Delta Air Lines (DAL Quick QuoteDAL - Free Report) kicked off the second-quarter earnings season for the airlines sector with an earnings beat last week. However, the Atlanta, GA-based carrier continued to struggle on the revenue front with the top line shrinking 2.4% mainly due to currency woes. Revenues also fell short of the Zacks Consensus Estimate.

United Continental Holdings (UAL Quick QuoteUAL - Free Report) also posted a second-quarter earnings beat on Jul 19 (after market close). The Chicago-based carrier went a step ahead, outshining the Zacks Consensus Estimate even on the revenue front.

On the non-earnings front, somber news flowed in from Nice, France when a suspected terror attack resulted in over 80 casualties apart from multiple injuries. The incident occurred when an individual drove a truck through a crowd watching Bastille Day fireworks. The massacre hurt travel stocks, airlines being no exception.

Low-cost carrier Spirit Airlines (SAVE Quick QuoteSAVE - Free Report) also grabbed headlines by virtue of its bearish second-quarter view, especially with respect to total revenue per available seat mile (TRASM). The past week also saw the likes of American Airlines Group (AAL Quick QuoteAAL - Free Report) , JetBlue Airways Corp. (JBLU Quick QuoteJBLU - Free Report) and GOL Linhas disclosing their respective numbers for June.

On the price front, the NYSE ARCA Airline index was almost flat over the past week at $90.15 as the positive impact of Delta’s bottom-line outperformance was offset by the terror-induced sell off.

Read the last Airline Stock Roundup for Jul 13, 2016.

Recap of the Past Week’s Most Important Stories

1. Delta Air Lines kicked off the second-quarter earnings season in the airline space on a mixed note. The airline behemoth reported lower-than-expected revenues while earnings beat estimates in the quarter. For the third quarter of 2016, the carrier expects operating margin in the range of 19% to 21%. Passenger unit revenue in the third quarter is projected to decline in the band of 4% to 6% (read more: Delta Air Lines Q2 Earnings Beat, Stock Up).

2. Stocks in the airline space, such as Delta Air Lines and United Continental Holdings were particularly hurt by the suspected terror attack in southern France on Jul 14. The possibility of waning travel demand from security fears hurt investor confidence. Such terror acts are unfortunately becoming more regular, dealing a heavy blow to airlines.

3. United Continental’s second-quarter 2016 earnings (on an adjusted basis) of $2.61 per share beat the Zacks Consensus Estimate by 8 cents. Earnings, however, declined 21.1% on a year-over-year basis. Operating revenues of $9.4 billion in the quarter edged past the Zacks Consensus Estimate of $9.38 billion. However, revenues fell 5.2% on a year-over-year basis due to a strong U.S. dollar, lower surcharge, drop in customer travel due to low oil prices and competitive actions.

The carrier expects consolidated PRASM decline in the range of 5.5%–7.5% in the third quarter. Consolidated capacity is projected to increase 1.5%–2.5% in the third quarter. Fuel price, including all cash settled hedges, is estimated in the band of $1.48 to $1.53 per gallon. The company expects pre-tax margin in the range of 13.5%–15.5%.

4. Shares of Spirit Airlines were hurt by its bearish guidance with respect to TRASM for the second quarter of 2016 (detailed results will be revealed on Jul 29).The company now expects the metric to decline 14.3%, which is at the lower end of the initial guidance mainly due to discounts from rivals. Capacity for the second quarter is expected to increase 23.1% while operating margin is estimated at around 22% ( the initial guidance was in the band of 20.5% and 22%.

5. JetBlue Airways witnessed an improvement in air traffic in the month of June. Traffic – measured in revenue passenger miles (RPMs) – was 3.95 billion, up 11.6% from 3.54 billion recorded a year ago. On a year-over-year basis, consolidated capacity or available seat miles (ASMs) soared to 10.5% to 4.58 billion (read more: JetBlue June Traffic Improves, RASM Declines 4.5%).

6. June traffic at American Airlines improved 2.2% on a 2.8% capacity expansion. The carrier now expects PRASM (passenger revenue per available seat mile: a key measure of unit revenue) to decline in the band of 6%–7% for the second quarter (detailed results will be revealed on Jul 22). The earlier guidance had called for a PRASM decline in the band of 6% to 8% (read more: American Airlines June Traffic Up, Guidance Revised).

7. GOL Linhas, weighed down by weak economic conditions and currency headwinds, reported dismal traffic numbers in June with all three key metrics viz. traffic, capacity and load factor moving south. Traffic – measured in revenue passenger kilometers (RPK) – stood at 2.76 billion, down 7.1% from a year ago.

Also, on a year-over-year basis, consolidated capacity (or available seat kilometers/ASKs) was down 5.9% to 3.68 billion mainly because of 5.2% and 10.9% declines in domestic and international capacity, respectively. Load factor contracted 100 basis points to 74.9% in Jun 2016. Furthermore, in the month, the carrier witnessed a 19.7% decline in the volume of departures.

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 airline stocks exhibited a mixed trend with respect to price over the past week. Shares of GOL Linhas appreciated the most (23.92%) and Spirit Airlines emerged as the biggest laggard with shares depreciating 8.97%.

Over the past six months, the majority of the airline stocks gained value, leading to a 21.14% improvement in the NYSE ARCA Airline index on the back of huge gains at  GOL Linhas and Virgin America.

What's Next in the Airline Space?

Earnings releases are going to dominate the airline space this coming week. Sector heavyweights like American Airlines Group and Southwest Airlines (LUV Quick QuoteLUV - Free Report) are slated to release their quarterly figures over the next few days.

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