious outlook. (Read More: Airline Continues Losing Altitude: 3 Carriers to Avoid)

5.    GOL Linhas inked a code share agreement with UAE-based Etihad Airways that will initially give the latter increased access to South America. The deal fortifies the low-cost Brazilian carrier’s partnership with Etihad Airways. (Read More: GOL & Etihad Airways Strengthen Ties with Code share Deal)

Performance

The following table shows the price movement of the major airline players over the past 5 trading days and during the last 6 months:

Company

Last 5 Days

Last 6 Months

AAL

4.07%

51.53%

ALK

2.79%

27.18%

CPA

4.21%

-3.80%

DAL

2.90%

21.15%

GOL

11.99%

20.22%

HA

2.79%

23.01%

JBLU

1.50%

20.49%

LUV

2.54%

32.42%

SAVE

3.42%

36.00%

UAL

12.85%

-2.75%

Over the trailing 5 sessions, all the airline stocks listed above continued to trade in the green. The biggest gainers were United Continental Holdings and GOL Linhas, which gained 12.9% and 12%, respectively.

Over the past 6 months, most of the stocks have fared reasonably well with the exception of Copa Holdings SA (CPA - Snapshot Report)  and United Continental that dropped 3.8% and 2.8%, respectively. The biggest gainers in the 6-month span were American Airlines Group Inc. (AAL - Snapshot Report) and Spirit Airlines, Inc. (SAVE - Snapshot Report), sporting growth of 51.5% and 36.0%, respectively.

What’s Next in the Airline Biz?

In the coming days, we await the earnings results of some of the major airline companies. Some notable names in the sector are United Continental, Delta Air Lines and Southwest Airlines, with the respective Zacks Consensus Estimate for earnings in the second quarter pegged at $2.19, $1.03 and 59 cents.  

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