The past week saw United Continental Holdings, Inc. (UAL Quick QuoteUAL - Free Report) issuing an improved outlook with respect to passenger revenue per available seat mile (PRASM: a key measure of unit revenue) for the second quarter of 2016. The company, at an investor call, also highlighted its plans to improve financial performance and operations. The announcement found favor with the investors and the stock gained 3.36% on Jun 21 to close at $44.86.

Low-cost carrier Spirit Airlines (SAVE Quick QuoteSAVE - Free Report) also rallied following its upgrade by Credit Suisse. On the traffic front, Latin American carrier GOL Linhas Aereas Inteligentes S.A. revealed disappointing numbers for the month of May. Load factor (% of seats filled by passengers) declined as the contraction in traffic was more than that in capacity.

Meanwhile, according to the employment data for passenger airlines, there was a substantial year-over-year increase in full-time equivalent (FTE) employment this April.

On the price front, the NYSE ARCA Airline index gained only 0.26% to $82.98 over the past week.

Read the last Airline Stock Roundup for June 15, 2016.

Recap of the Past Week’s Most Important Stories

1. Chicago-based United Continental Holdings, which has been struggling for long, recently revealed plans to boost revenues, trim costs in a bid to improve its financial performance and gain customers. The company also unveiled an improved PRASM outlook for the second quarter of 2016.

The company now expects the metric to fall in the band of 6.5% to 7.5% (earlier forecast had called for a 6.5% to 8.5% decline). Through the proper execution of its initiatives, the carrier aims to generate additional revenues of $3.1 billion by 2018 ($300 million through operational improvement, $1.5 billion through commercial betterment and $1.3 billion by trimming cost structure).

  2. GOL Linhas, weighed down by weak economic conditions and currency headwinds, reported dismal traffic numbers in May with all three key metrics viz. traffic, capacity and load factor moving south. Traffic – measured in revenue passenger kilometers (RPK) – stood at 2.80 billion, down 7.8% from a year ago.

Also, on a year-over-year basis, consolidated capacity (or available seat kilometers/ASKs) was down 6.6% to 3.74 billion mainly because of declines of 6.3% and 8.8% in domestic and international capacity, respectively. Load factor contracted 90 basis points to 74.9% in May 2016. Furthermore, in the month, the carrier witnessed a 21.3% decline in the volume of departures.

3. According to data released by the Bureau of Transportation Statistics, there was a 3.6% increase in the number of workers employed by U.S. scheduled passenger airlines. This marked the 29th consecutive month of year-over-year increase. The report also stated that the number of FTEs (407,763) for Apr 2016 was the highest since Jul 2008. According to the update, the most number of FTEs in the month were employed by the American Airlines Group (AAL Quick QuoteAAL - Free Report) , among the network airlines. Southwest Airlines (LUV Quick QuoteLUV - Free Report) took the honors in the low-cost carrier category.

4. Good news flowed in for Spirit Airlines as analysts at Credit Suisse upgraded the rating on the stock to “Outperform.” The firm also raised its target price on the carrier as analysts are bullish on its 2017 prospects despite increasing oil prices. Not only 2017, analysts expect performance of the low-cost carrier with respect to unit revenue to be better than its peers in the second half of 2016 as well.

5 In a bid to expand further, Alaska Airlines, the wholly owned subsidiary of Alaska Air Group, Inc. (ALK Quick QuoteALK - Free Report) , announced its decision to launch daily nonstop flights connecting Portland and Orlando starting March next year. Alaska Air Group will be operating flights on The Boeing Company’s 737 fuel efficient jets.

Performance

The following table shows the price movement of the major airline players over the past week and during the last 6 months. 

The table shows that most of airline stocks traded in the green over the past week although the gains were mostly muted. Shares of GOL Linhas appreciated the most (16.26%).

Over the past six months majority of the airline stocks lost value, leading to a 7.19% decline in the NYSE ARCA Airline index. Shares of JetBlue Airways Corp. (JBLU Quick QuoteJBLU - Free Report) lost the maximum at 30.08% over the same period.

What's Next in the Airline Space?

All eyes will be on Southwest Airlines’ investor day presentation, scheduled on Jun 23. The Brexit vote on the same day is also much awaited.

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