The past week was a busy one for airlines with industry heavyweights like American Airlines Group (AAL Quick QuoteAAL - Free Report) and United Continental Holdings (UAL Quick QuoteUAL - Free Report) unveiling bullish views on unit revenues for the current quarter. Southwest Airlines (LUV Quick QuoteLUV - Free Report) was also a major news maker last week, courtesy of its strong November traffic report which was primarily responsible for airline stocks soaring on Dec 7. JetBlue Airways Corp.’s (JBLU Quick QuoteJBLU - Free Report) bullish investor day presentation also grabbed headlines.

The past week also saw the International Air Transport Association (“IATA”) and Airlines for America (“A4A”) providing forecasts for 2017 profitability and the upcoming winter holiday season (Dec 16–Jan 5), respectively.

 (Read the last  Airline Stock Roundup for Dec 07, 2016).

Recap of the Past Week’s Most Important Stories

1. American Airlines unveiled an improved view with respect to total revenue per available seat mile (TRASM: a key measure of unit revenues) for the current quarter. The metric is projected in the band of a decrease of 1% to an increase of 1%. The view represents a marked improvement from the guidance issued last month, when it expected the metric to decline in the band of 0.5–2.5% (Read more: American Airlines Gains on Bullish Q4 Unit Revenue View).

2. United Continental too unveiled an improved fourth-quarter forecast with respect to passenger unit revenues. The Chicago, IL- based carrier expects this metric, which is a measure of sales relative to capacity for a carrier, to decline in the range of 3% to 4% in the final quarter of 2016. Earlier, the company had issued a guidance of a decline of 4% to 6% (Read more: United Continental November Traffic and Load Factor Rise).

United Continental’s subsidiary – United Airlines – announced that it intends to launch the new Boeing 777-300ER aircraft for its flights scheduled in 2017. Notably, one of the key features of this offering will be the company’s new United Polaris business class, which is scheduled to start regular service from February next year (Read more: United Airlines to Introduce New Boeing Aircraft to Fleet).

3. Stocks in the airline space had a field day on Dec 7, gaining considerably. Southwest Airlines’ bullish traffic report was the main catalyst for the surge. The Dallas-based carrier’s November traffic (measured in terms of revenue passenger miles or RPMs) increased 7.2%, while capacity (available seat miles or ASMs) expanded 4.9%, both on a year-over-year basis. Another important metric, load factor – percentage of seats filled by passengers – climbed 180 basis points (bps) to 85.1% as traffic growth outpaced capacity expansion. Interestingly, this is the highest ever load factor recorded by the carrier in the month of December (Read more: Why Airline Stocks Were Flying High in Wednesday's Trading).

Southwest Airlines was also in the news for a new deal with the Los Angeles, CA-based Global Eagle Entertainment Inc., which offers content and connectivity services for the travel industry. Notably, the carrier commenced services to the Cuban capital of Havana – its 100^th destination – during the week.

4. Shares of JetBlue Airways gained 4.21% on Dec 13, to close the trading session at $22.53. The stock price appreciated after the carrier’s bullish investor day update in which it predicted savings of $250–$300 million by 2020 through cost-control efforts. The bulk of the savings are expected to be from aircraft maintenance operations. Investors were also pleased with the company’s intention to double its buyback plan to $500 million through 2019, mainly due to higher-than-expected revenues from checked bag fees alongside other factors. Revenues from the same are now expected to be $260 million in 2016 as opposed to $200 million projected earlier. The carrier expects capacity to expand in the band of 6.5% to 8.5% in 2017. 

JetBlue also reported an encouraging November traffic report. RPMs climbed 7.1% on a year-over-year basis in November, while ASMs grew 5.2%. Load factor increased to 85.4% in Nov 2016. JetBlue’s preliminary revenue per available seat mile (RASM) in the month remained almost flat on a year-over-year basis. The low-cost carrier expects RASM to decline in the band of 1% to 2% in the fourth quarter. The forecast is favorable when one compares it to the 3.5% RASM decline witnessed in the third quarter (Read more: JetBlue Airways' November Traffic, Load Factor Improve).

5. Copa Holdings, S.A. (CPA Quick QuoteCPA - Free Report) revealed impressive traffic numbers for the month of November. RPMs improved 11.8% on a year-over-year basis to 1.46 billion. Load factor increased 660 bps to 80.6%. This was because traffic growth outpaced capacity expansion (2.7%) in the month for the Zacks Rank #1 (Strong Buy) carrier. You can see the complete list of today’s Zacks #1 Rank stocks here.

6 The IATA provided a lackluster view for carriers with respect to the profitability level for 2017. The research firm predicts global net profit for the industry of $29.8 billion. This is much lower than the 2016 profitability forecast of $35.6 billion. The gloomy projection may be attributed to the anticipation of rising oil prices. Moreover, the firm trimmed its profitability forecast for the current year (Read more: IATA Unveils Tepid 2017 Profit Forecast on Rising Oil Prices). Staying with the issue of forecasts, the winter holiday season is expected to be a busy one for U.S. carriers according to ‘A4A’. The organization expects 45.2 million passengers to opt for air travel during the period, reflecting a 3.5% increase from the 2015 figure.

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 above shows that all airline stocks, barring GOL Linhas, traded in the green over the past week resulting in the NYSE ARCA Airline index gaining 3.09% $111.77 over the period. The uptick was primarily driven by the bullish fourth-quarter views and the optimism surrounding the U.S. economy. Shares of Hawaiian Holdings (HA Quick QuoteHA - Free Report) appreciated the most (5.56%). Over the course of six months, the NYSE ARCA Airline Index appreciated 35.79%.

What's Next in the Airline Space?

Investors will await updates from Delta Air Lines’ (DAL Quick QuoteDAL - Free Report) investor day, scheduled for Dec 15.

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